Online retail remains a world in flux. Boxed is powering forward despite Bezos & Co. Its experience offers lessons for other companies and industries.
The following transcript has been lightly edited and condensed for ease of reading.
Aaron Price: Hello everybody.
Chieh Huang: Hey, everyone.
Price: I know we’ve had a long morning here, so we’re going to see if we can add some energy to the crowd. Let’s try that again, hello, everybody.
Price: There we go. That’s what I’m talking about.
Huang: There it is. It’s a wild morning for me. I’m having a full sugar Coca-Cola, so.
Price: Yeah, that’s very bad for you.
Huang: As I’m getting older, you know, these are the wild nights for me. It’s like, oh, full sugar Coke. My phone is on airplane mode so I’m really, I’m living dangerously right now, so.
Price: How many people here have ever heard of boxed.com?
Huang: Oh, wow. Thank you. So many friends in the audience.
Price: We—so we’re livestreaming, for those that can’t see that was maybe half the room. Raise your hand if you have bought something from boxed.com.
Huang: Oh, still not bad, you know, but—
Price: That’s good salesmanship.
Huang: Yeah, the interesting thing is you guys are probably all customers. In fact, I know you guys are all customers. You guys just don’t know it. And it’s not because it’s some like creepy Facebook thing where we know what you’ve bought, but because B to B is also a big part of our business, and Convene is a customer. So if you are eating a snack or if you ate something or drank something, you’re a Boxed customer you just weren’t a direct Boxed customer.
Price: So we just set them up, they are now—they have all experienced the Boxed world.
Huang: So everyone raise their hands. Thank you very much, yeah.
Price: Just to have the comparison, how many people here have ever bought something on Amazon.
Huang: Oh, jeez, yeah.
Price: Right? So we had maybe 10% of the room had bought something on Boxed, it seemed like 80% plus of the room, which I’m a little surprised it isn’t more like 100, unless it’s just lazy hands, bought on Amazon.
Amazon owns 50% of the ecommerce marketplace, right? And if you think about that in visual terms, imagine you live somewhere, there are millions and millions of stores, 50% of the people go to one of them. How does anybody launch anything that competes with that?
Huang: I think there’s a fine line between hubris and being naïve. And so—
Price: It’s called being an entrepreneur.
Huang: Yeah, that’s being an entrepreneur is knowing that fine line, so. You know, when we started in 2013 in a garage in New Jersey, it’s probably a little bit more being naïve than being fully hubris. But I think that aloofness is quite good, is not understanding kind of why the world or why an industry is a certain way. For us we couldn’t understand why Amazon didn’t really sell the big, bulky packs. If you were stocking up for like a big party, or if you were buying stuff for your office pantry, why didn’t they really sell too much of the big stuff? But later on we found out all the different reasons, whether it’s from profitability or whether it’s simply from trade classes where, you know, when you walk into a Costco or Sam’s club, the pack sizes that they carry are vastly different from what you would carry—what you’re allowed to carry as a Dollar General or even as a Target. And so those were things that we didn’t know early on, but we found out in a lucky way.
Price: You guys launched in 2013, right?
Huang: 2013 in a garage in suburban New Jersey, where the kids in the neighborhood started avoiding the garage because it would be open and the parents would be like, “Oh, that’s the scary dude selling toilet paper from his garage.”
So I swear to gosh, I saw kids, like, when they came off the bus stop they would like do this, cross the street, walk past my house, and then cross the street back.
Price: Are you suggesting that New Jersey has some reputation for shady characters?
Huang: Well, starting things in a garage in Jersey you’re either going to be Bon Jovi or Boxed, so—it’s one or the other. So we ended up selling toilet paper, so.
Price: How many people here are from New Jersey, by the way? I know we invited some people. Nice.
Huang: There you go. There you go.
Price: Way to represent.
Huang: How did you find out about that? Usually a lot of people are like—
Price: I know, right?
Huang: In like Silicon—if we were in Palo Alto people would be like, “Oh,” you know, like “Oh.” New Jersey, “Oh, yeah, another life.”
Price: Yeah. I think I’ve heard of it. How much was timing a factor in your ability to get this business to where it is today? And start that with—give people a sense of, especially for those who aren’t aware, what is your top line revenue at this point?
Huang: So our top line revenue—or you know, the things we publicly disclose is like we’ve actually sold hundreds of millions of dollars worth of stuff now. So it’s been a pretty wild ride since $40,000 in sales our first year in business.
But timing was everything. I think at the end of the day there’s a lot of smart people but a lot of times you just don’t get lucky enough to ride the wave. And so in 2013, when we started off, what we thought was a disadvantage—because no one wanted to fund ecommerce in 2013. Like when we went up and down Sand Hill Road most folks would say, you know, “Dude, like, ecommerce man? Like, the ’90s called they want your business model back. Like, we’re not doing ecommerce anymore, okay?” But actually, because there was a dearth of funding of ecommerce companies back then and because we caught perhaps one of the greatest waves of private technology company funding periods in history, we’re here, you know. And so the crazy thing we were talking about backstage is we’ve now raised a quarter billion dollars. But the crazy thing is in this environment, that’s not that much. Meaning that like people raise that in a single round these days.
