Before you showed up, I was actually petting it,” Boxed.com co-founder and CEO Chieh Huang tells me as we complete an hour-long tour of his company’s newly upgraded fulfillment center in Union. The smiling, chatty 35-year-old isn’t talking about a company cat. He’s referring to the multimillion dollar assembly line installed just two weeks earlier to process the hundreds of thousands of items Boxed ships from the facility each day.
“Forty months ago, we were in my garage and I had a tape gun,” Huang marvels as he shows off the part of the two-mile conveyor system that seals boxes with digitally encoded tape—all the better to ensure accurate, speedy delivery.
Boxed, founded in 2013, specializes in direct shipping of bulk items like toilet paper, breakfast cereal and pet food to consumers and businesses. It is considered the first online-only retailer to seriously take on industry leader Amazon and big-box stores like Sam’s Club, Costco and BJ’s.
The privately held company has been generating media and consumer buzz for its deep discounts on brand-name products as well as its egalitarian and charitable workplace culture, all of which has made Huang (pronounced hwong) one of the most talked-about Internet entrepreneurs of his generation.
Huang, a North Edison native, went to law school at Fordham and worked at a corporate law firm in Manhattan. But after two years, the child of Taiwanese immigrants knew he “wasn’t cut out for it,” so he and two friends from JP Stevens High School— Will Fong and Chris Cheung—quit their corporate jobs, moved into his friend’s mom’s attic, and developed Office Heroes, one of the first social games designed for the iPhone.
No one played the game, Huang acknowledges, but the app caught the attention of a Japanese gaming company that wanted to invest. Within two weeks, the first-time developers received a wire transfer for $800,000.
“We were like, ‘How did this happen? We’re just three guys from Edison,’” he laughs.
Eight months later, the partners sold their nascent company to Zynga, a San Francisco-based video-game developer. They stayed on for two years, then cashed out. Too young to retire, they needed something else to do. Realizing they and their city-dwelling peers didn’t have the time, the desire, or even the wheels to spend hours driving and then shopping at suburban big-box stores, they came up with the idea for Boxed.
To date, millions have subscribed, but sales still lag far behind the big-name competition, and Boxed has yet to turn a profit. Promotion has been limited. The company is running advertising tests in two markets, but has mainly relied on social media to get the word out. Boxed has already succeeded in breaking through to urban millennials—its initial target market. Huang says 81 percent of Boxed shoppers are between the ages of 25 and 44, but adds that many customers are large families and small- to medium-sized businesses. Boxed charges no membership fee, though there are minimum-purchase requirements. Most orders qualify for free shipping.
“They’re doing a lot of things right,” says John Impellizzeri, director of of the Center for Supply Chain Management at Rutgers Business School. He predicts Boxed will be a huge success. “A large portion of the population has to drive 20 miles to a Sam’s Club, so at some point the 55-year-old mom or dad will say, ‘Do we really want to drive 40 miles and pay a membership fee?’”
Boxed can offer discounts, Huang says, because it carries only about 1,500 different items at a time, usually representing no more than three brands each. That keeps overhead relatively low and inspires manufacturers to cut favorable deals to get their products onto Boxed’s tightly curated shelves. By comparison, Costco peddles about 3,500 distinct pieces of merchandise, grocery stores top out at 100,000, and WalMart trades in the hundreds of thousands.
Some see Boxed as a retail disrupter, but it’s Huang’s progressive customer- and employee-relations policies that grab most of the attention. Last October, the company announced that it would bring parity to pricing on women’s beauty and wellness items, which, according to the Boxed website, can cost up to 108 percent more than the equivalent for men. What’s more, two of Huang’s senior managers take work time to travel the country lobbying against the so-called pink tax, a luxury tax levied by more than 30 states on basic women’s health items like tampons and sanitary pads.
Closer to home, Huang speaks proudly of his decision to minimize unnecessary hierarchy within his company’s ranks. While many companies build separate bathrooms, break rooms and workspaces for various classes of worker, at Boxed, everyone shares. Once a week, union employees help themselves to free lunch bought with money raised from recycling the wooden pallets that carry merchandise into the fulfilment center. More impressively, Huang funds college—after scholarships—for the children of fulltime employees, and the company pays up to $20,000 for employee weddings. Huang says such benefits, though costly, can greatly improve employee retention. He claims the company has lost only 10 employees nationwide since startup out of a workforce of several hundred. (The Center for American Progress estimates the cost of turnover at up to 21 percent of an employee’s annual salary.)
