Boxed, the eCommerce startup that sells mainly household goods, has spent tens of millions of dollars on a new automation system that the company is hoping will keep costs down.
According to a report in Bloomberg News, the new automation system will triple the output of its warehouse in Union, New Jersey, without the need for more space or to hire more employees.
“By having a smaller number of products, Boxed can get stuff out the door more cost effectively by reducing the warehouse footprint and the complexity of the operation,” said Clint Reiser, director of Supply Chain Research at ARC Advisory Group, in an interview with Bloomberg. “It becomes a competitive advantage.”
Boxed currently has warehouses in New Jersey, Dallas, Las Vegas and Atlanta and offers customers bulk-sized products similar to those found at big warehouse retailers like Costco Wholesale. Boxed told Bloomberg the company had sales of roughly $100 million last year, which is up from $50 million in 2015.
According to the report, the average order size for Boxed is $100 and includes 10 items. Orders have to meet a $50 amount to get free shipping. “Our strategy is to not chase Amazon,” Boxed Founder Chieh Huang said in the report. “We have to build our business our own way.”
One way Boxed has stood out and pleased both brands and shoppers is by putting free samples in orders and suggesting smaller items, including chewing gum and mints, at checkout to increase the order size and not incur more shipping costs.
“Where does impulse go when you shop online?” said Rick Zumpano, Boxed’s vice president of Distribution, in the report. “A lot of our partners count on that in retail stores, so we offer something similar.”