Boxed: How Chieh Huang built a pureplay online warehouse giant
In just six years, Chieh Huang has built an online-only, wholesale retail concept Boxed, which is now seriously challenging the market dominance of warehouse giants Costco, Walmart-owned Sam’s Club and BJ’s.
Started in a garage in Edison, New Jersey, Boxed – unlike its brick-and-mortar rivals – is membership-free. It offers direct delivery of bulk-sized packages, ordered online or via a mobile app.
Huang, who shared his story on stage at the BrandLoyalty conference in Amsterdam, was inspired to create Boxed when living in Manhattan. Without a car or a wholesale club nearby he realised he didn’t have access to those types of retailers any longer, recognising a blind spot in the wholesale market. So he returned to his roots in suburban New Jersey with a plan to change that.
“It started off in my garage in tropical New Jersey, a very exotic place, home to the Jersey Shore and folks like Bon Jovi and Bruce Springsteen. I was sitting there, saying, okay, it’s time; I’m going to start my own business.”
Things usually start off slow in business, but pushing the boulder up that proverbial hill didn’t take long. As Huang recalled: “When we started really growing we started hiring friends and family members, and by this time, trucks would drop off entire pallets on my driveway. And if you find my home address on Google Maps, you’d actually find a street view picture of like, a huge 40-foot container in my driveway, in the middle of a residential neighborhood with 20 people walking in and out of the house. So of course, my neighbours thought I was selling drugs.”
But it was toilet paper being moved in bulk, not drugs, and Huang was soon nicknamed ‘The Toilet Paper Guy’. It wasn’t long before the business outgrew a suburban garage and the founding team needed to find a proper facility. “We had to get out of my garage, because at this point in time, like the neighbours, they were definitely going to call the cops,” he jokes. “So we moved into our first facility, our first warehouse.”
Though it wasn’t the nicest of warehouses, it allowed Boxed the space to continue to expand, which it did, at a rapid pace, filling a niche in the wholesale market while generating millions in sales.
Even Huang couldn’t believe it. “When you think about a retailer that went from $40,000 in sales to hundreds of millions in 60 short months, that sounds absolutely nuts. It’s even crazier because this type of service didn’t exist 10 years ago. It tells us that in the current economic climate that this rate of change is only going to get faster and faster and faster.”
With such a rapid ascent there have been a lot of triumphs as well as a number of lessons. For one, Huang had to learn to stop micromanaging his employees. He referenced this in a recent Ted Talk he participated in when he said, “What is micromanaging? I posit that it’s actually taking great, wonderful, imaginative people, bringing them into an organisation, and then crushing their souls by telling them which font size to use. Thankfully, there’s a cure to this management madness: trust. When we stop micromanaging the wonderfully creative people at our own companies, innovation will flourish.”
Which is precisely what happened. Boxed has been innovative in its relationships with both producers and consumers alike. In regard to producers, just one example is how the company took a new approach to advertising.
“We like to think of ourselves as not only retailers, but also as an advertising platform. A significant portion of the revenue that we generate is not from just selling potato chips online, but it’s also from selling ads for potato chips, which is actually an almost 100-per-cent gross-margin business.”
Boxed works with those manufacturers, providing data on buying patterns. They agree on a performance benchmark for sales and if that is not met, the manufacturer receives a rebate. This serves as an alternative to catalogues and flyers and manufacturers compete with each other for promotional space as they would on Google or Facebook.
Such strategies are clearly resonating with manufacturers just as consumers are embracing the convenience of shopping on Boxed in bulk, saving money and having goods delivered to their door. Huang says the company is turning inventory 12 to 15 times a year. In Boxed’s first year its turnover was about US$40,000. Six years on, it turns over hundreds of millions of dollars annually.
While Boxed is selling products in bulk – 24-bottle slabs of water or 48-packet boxes of Oreo cookies – it is still personalising its engagement with customers.
“Even though we’re a new retailer, we use some old-school kind of things like handwritten notes. If you buy diapers from us the folks at the fulfilment centres, will write a nice note that says, ‘say hi to the baby for us’. And then as time goes on and the diaper sizes increase, the next note will say, ‘wow, the baby is growing up so fast’. And so they start to kind of form that one-on-one connection.”
Another hallmark of Huang’s business strategy for Boxed is the corporate concern the company shows towards social injustice. That’s not to say they are taking a stand on hot-button political issues.
As Huang explains: “Treating our customers’ right with trusted brands and the best pricing, that’s just good customer service. But we’re actually helping them with social issues that feel unjust. For example, women are charged tax in numerous states for feminine care products like tampons and pads while items for men like condoms and Regaine are not charged.
“We have to collect the tax by law, but then we rebated it back to customers, even though it hits our bottom line. But when you poll customers, especially the 60 per cent who are female, one of the top reasons that they shop with us is because we take stands like this.”
This feature originally appeared in the Inside Retail Hong Kong’s magazine edition, available by subscription in digital or print versions.