But for Huang, the employee perquisites are about more than efficiency. “At its core, it just comes from me growing up poor and seeing my parents come home pretty beat up. It was tough,” he says. “In New Jersey, you have all different types of worker. You get exposed to part of the workforce you don’t get exposed to in [affluent] Silicon Valley.”
Huang’s parents, professionals in Taiwan, immigrated to the United States when he was a baby. Like most immigrants, they were seeking a better life for their children. As non-English speakers, they struggled in minimum-wage jobs and on unemployment, but always taught their two kids the value of hard work.
Now, Huang splits his time between an apartment in Battery Park City and a home in Middlesex County with his wife and two young children. Yet he says he eschews the lavish lifestyle of a budding mogul. He flies economy—and often horrifies employees by insisting they share hotel rooms with him on business trips.
Huang says he’s committed to investing in New Jersey, where Boxed employs 115 skilled and low-skilled workers. “This site was a huge dairy factory,” he says. “Now Union County is home to one of the most advanced fulfillment centers in the world.”
The Boxed shipping process is highly automated and extremely intelligent. Its new system can calculate how to custom build the smallest box possible to fit the items in a specific order (with an average of 8 to 10 items) and then configure the shipment (or “Tetris” the items, as Huang says) for maximum efficiency. Further down the line, a computer checks, for the third time, the contents against the order and the shopper’s address. It snaps a picture of the contents and sends it along with the package.
“The new system is six seconds faster than the old one,” Huang boasts.
Boxed entices shoppers by including free samples with every order and provides videos that encourage customers to reuse delivery boxes as kids’ castles and other fun toys. The company reduces energy consumption and saves on shipping by selling unique products regionally at each of its four national warehouses. By decentralizing distribution, Boxed can deliver 94 percent of all packages within two days; 51 percent are delivered in a single day, the company claims. Boxed is testing an express service for same-day delivery of fresh food in a few East Coast cities. It also has a new sommelier-curated wine service.
Though Boxed has additional fulfillment centers in Atlanta, Dallas and Las Vegas, along with an office in California, Huang’s heart—and a good portion of his balance sheet—belong to Jersey. The state provides easy access to several major metropolitan areas and many modes of transport.
New Jersey also nurtures direct-shipping culture by offering generous tax incentives to high-tech firms that hire a sufficient number of employees and locate in designated areas. Earlier this year, Amazon opened a 1 million-square- foot fulfillment center in Carteret and announced plans for three more in Edison, Cranbury and Logan Township. Amazon already had centers in Logan Township, Robbinsville, Avenel and Florence. The company employs more than 13,000 people in New Jersey. Other shippers who have invested here include Wayfair, Blue Apron, Jet.com, FedEx and UPS.
“A New Jersey location gives companies easy access to one of the most concentrated and affluent consumer markets in the world,” says Michele Brown, president and CEO of Choose New Jersey, a nonprofit that markets New Jersey as a premier business location. “In fact, a distribution center in central New Jersey can, within a two-hour drive, serve more than 20 million consumers who collectively have nearly $800 billion in disposable income.”
Huang and his original partners (Fong is chief technology officer, Cheung is chief creative officer) hope to continue making Boxed more efficient; eventually, a public offering is likely. For now, data guides their expansion decisions. Boxed’s chief marketing officer, Jackson Jeyanayagam, former head of digital at Chipotle and one of several high-level recruits, culls data that dissects every customer down to the minutia of race, sex, age, geographic location and purchasing habits. This helps steer inventory and marketing decisions; it even determines which products each customer sees on the home page.
“We started by selling toilet paper, and now we have organic coconut oil,” says Huang. “It’s a little bit old school versus new school. It’s old school in that we use old-school merchandising to pick products, but when you look at the back end there’s nothing old school about it.”
Tara Nurin writes the Libations column for New Jersey Monthly.