Price: Yeah, I mean, Mark Lore raised over $1 billion with jet.com. But then they hit an interesting problem, sort of ran out of cash, and struggled to compete with Amazon. How do you avoid that same outcome?
Huang: I think they ran straight after them. And I know the title of this session is like “Can Anyone Beat Amazon?” And I think most folks would think that I would say, “Yes, of course.”
I think the reality is, in this day in age, in the short to medium term, no one can beat Amazon. That’s not to say you can’t build a really big business with them in the arena. Look at Walmart, they are just absolutely dominant in offline retail. But there’s folks like Dollar General, Target, Publix, Stop and Shop, these are all multibillion dollar businesses that have built a business—an interesting business—in the shadow of Walmart. But if you run directly after Amazon, if you try to out Amazon Amazon, it’s like suiting up against Usain Bolt in the 100-meter dash. You’re like, you’re basically playing for second.
Price: So how do you differentiate?
Huang: So for us, big B to B—so we talked a little bit about how we service kind of, not only kind of co-working spaces but also fortune 500 companies, many, many office pantries of small to medium size businesses, selling only the wholesale pack and not trying to be the everything store. And then even down to just thinking what we do underneath the surface of our core retail business, which is also licensing out the technology that we built.
Price: Yeah. So let’s switch gears a little bit to that. So now you’re six years in the business, you’re looking at other revenue streams and actually launching a business around the software platform, right? Can you share a little bit about what that’s about and why now is the right time to do that? Because that—you know, from an entrepreneur’s perspective, that sounds like a risk of distraction.
Huang: Sure, absolutely. I think we’ve often thought about, you know, kind of different ways for revenue streams, whether it’s advertising or whether it’s—whatever activity outside of selling potato chips online there could be in our business. And so this was just a natural extension, especially considering there’s very few companies that have built the technology stack that we’ve built. So meaning that when you come into the app or the front-end website, that’s all built by us. Which is not that crazy. There’s a lot of companies that do that. But actually, the inventory management software, the warehouse management software, that’s all actually intertwined and built by ourselves.
And so why does that matter to you? Well, two main things. One is label transparency. So when you come into Boxed, we’re the only national retailer that tells you what expiration date—what the expiration date of the item you just clicked on that you’re going to get. So meaning that if you didn’t write the end to end software, that data is held by a module built by SAP, the front end might be built by SalesForce, but all of it is talking together on our stack.
Further downstream, something like yesterday there was a recall of beef jerky. If your stack is not talking to each other, you don’t really know which lots were sent out to which person, let alone physical stores. Then you’re just like, good luck, you know, hopefully you read the paper that there was a recall, bring it back for a refund. But now we even build and manufacture our own robotics in our facilities. And so if you go to some of our newest facilities, 100% our software, 100% our hardware—these little like bot things that go around. I should probably have a better explanation for what they are. “Little bot things” is not very sophisticated.
Price: I think that’s the technical term.
Huang: That doesn’t pay homage to the people who actually designed it. The hardware engineers hate me right now. But even that is built in. So think about retailers across the world that need tools in their fight against Amazon, like, not many choices.
Price: So it seems like what you’ve just described is a competitive advantage, but you’ve decided to license that out. And so how do you not risk giving up what is part of the secret sauce that makes Boxed work?
Huang: I think—and maybe my opinion is not very popular in this sense, but I think Amazon, —when we fight other retailers, like in this like death grudge match, the only winner is Amazon. Like because they’re just running away with it, so.
Price: So you think by empowering other competitors to Amazon, it’s a rising tide?
Huang: Yeah, because other retailers, kind of as you’ll see hopefully later this week is, you know, the things that we get in return oftentimes are things that we won’t build ourselves, or access to stores, access to different assortment, access to scale. So actually working together could be a really powerful thing.
Price: Yeah. There’s someone speaking here tomorrow who’s running for president, Andrew Yang.
Huang: Yeah, the Yang gang.
Price: The Yang gang, who talks about how AI will kill the economy and he has a basic income structure he’s proposing around how to solve it. But it sounds like you have a counterpoint to that, right? You guys have actually built robotics and AI into your warehousing and maintained and grown your warehousing staff. So can you talk about how that—how you’ve made that possible, and maybe how those workers don’t need to worry as much?
