Boxed, the digital retailer known for bulk sizes and just 1,600 products in its online store, will now license pieces of its end-to-end technology to its first grocer. The startup now offers delivery to Lidl customers in parts of both New York and Georgia, as it tests out a partnership with the fast-growing chain. Boxed customers in those areas will now also have access to fresh meat and produce delivery for the first time.
While grocery-delivery app Instacart has recently inked high-profile deals with Costco, Kroger, Albertsons and Publix, Boxed is betting on Lidl, the German grocery chain which expanded to the U.S. in 2017. Its 68 stores, mostly in the Southeast, are mainly stocked with the chain’s own private-label products. The real potential for Boxed comes with Lidl’s global footprint, which tops more than 10,500 stores in 29 countries.
“This is just the first test,” says Chieh Huang, CEO and cofounder of Boxed. “But as the partnership gets deeper, we can bring a lot more to the table.”
Boxed is one of the leading startups in the food logistics business. In September 2018 it raised $111 million in Series D funding that valued the firm at $600 million. In all, it has raised $250 million from investors like Greycroft and Founders Fund. The company declined to provide sales and last released the figure three years ago, when it surpassed $100 million. A representative for Boxed only said “it has increased significantly since then.” The company is not yet profitable—but Huang says it is on track to be soon, and the Lidl partnership will surely help.
In the ever-challenging grocery industry, any possible edge over competitors matters. Recently, that’s created a healthy appetite for acquisitions, particularly among delivery startups. After Walmart spent $3.3 billion to acquire Jet.com in 2016, a panic set in across the rest of the industry. In 2017 alone, Plated was acquired by grocery giant Albertsons for a reported $200 million and Target spent $550 million to acquire Alabama-based Shipt.
Boxed then started to attract its own offers. In January 2018, Kroger reportedly bid $400 million for the startup, but Boxed’s board voted against the deal. Amazon, Target and Costco also were said to have expressed interest in acquiring Boxed, and Huang met with these companies (and even Jeff Bezos) to talk about potential deals. In the end they did not submit formal bids.
It all taught Huang a crucial lesson. “We found out that the technology we built is actually really valuable and that we could use it to really bring most grocers, whether in the U.S. or around the world, into the 21st century pretty quickly,” says Huang. “I don’t think a lot of folks really believed me when I said we were staying independent. Now that we’re licensing the technology out, it shows that we’re in this for the long haul.”
In fact, Boxed is one of the only end-to-end platforms like this in the world. IBM can build a company’s warehouse management system, and Salesforce can build the management system to track purchases. Delivery apps like Instacart and Shift can handle the transport. But globally the only other companies with the kind of combined capabilities that Boxed now has are some of the most prominent tech giants out there: Amazon, Alibaba, JD.com and Ocado.
“Because we started off with no resources and a completely blank slate, we were actually forced to build our own solutions,” says Huang. “We didn’t have the money for a sales force or to call up SAP or Oracle or for an off-the-shelf software like Shopify or Squarespace. And we knew it wasn’t going to be sophisticated enough as we got into the hundreds of millions, if not billions, of sales.”
Now, Huang says Boxed will offer these different kinds of “plug-and-play” solutions to any company that needs it. While Boxed has become well-known for limiting the products it sells online to maximize its own profit, Huang says the software works for any number of items and can be tweaked to fit the needs of any business.
So is Boxed now handling how Lidl warehouses its products, too? Huang says not just yet, but that it could come eventually. Lidl and a lot of regional grocers only maintain local warehouses, so Boxed, for example, could start storing products for Lidl’s in-house private-label brand and distribute it across the country for the first time, delivering it in two days or less. Boxed could also build Lidl a website that can tell each customer the exact expiration date that the item in their cart will have. Because the website that customers use is tied to Boxed’s warehouse management system, the company knows exactly which pallet the item will come from by the time the order is filled. Currently, Boxed is the only retailer that offers this level of detail to its customers.
Huang hopes Boxed’s new focus will be worth it: “Partnering with Lidl certainly would not have happened if we had merged with anyone a year ago. Food retail across the globe is probably even more in flux than it was. The opportunities for us are even larger today. I don’t think we would’ve maximized them if we had merged with someone.”