Boxed, 'the Costco for millennials,' says its private label is blowing up, and it reveals a new front in the war for online shoppers
- Boxed says it saw a startling growth rate of 400% for its private label, Prince & Spring, between October 2016 and October 2018. The private label now accounts for 15% of sales on Boxed's website.
- It mimics a model pioneered by its bulk-shopping competitor Costco, which saw about 28% of its sales come from its private-label Kirkland brand in 2017.
- Private label is relatively new online, but it's likely the model will succeed for e-commerce just as it has proliferated in physical stores, according to e-commerce analyst Sucharita Kodali of Forrester Research.
Boxed CEO Chieh Huang calls the success of Prince & Spring "definitely a top five - if not top three - surprise."
It's a pleasant surprise, of course. Huang told Business Insider in a recent interview that the private-label brand of online bulk retailer Boxed, which has been called the "Costco for millennials," now accounts for about 15% of its total sales sitewide.
Sales of Prince & Spring grew 400% from October 2016 to October 2018. The third quarter of this year saw the highest sales ever for the brand, Huang said.
Of course, it hasn't always been this way. The brand launched just three years ago, in 2015.
"It's driven a lot of growth on Boxed and is definitely something that we're proud of, and want to continue to invest in and grow," Jeffrey Gamsey, head of private brands at Boxed, said.
Read more: Boxed, the 'Costco for millennials,' just got supercharged by the Walmart of Japan
Boxed itself has been around since 2013. It crossed $100 million in revenue in 2016, but is not profitable, according to The New York Times.
A bare necessity
Huang describes the inception of Prince & Spring as a necessity more than anything.
"In the very beginning, it was just like, 'Man, it's really tough to make money on shipping toilet paper online,'" he said.
So Boxed developed its own private-label paper towels and toilet paper, in order to take a larger share of the sales.
"We then started expanding into items where we just could not get our hands on either the product itself or the right size of product," Huang said.
Through Prince & Spring, Boxed offers food items like snack mixes and emoji-shaped fruit snacks called Fruitmoijs, as well as household items like hangers, batteries, laundry detergent, and disinfectant wipes. Boxed now sells more than 100 products through the Prince & Spring line.
The line also keeps customers coming back, Gamsey said.
"50% of Boxed repeat customers buy at least one Prince & Spring item every time they shop at Boxed," Gamsey said.
Customers who shop Prince & Spring also tend to spend more, with average cart sizes "well over $100."
Boxed is far from the first retailer - selling in bulk or otherwise - to come up with the idea of a private label.
Costco's Kirkland Signature is often touted as one of the great successes in this field. It accounted for about 28% of Costco's total sales as of 2017.
Private brands give retailers a better handle on margins, and their unique offerings provide a hedge against big competitors like Amazon.
"If you have something unique, it's un-Amazonable," Simeon Gutman, a retail analyst at Morgan Stanley, told the Wall Street Journal in 2017.
Boxed
Name brands still matter
Huang predicts that Boxed could eventually be earning as much as 40% of its sales - or higher - through private labels, which Gamsey says would put it well ahead of its bulk-selling, brick-and-mortar competitors.
There is a limit, however, and he says Boxed will never shift to be 100% private label.
"There's still a lot of value in the national brand in driving awareness for the service. And also in some categories people just trust the national brand," Huang said.
Most customers who shop online are looking for the national brand first, according to Sucharita Kodali, vice president and principal analyst at Forrester Research.
"Usually when people are shopping online, they're often shopping for brands," Kodali said.
But private labels for both grocery items and consumer goods do have room to grow online, just as they do in stores, as customers begin to trust a retailer and its unique offerings.
"[Private label] should succeed online over time online the way that it succeeds offline because often it's very price competitive, [and] the packaging is very attractive," Kodali said.