Thursday, May 15, 2014

Costco in the News: Forbes article on new 'Boxed' app

I like to keep up with Costco in the news (thank you Google Alerts!) and yesterday I came across a Forbes article that I felt compelled to comment on. “‘Costco Of Mobile Apps’ Boxed Raises $6.5M To Take On Amazon Prime,” written by Forbes staff writer Hollie Slade, the article talks about a new mobile app called Boxed and how it is trying to become the mobile equivalent to Costco and aims to entice shoppers to give up their big box stores and instead use the Boxed app to buy their bulk packaged goods and have them delivered to them for free.

What exactly is Boxed? It’s a shopping app that claims to give you a warehouse club shopping experience from your mobile device while saving you the time and hassle of having to drive to a wholesaler like Costco.  There are no membership fees and they currently ship to any physical address (no PO Boxes) in the continental US, but there are a few catches. Boxed requires a $25 minimum to place an order, shipping is free only if your order reaches a total of $75 or more and, I have been unable to find any information on how to make returns to Boxed or if they even accept returns.

Going back to the article itself, my first gripe is that it starts off by claiming that wholesale aficionados spend hours “bargain hunting” in Costcos, but this simply isn’t true. The term bargain hunting implies you are sorting and sifting through non-bargains in order to find a few good deals, but at Costco there is no need for bargain hunting because EVERYTHING Costco sells is already a bargain! Costco limits its markup price on items to 14%, which means if Costco pays $1 for an item they will sell it for no more than $1.14. That’s the beauty of Costco; you can shop worry free knowing that you’re getting a great deal on everything you buy at Costco.

According to the Forbes article, Boxed touts that shoppers can “save between 25-50% on the majority of products compared to most stores, as well as saving time and gas driving out to wholesalers,” but that’s a pretty bold statement considering the numbers just don’t add up. Sure you could save a little time and gas using the Boxed app instead of driving to a wholesaler like Costco, but if you drive to Costco you could take that opportunity to fill up your car with less expensive gas and you could go home with your items that same day instead of having to wait 2-days for the Boxed delivery. As for the 25-50% savings claim, I downloaded the Boxed app (which is free in the iTunes app store) and I did a quick comparison of their prices with the same items sold at Costco and I discovered that the Boxed prices are all MORE expensive than Costcos prices.

Boxed is selling an 80-count box of Swiffer Sweeper dry cloth refills for $17.99, but Costco sells this same item for only $11.79 which is 34% cheaper. The $11.79 Costco price includes a limited time instant manufacturers rebate of $3 off which is good through 1 June, but even the regular Costco price of $14.79 is STILL 18% cheaper than the Boxed price. The photo below shows a Boxed screenshot on the left and pictures from Costco on the right.

Another product Boxed offers, Scrubbing Bubbles Bathroom cleaner sells for $2.99 for a single 25oz can; (which by the way I fail to understand how a single 25oz can of cleaner is considered bulk shopping…); but at Costco you can get a 4-pack of 25oz cans for $7.49 which comes out to only $1.87 per bottle making the Costco price 37% cheaper than the Boxed price! Even the regular “non instant rebate” Costco price of $9.99 for a 4-pack still saves you over 16% compared to the Boxed price.

Boxed sells a 110-count box of Finish All-In-1 Power dishwasher tabs for $17.99 while Costco sells this same item for only $11.49 which is 36% less than the Boxed price! Again, even the regular “non instant rebate” Costco price of $14.49 is still 19% cheaper than the Boxed price. And remember, with Boxed you have to wait 2 days for your items to arrive.

In the article, Boxed CEO and cofounder Chieh Huang stated that he grew up shopping at Costco in New Jersey and when he moved to Manhattan he didn’t understand why things cost three or four times the price in the city. Putting aside the basic economics 101 lesson on why cities are more expensive, maybe he should take a trip up to E 117th St to check out the Manhattan Costco, which has been open since November 2009. Or he could go to the Brooklyn Costco on 3rd Avenue or the Queens Costco on Vernon Blvd or the Staten Island Costco on Richmond Avenue, all four of which are located within New York City limits.

Haung then states that wholesale clubs generate “a little over $20 billion of top line a year,” while I am not entirely sure what he means by “top line,” if he is referring to net sales Costco’s annual report shows that Costco alone netted over $102 billion in 2013 which is considerably more than “a little over $20 billion.”

Haung goes on to say that he is not concerned with what his competitors are doing, but he may want to take some time to check out what Google is up to with Google Shopping Express. Also membership free, shoppers can use Google Shopping Express (from their computers or through the free mobile app) to shop for books, clothing, electronics, appliances, toys, etc, as well as groceries from retailers including Costco, Walgreens, Target, Whole Foods, Toys R Us, Staples, Guitar Center and more. Google Shopping Express matches the Costco price so while Boxed may sell a 44oz bottle of Nexxus Therappe moisturizing shampoo for $18.99, Google Shopping Express sells it for the Costco price of only $11.99 (a 36% savings). The photo below shows a screen shot from the Boxed app on the left, and a screenshot from the Google Shopping Express app on the right.

In another example, Boxed sells a 12-count box of Kraft Easy Mac for $10.99 but Google Shopping Express sells the same product for the Costco price of only $6.79 (a 38% savings)!

The best parts about Google Shopping Express are that you don’t have to wait two days for your items to be delivered and you can order TVs, appliances, clothes and more as well as groceries. The downside though, is that Google Shopping Express is currently only delivering to a few limited areas, but if you’re in one of those locations you might want to check it out.

Wrapping up on the Forbes article, while the author Slade is right that the Boxed prices may be “a snip” compared to what shoppers might pay for the same items at brick & mortar stores like Whole Foods or Duane Reade and even online retailers like; but compared to Costco, the Boxed prices just can’t compete.

Boxed also fails to address the MANY other aspects of a Costco membership that go well beyond simply buying in bulk, including great prices on: clothing, jewelry, electronics, books, toys, furniture, appliances, sports equipment and other non-grocery items. And don’t forget about the tire centers, gas stations, pharmacies, optical and hearing aid departments, photo labs, and Costco travel deals- all products and services offered by Costco at great prices that all come with Costco’s satisfaction guarantee.

I suppose the Boxed app may be worthwhile for someone who doesn’t have a Costco membership and who doesn’t mind the higher prices or the two day wait for their items to be delivered. As for me, I’m keeping my membership and I’ll continue to do my shopping at Costco.

One thing I'm sure Boxed is not going to be able to do is help you obtain a cake to feed 48 people at the last minute for under $20 ;)

Until next time,
the Costco Connoisseur



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