Dive Brief:
- The competition to acquire online warehouse retailer Boxed.com is so intense that the company has reportedly turned down a $300 million to $400 million bid from Kroger, anonymous sources told the New York Post.
- Boxed is a hot acquisition target, and Amazon is taking direct aim with meetings between top executives from the two companies. Amazon is seen as a leading candidate because it may be willing to pay a higher price for Boxed’s technology, Supermarket News reported.
- Costco, Target and Aldi also have been mentioned as possible buyers. If Boxed isn’t acquired, it plans to raise additional funding and remain independent, sources told Forbes.
Dive Insight:
Boxed.com, dubbed "Costco for millennials," is an attractive acquisition target because it occupies a unique niche as the e-commerce version of wholesalers like Sam's Club and BJ's Wholesale. Among its attributes, Boxed has a robust private label program and a fast-growing business-to-business channel.
The company's many potential acquirers seek to benefit from these attributes while enhancing the online retailer with their own strengths — and lots of money. It has been estimated that Boxed might ultimately sell for as much as $500 million. It was valued at $470 million in 2016.
Costco and Walmart’s Sam’s Club could use the purchase to jump-start online offerings, while Kroger and Target would benefit from the company's technology and logistics, as well as an entry into the warehouse club space. All would profit from Boxed’s millennial cachet.
Meanwhile, Kroger has been in talks with Alibaba to form a partnership, as well as with Ace Hardware to locate hardware stores inside Kroger supermarkets. There has been no mention of Kroger upping its offer for Boxed but analysts indicated that other factors may drive the eventual decision. Amazon has been pegged as the favorite to win a bidding war for Boxed because of its aggressive growth and size, and the ways it could benefit from Boxed's technology.
"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," Burt Flickinger III, managing director of Strategic Resource Group, told Supermarket News. "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."
Walmart also is expected to make a bid for Boxed. Flickinger said the wholesaler would be acquired by another company within the next quarter. A bid from Costco bears watching because of all the brick-and-mortar operators, the wholesale club has the most to lose from Boxed gaining more competitive strength.
In addition, Boxed’s warehouses are highly automated and robot controlled, giving it an advantage over slower moving competition. Social issues also are a priority for Boxed. For example, it is out in front of the fight against the "pink tax." This applies to some products, like razors, that are priced higher for women than men. The company has said it is willing to accept lower margins to correct this situation.
Mission-based initiatives like these, in combination with its convenient online service, could be a strong lure for younger consumers. Whichever company acquires Boxed would be wise to keep these commitments in tact, as they could provide a strong halo of social responsibility — a growing demand for millennial shoppers.
