Costco-style commerce app Boxed expands nationally

By Erin Griffith , written on November 14, 2013

From The News Desk

Boxed is an app for buying bulk goods, like you'd get from clubs like Costco, without having to be a member or travel to the stores. The app's initial launch in late August went well enough that the company, having only raised $1.1 million in outside capital, is quickly expanding. After two months operating in 13 Northeastern states, the app goes national today.

Co-founder and CEO Chieh Huang, who sold his mobile gaming company to Zynga in 2011, fully admits he's got a lot to learn when it comes to running a commerce company. Prior to launching his Boxed two months ago, he had to study up on all kinds of fun stuff that gaming companies never deal with, like inventory, shipping, logistics, payments, fulfillment and customer service. Boxed now has two physical warehouses, something foreign to the gaming world -- one in New Jersey and one in Las Vegas.

But preparation and studying doesn't compare to real world experience. After launching Boxed, Huang quickly discovered a number of his team's assumptions were wrong.

"I thought we had learned a lot already, but when we went live, you really could tell we really are new at this," he says. "We were off on a lot of assumptions about what customers want."

For one, he thought customers would shop on Boxed for utility. Since Boxed saves people the time and trouble of going to a wholesale store, he thought they'd use the search feature to get in and out as fast as possible. But turns out, they like to browse for deals and check out the week's inventory (warehouse clubs heavily rotate their inventory). Session lengths rivaled that of some of his mobile games. So now, he's working on introducing more curation and personalization to the browsing experience.

Likewise, many women shop on Boxed, and they've requested more women's care products, in addition to the app's standard food and household care products. Boxed's users also wanted more organic products, which aren't often sold in bulk. Lastly, the Boxed team learned that it needed to break up large orders into separate shipments, because it can be difficult for people to apartment buildings to carry giant 35-pound boxes up flights of stairs.

Despite his missed assumptions, Huang also believes his team's outsider perspective has given them an advantage over their competitors, namely Costco, Sam's Club and BJ's. The app uses gaming mechanics like personalized push notifications and tailored product offerings to keep users coming back. It's 101-level stuff for Web commerce, email marketing, and yes, mobile gaming. But when Huang and his team began building Boxed they were shocked to see that mobile commerce hasn't developed these capabilities up yet.

Huang isn't disclosing usage numbers or downloads for Boxed, since the company has put almost no money or efforts behind marketing prior to its national launch. The company cracked the top 200 Lifestyle apps after launching, according to App Annie, but has mostly been ranked between 500 and 1000.

Boxed has one strong data point: its average order is higher than its brick and mortar competitors. The company's shoppers typically spend more than $100 each time they shop.

"The overarching thing is there's no playbook for delivering heavy big stuff," Huang says. "In gaming, there were a ton of people you could watch, to avoid the traps they fell into. We're learning as we go along, but best practices don't really exist yet."