Huang: First of all, like I love Andrew. Like I know him quite well, so this is not a knock on him. I think I’m—just because we have a front row seat on automation. Like that big giant New Jersey fulfillment center that some of you might drive by on 78, that thing is fully automated. Like the nickname for that—the project code was Project Star Wars for that thing. When you come in there’s like, there’s shit flying everywhere. It’s just like, even when I walk in, I’m like, “Whose company is this? This is really cool,” you know.
Price: All these little bot things.
Huang: Exactly, like who built that? Like oh my gosh, we should invest in this company. Sorry, sorry, it’s the Coke speaking.
You know, what we found is that when we automated two years ago, we have more humans and more labor on payroll now than we did two years ago, for the very fact that our unit economics got better because we automated, we were able to raise more money, be more profitable, and then now business has grown like however many-fold since those days, and now we need more people. It’s not like—there are still some fundamental technologies that cannot replace human beings. Some of those fundamental technologies are, say, the hand. The dexterity of the human hand compared with the vision and the intelligence of how to pick up certain things has not been replicated in a meaningful way anywhere in the world.
So you see this little toys that are like these little like Emperor Palpatine-looking suction cup things that like pick things up. But those things, like when you’re doing millions and millions of orders, like, a month, there’s not enough speed and scale for that just yet.
So what I’m saying, though, is that throughout the history of time there’s been automation. Whether it’s farm equipment, whether it’s ATMs, the rise of automation often happens in a curve in which human beings adapt. Like there’s less people coming out of college saying, “I want to be a farmer,” because a lot of farming has been automated. So guess what, the next generation of would-be farmers, they go to other jobs. So I would say if fulfillment center workers and kind of truck drivers, if those industries get fully automated, there will probably—probably the next generation of people coming out of school probably won’t be truck drivers and fulfillment center workers. If the economy grows, they’ll go do something else.
Now, the only risk to that is if it automates in a way that outpaces how fast humans can adapt. So meaning that if someone invented tomorrow a perfect dexterous hand that can do everything that we can do, we’re all F-ed. Like you run the other way because like there’s going to be a lot of unemployed people. If self-driving trucks were here tomorrow, I mean like fully safe and ready, we’d be in trouble. But I don’t know, I don’t think it happens that quickly.
Price: Yeah. What keeps you up at night?
Huang: If I have too much caffeine.
Price: When you think about the business and it’s future, what worries you in the evening?
Huang: I think it’s the ever-rising bar of the consumer.
Huang: I think at the end of the day, we could talk all about Amazon, we could talk all about Walmart. We’re all subservient to the consumer, and the consumer bar is ever-rising.
Price: Is it consumers who drive that, or is it Amazon driving that?
Huang: I think it’s a little bit of both. It’s setting that expectation, whether you’re Amazon, or whether you’re us, or whether it’s anyone. But consumers don’t care where that innovation comes. They see it and then they expect it the next day to populate across the entire universe of retailers.
So five years ago, two-day shipping was like unreal for most of our customers. So 90% of our customers get two-day or less shipping. Now, five years later, two-day shipping is like barely passing. Next day shipping is kind of like a B-plus and, you know, same day is like an A-minus.
Huang: So I guess, yeah, we’re all kind of like tiger moms in that sense. It’s like anything under an 85 is a failing grade. So, yeah.
Price: I could just add it to my cart and it just shows up on my couch instantly.
Huang: That’s the expectation these days, and with no—so we were talking about this too, with no dunnage to protect the actual contents of the box. Because, you know, people are very environmentally conscious these days, and they still want it to come perfectly packed and perfectly not broken. So it’s—yeah, it’s not an easy life being an online retailer.
Price: For—to make a prediction, bringing this back full circle, in what year does Amazon start to lose market share?
Huang: Oh, that’s a really good question.
Price: That I did not prep you for.
Huang: Yeah, jeez, okay. I think—so I don’t know about the exact year, but I know if there were to be a decay, it would be the year probably Jeff Bezos is not actively involved in the business.
Price: So just the whole—give me a number.
Huang: What year are we in now, 2019? He’s looking real fit these days.
Price: He is.
Huang: He’s got a long life ahead of him.
Price: He’s like a super hero.
Huang: Yeah. I saw the meme—you saw the meme? It’s like, “I sell whatever the F I want these days.” Did you guys see this? There’s like a meme of him when they first started, he was like kind of nerdy and it was like, “I sell books.” And then like—
Price: I build spaceships.
Huang: Yeah, I sell whatever the F I want now.
You should look it up, it’s a really funny meme. I feel like he’s going strong, so he’s probably got another 30 years left in him, like actively involved.
Huang: 2049, probably. Assuming no legislative action, because there’s like stuff swirling on that front, too. So—because I feel like, yeah, Jeff Bezos is probably one of those founders and entrepreneurs that you’ll have to wheel him out of the office, literally wheel him out of the office, and that will be the final day in office.
Price: Yeah. Unfortunately we are out of time, but thank you for joining us. Everybody, big round of applause for Chieh Huang.
Huang: Thank you.