Boxed.com rejects Kroger offer

Boxed.com rejects Kroger offer

Online club-size retailer reportedly being courted by Amazon and Walmart

Online retailer Boxed.com has spurned an acquisition bid from The Kroger Co. and is instead sending out feelers to Amazon, according to news reports.

Kroger’s bid was believed to be in the neighborhood of $300 million to $400 million. Industry observers said the Cincinnati-based chain was interested in Boxed to help it boost delivery capabilities, attract more Millennial customers and better compete against Costco.

New York-based Boxed.com has been described as the “Costco for Millennials,” offering consumers and businesses club-sized packages with free two-day delivery in the lower 48 states on purchases of over $49, without the membership fees and hassles of visiting a club store. Plus, it offers its customers 1% in cash rewards on the total price of every purchase. In addition to hard-to-lug warehouse club mainstays of paper towels, sacks of dog food and cases of bottled water, Boxed.com also offers wine and a wide assortment of private label items under the Prince & Spring brand.

Amazon is reportedly interested in the four-year-old firm, with its CEO Jeff Bezos inviting Boxed.com’s founder and CEO Chieh Huang to visit its Seattle headquarters last week. Union, N.J.-based Bed Bath & Beyond has also expressed interest in acquiring Boxed, according to reports.

“Walmart is in an arms race with Amazon and Boxed.com has a higher degree of likelihood of being acquired by Amazon for a higher price,” said Burt P. Flickinger III, managing director at Strategic Resource Group, based in New York. “Boxed.com has some of the best engineers in the business and outstanding technology. Boxed.com could provide a new element of supersonic weaponry in Amazon’s arsenal,” he added.

“Although the Kroger offer was a good, responsible offer, Boxed.com wants to be with the ultimate winner in the arms race which is going to be Amazon or Walmart,” Flickinger said, adding that he expects Walmart to also make a bid for Boxed. He believes Boxed will be acquired by someone within the next quarter.

“Walmart is hiring a lot of Cornell students away from Amazon and Walmart is hiring the best and the brightest in the industry worldwide and has a lot of unannounced new initiatives coming,” Flickinger added.

Bill Bishop, chief architect and co-founder of the Barrington, Ill.-based consulting firm Brick Meets Click, said Kroger has excelled when it comes to sourcing and implementing technology.

“Kroger has done a good job of turning over stones to make sure that they don’t miss an opportunity, and I think Boxed was one of the stones in that category, as is Overstock and there has been a tremendous amount of buzz around conversations with Alibaba,” Bishop said.

“What Boxed could have afforded Kroger was something that would have been quite complementary to their business and consistent with being sharp and being on spot, as I do think Alibaba’s conversations are,” he said, noting that he expects consolidation of both brick-and-mortar and online retailing to accelerate.

“I am sure officials at Kroger feel that if they could use Boxed to improve the profitability of our growing segment of business that is online it makes huge sense,” Bishop said, adding that Boxed officials are likely holding out for higher bidders.

“It is probably not surprising that the Kroger folks were rebuffed because I am sure that the expectations of whatever the purchase price is at Boxed are pretty high,” Bishop said.

Boxed operates highly automated robot controlled warehouses, and is known for outstanding benefits for its human employees, offering perks like paying for the children of employees’ college education, and paying up to $20,000 of the cost of an employee’s wedding.

Boxed has also made a name for itself by taking a stand on social issues. One example is its fight against the “pink tax” (#RETHINKPINK), on household products, such as razors, where many manufacturers charge more for items marketed to women over their male equivalents. “We want to take a stand to correct this, even if that means taking a hit on margin,” the company states on its website.

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