STOCKING UP ON STARTUPS
56 percent of consumers who were likely to order groceries online said they would most likely order from Amazon, compared with 14 percent who would go to a mass merchandiser and 10 percent who would use their local supermarket.
Phil Lempert, a grocery industry analyst, predicted store closings for chains that do not evolve to meet the changing needs of customers. Stores offering curated selections, specialty items, cooking classes and the option to buy online and pick up in person will thrive, he said.
“The bulk of stores — they haven’t been doing exciting things for a long time,” Lempert said.
Josh Hix, chief executive of Plated, a meal kit startup, said the Amazon-Whole Foods deal had immediately changed his discussions with grocery chains. Meal kit companies have a checkered record. But the grocery companies saw an opportunity to use Plated’s data and research on recipes and taste preferences.
“The pace of follow-ups went from ‘This is interesting, and we’ll be in New York again in five months’ to ‘This is really interesting, and how’s tomorrow at 9 a.m. look for another call?'” he said. After years of not being taken seriously, “it was very cathartic.”
Plated held deal conversations over the summer with “virtually everybody” in the industry, Hix said. In September, it sold to Albertsons, a large grocery chain. At the time, Albertsons’ chief executive, Bob Miller, said the deal was “the latest example of Albertsons Cos. meeting our customers wherever and however they like to shop.”
Huang also fielded numerous acquisition offers for Boxed, creating a harrowing few months.
Most of the big grocers “have wanted to kill us, partner with us, invest in us or buy us — all probably in the course of the same conversation,” he said.
Huang, who previously founded a gaming company that was sold to Zynga, decided that the opportunity was too good to sell now. He opted to take the investment from Aeon instead.
The ownership structure allows Boxed to license its technology to its retail competitors in the United States as they try to become more digital. The company is in talks with 10 or so potential partners for various pieces of its technology. They include mobile app technology, personalization software, a packing algorithm that maximizes space in shipping boxes, software that tracks item expiration dates, order management software and warehouse robotics automation.
Boxed, which is based in New York City and has about 250 fulltime employees, sells food and other everyday essentials in bulk. It has built a sizable business supplying snacks and office goods to companies and also earns revenue selling ads to suppliers to promote their items in its e-commerce site and app.
Huang spoke about the deal with Aeon from Boxed’s New Jersey fulfillment center, as a self-driving cart rolled around the corner and slid sideways toward a shelf, waiting for a worker to place a box of Pampers or a can of Planters on its back. Nearby, a three-story automated wall of plastic tubs rearranged itself, while workers dropped handwritten notes to customers into boxes before taping them shut.
Grocery delivery is difficult to do affordably, but tech-driven efficiencies like those developed by Boxed, Amazon and others have forced change on the industry.
“Consumers want convenience and will pay more for it,” said Michael Pachter, an equities analyst at Wedbush Securities. “Once they stop going to grocery stores,” he added, “grocery stores are going to have a problem.”