Boxed reportedly rejected $400 million buyout offer from Kroger

Boxed, the site for buying food and household items in bulk, has turned down a $400 million acquisition offer from Kroger, Bloomberg reports.

Earlier this year, word on the street was that Boxed was in talks with Kroger to be acquired for about $500 million. At the time, other retailers were rumored to also be making bids.

It seems those other interested parties were Amazon, Target and Costco. However, only Kroger made a bid for Boxed, according to Bloomberg’s source.

Boxed, which first launched in 2013, is essentially a Costco competitor. What differentiates Boxed from Costco is the fact that it’s online, offers free delivery and does not require any membership fee.

To date, Boxed has raised about $165 million from Bessemer Venture Partners, GGV Capital, Greycroft Partners, First Round Capital and others. It’s reportedly valued at $470 million.

I’ve reached out to Boxed and Kroger and will update this story if I hear back.

Boxed in talks to be acquired by Kroger for $500 million

New York-based Boxed, the startup for buying food and household items in bulk, is in talks to be acquired by Kroger for about $500 million. Other retailers are also expected to be making bids.

The news was first reported by Forbes and confirmed to TechCrunch by a source with knowledge of the situation. We’re hearing that the company is aiming to make a decision this weekend.

Founded in 2013, Boxed is effectively an online Costco competitor. With just a few taps, customers can order large boxes ranging from cereal to laundry detergent. The items are priced at a discount.

In an era where Jet can sell to Walmart for $3 billion, it’s unsurprising that Boxed would generate buyer interest. The race is on to keep up with Amazon and retailers are hoping to snap up emerging platforms.

But it hasn’t been cheap to build Boxed’s business. The company has already raised at least $132 million from well-known investors like Bessemer Venture Partners, GGV Capital, Greycroft Partners and First Round Capital. Its latest Series C round was in January 2016.

Co-founder and CEO Chieh Huang previously worked at Zynga and before that, practiced law.

This app will help you figure out if you can fit that Costco-sized paper towel box in your apartment

You’re probably going to get a better deal when you buy consumer products — like paper towels — wholesale, but at the same time you’re also buying a very, very large package of said consumer products. So, they might not always fit in your apartment.

Wholesale goods are the primary play for a startup called Boxed, a retailer looking to play the sort of digital-to-your-door Costco game. But there might be a bit of a challenge visualizing how big those packages are, so the company built an augmented reality tool to demo the sheer size of that massive box of Mac and Cheese you might buy through the app. All things said the AR demo is a little bit of a joke. Built during a hackathon, Fong said that it’s primarily a way to help get the brand out there.

It’s a fun little application, though there will probably be a segment of the universe that would appreciate a warning as to how big a wholesale package of toilet paper will be when sitting in their apartment. Instead, the tool is matched with two other feature updates the company is rolling out: a chatbot and group orders.

“It was a fun project for us to build, and one of the things that we kind of like to hammer in is the idea we sell these bulk goods,” CTO William Fong said. “Being able to envision bulk sizes versus retail sizes plays into the brand. The idea behind it was to convey the idea of bulk, help reinforce the measures that hey these products you’re getting are bigger than your retail packs. It’s really gonna help you stock up for the long run. It’s kind of like a branding but also provide a little practical value for those who might find it challenging to say, ‘how might I fit this in my apartment?’”

Group orders help existing Boxed users summon in their housemates or family members to add products to a Boxed order. But those additional shoppers don’t actually have to log in or sign up for an app, and instead just open up a link and start adding various products to the basket. Then the original user checks out, sending off the order to the company’s fulfillment centers. The extra shoppers will get a prompt at the end of the session to sign up for Boxed, as it’s obviously a user acquisition play as well, though users aren’t required to sign up afterward.

Boxed’s play is to try to always keep you stocked up, to the point that it’ll try to figure out ahead of time when you’re about to run out of toilet paper or snacks. You could easily order those kinds of products on Amazon, though Fong says the play for Boxed is to have a small set of huge wholesale products that it can store in its fulfillment centers and ship out. By doing that, it can be more efficient and be able to potentially compete with Amazon, Fong said.

“When you go to Amazon, it’s very transactional,” Fong said. “You check out with 1 or 2 things, what we notice with Boxed is our customers behave differently. They’re taking more time to finish checkout process because they’re browsing. This might go to multiple sessions, days or weeks.”

The company also said it’ll roll out a chatbot with some limited functionality, which allows users to shop through Facebook Messenger instead of having to go through the app. A chatbot might potentially fragment the user experience and yank potential shoppers out of the app, but Fong said they were trying to have a stripped-down experience that would make more sense in a messaging format. The bot may also help re-engage users, Fong said.

So, two new features that could actually be useful to shoppers looking to buy wholesale goods, and one that may-or-may-not-be-useful feature in the AR addition — though, as far niche apps go, this niche is a pretty good one.

Boxed shows off the automated tech it uses to ship toilet paper and more

Boxed offers the online equivalent of the bulk shopping offered at stores like Costco. But big discounts aren’t the only thing the company’s focused on.

Boxed introduced automation to its Union, New Jersey fulfillment center earlier this year, installing a system where the items for shipping are transported to the people doing the packing. And the company says it was able to make the transition without eliminating a single job.

We visited the Union facility, where the company says it ships out 40 to 50 percent of its orders, and where we talked to CTO Will Fong and Vice President of Distribution Rick Zumpano about how technology changes the shipping process. We also got a sneak peek at the autonomous guided vehicles (basically, self-driving carts) that will be involved in transporting goods in the other fulfillment centers.

“If you think about what’s really happening behind the scenes, you’re tapping a few buttons on your phone and two days later a box full of toilet paper, paper towels, your daily essentials just shows up at your door,” Fong said. “So there’s a ton of technology that actually powers these types of transactions and this kind of fulfillment.”