Boxed Acquired as Economic Shifts Shake Up Online Grocery

With rising food costs eating into merchants’ margins and changing how consumers shop, the return of Boxed is just the latest change in the quickly evolving eGrocery landscape.

On Friday (Aug. 18), food and household products distributor MSG Distributors announced that it has acquired online consumer-facing wholesale retailer Boxed.com with a plan to bring back the eGrocer with new and returning products.

“This acquisition strengthens our inorganic growth strategy and diversifies our distribution models nationwide,” MSG president Mark Gadayev said in a statement. “The loyalty and trust that customers and brands have in Boxed is priceless, and we are committed to continue this model of offering bulk-sized products to customers at wholesale prices.”

The news comes months after Boxed filed for bankruptcy back in April following the collapse of Silicon Valley Bank (SVB), in which the retailer “held the majority of its cash deposits and other liquid instruments,” according to a filing in March with the U.S. Securities and Exchange Commission (SEC).

Boxed’s shutdown may have been due in large part to this collapse, but few online grocers and food eCommerce have been spared the challenges of the macroeconomic environment of the past couple of years. There was Freshly’s shutdown, Blue Apron selling off its fulfillment centers and equipment, Food Rocket’s demise and more.

These challenges have also affected how consumers buy groceries. According to data from PYMNTS’ Consumer Inflation Sentiment series, “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” for which we surveyed more than 2,000 U.S. consumers in April, 47% of grocery shoppers have switched to merchants that offer better prices, and 57% have cut back on purchasing nonessential grocery items.

Inflation has also shifted consumers away from delivery — the fulfillment method that most pure-play online grocers rely on — towards the lower-cost pickup channel. Research from PYMNTS’ study “12 Months of the ConnectedEconomy: 33,000 Consumers on Digital’s Role in Their Everyday Lives” found that 41% of consumers reported purchasing groceries online for curbside pickup at the close of last year, ahead of the 40% of consumers choosing to have groceries delivered to their homes at a later date and the 34% opting for same-day delivery.

However, with food-away-from-home inflation having pulled ahead of food at home, grocers such as Boxed.com may get another shot. The latest U.S. Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) data show that year-over-year restaurant inflation is nearly twice that of grocery, with the former up 7.1% and the latter just 3.6%.

Indeed, it seems the eGrocery market may be taking a favorable turn. Instacart is once again thinking about an upcoming initial public offering (IPO). Walmart is touting 20% growth in weekly active digital users.

Plus, consumers are getting ready to step up their online grocery adoption. According to data from “Tracking the Digital Payments Takeover: Catching the Coming eCommerce Wave,” created in collaboration with Amazon Web Services (AWS), which drew from an April survey of nearly 2,700 U.S. consumers, 32% of shoppers report that they are very or extremely likely to increase their online grocery purchases in the next year.