Connect 2018 Keynote: Adapting to Consumer 3.0
Jackson Jeyanayagam, Chief Marketing Officer of Boxed.com discusses how his brand understands and communicates with its customers.
I’ve good news and bad news. Bad news is I usually have an opening joke to break the ice with you guys but I already used it earlier in the panel, but the Costco-Amazon joke could be missed and I’ll talk to you later at drinks. It’s funnier then. But good news is up…you guys will appreciate this, I’ve been A/B testing that one and it seemed like it worked well with you guys. I’m going to keep using it because sometimes it doesn’t go off so well, depending on who you’re talking to, but you guys seem pretty cool and chill, so thank you for that.
So I’m Jackson, CMO of Boxed. I’m not going to explain who Boxed is since you guys already heard it, so I’m going to jump right in. I have a video and I talked a lot about product earlier and how important product experience is as well as the customer journey. I’m also going to talk about employee advocacy and engaging employees as a way to engage the customer. And oftentimes, people, when they hear customer or consumer 3.0, they assume it’s Gen Z, like the 13- or 14-year olds that are going to be driving all of our decision-making as marketers are the most important generation.
But actually, I think 3.0 is more of a psychology. It’s more about how consumers are thinking, at least from a U.S. perspective, the political landscape has influenced a lot of that we’re…consumers are making brands choose which side they’re on. Not necessarily like a red or blue, a political affiliation, but more like: what do you believe in, what values you believe in, what do you care about, are you going to put your money where your mouth is? So I think there’s a whole evolution of how we think about engaging and responding and building affinity with a customer.
It’s not a Gen Z, Gen Y, Gen X thing, it’s actually an overall consumer 3.0 thing. But before I get into my presentation, how many of you guys have watched the show “Silicon Valley?” Okay, good. Awesome. So my favorite scenes…and this gets to kind of it doesn’t matter how creative your marketing is, how analytical and data-driven you are, if you don’t have an awesome product that’s actually relevant to the customer, everything else is kind of bullshit.
So this scene, if you guys have seen recently, you’ll know exactly what I’m talking about. It’s where Jian-Yang is presenting to investors on his amazing idea that Erlich thinks is a virtual reality Oculus competitor. It’s actually something that sounds like Oculus but not quite but talks about why product is still very important and still number one. –
[Jian-Yang] Question for you, what’s a better than octopus recipe? Answer for you, eight recipes for octopus. My grandmother gave me a family recipe before she died in a horrible way. – [Man 1] What?
– [Man 2] Sorry, we knew Jian-Yang’s app was in the food space, but we assumed that it was camera-based. Like if you take a photo of food, the app returns nutritional information or recipes or how it was sourced. – [Erlich] Yeah, like Shazam for food.
– Exactly. But this, I mean this is…- Shazam for food.
– No, shit. Shazam is not my vision.
– Of course they know that you’re not pitching Shazam. That already exists. This would be a Shazam for food.
– Sorry, language barrier. You speak Mandarin? Anybody? No? [foreign language]
– That’s not Mandarin.
– He’s a stickler for the accent.
– No, my app is a seafood, like a food in the sea.
– That you can see.
– Oh, see food, S-E-E food.
– Oh, see food, now, that we like. [crosstalk]
– So if you saw that scene or that episode before that, he had thought he heard Oculus and he freaked out and it’s kind of poking fun at Silicon Valley. If you know the Valley, you know how a lot of investors can go a little crazy for the newest thing, the hottest thing, and I see people here laughing too because you know how this is.
And at the time, Oculus, if you had an Oculus competitor, everyone was willing to fund you. So he went into all these investors with these Sequoia and Andreessen Horowitz-type investors, then he got there, literally right before the meeting, he hears that’s an octopus recipe which clearly no one needs eight recipes for octopus. Maybe they do, but most people don’t. But the other day, when we were talking about “engaging your customer” and what Boxed tried to do was not solve for something so niche and so unique and so random that only seven or eight people in the world would need.
It was really solving a bigger pain point. But when they started out, they started out in a garage, in Chieh, my boss, one of the founders and CEO’s garage, and he jokes that in suburban Jersey, this is not a common thing to see a bunch of like pallets and trucks coming in and out of a garage in a cul-de-sac. And his wife and him…At first, his wife hated him for it but she said that his neighbors thought he was either building the next meth lab for like “Breaking Bad” or actually building a next online club wholesale.
Lucky for all of us, it was the latter. But what’s interesting and it really makes you realize, like being in a startup, how really turnkey they were. They essentially went to their local Costco, they found 500 items. They built an app. And these guys had launched a mobile app before, sold it to Zynga for a modest return, like not enough FU money to go live off, retire in a beach, but enough to like have a little bit of freedom to choose what they wanted to do, which is start a new company.
So they ripped off these products, said here’s 500 SKUs at Costco, seem like really popular ones, launched an app, put it into App Store, spend about $2,000 in advertising. Because they knew how Android and the Apple Store worked really well, they knew exactly how to get downloads, if you got that app in Jersey, you picked the products you wanted, they would get in their car, they would drive to Costco, they’d buy your product, and drive it to your door. And they did $80,000 in first 2 months.
In the first full year of doing just that, they did 8 million. Funny enough, if you worked at a CBG, how many guys have worked at a CBG before, or worked on the other side of one? Okay, so you know, the one guy right there who raised his hand, it is very difficult to go right to a P&G or a Unilever and say, “Hey, we want to buy $10 million of Bounty.” P&G would just laugh you out the doors, say, “Go to Costco because we’ll sell 100 million Bountys alone just to Costco.Forget Old Spice, forget Gillette, forget all the other products.”
So for them, $8 million is great but it was pennies to most of the CPGs so they kind of had to do this Instacart model where they were still going to Costco and 90% of the products were actually bought from a Costco and just selling it to consumer and the Costcos knew, because I’m sure some of you are thinking, “Oh, did Costco not knew?” Yeah, they actually knew it. We were a small business to them. They didn’t care because they were doing $150 billion annually.
So the opportunity was pretty large to grow that base without pissing off Costco and getting in front of the CBG. So as we grew, eventually 2014, 2015, took on funding, built a couple of warehouses or leased them, launched private brand. And private brand, if you follow the CPG retail industry, is one of the hottest trends right now. There’s a reason Amazon, Whole Foods, Trader Joe’s, Kroger have all launched a private brand.
People and consumers are becoming less and less loyal to CBG products because it’s somewhat of a commodity. As long as a brand looks and feels like it’s quality and I could save 25%, 30%, I will gladly buy Kirkland, 365, Uniquely J which is Jet or Amazon has a few different ones. And Amazon’s really sneaky too because they’ll let you advertise on Amazon. They’ll learn all the data about who’s buying Gillette, who’s buying Dove, who’s buying Old Spice, and guess what they do six months later?
They launch their own for about 45% of the price, and as soon as you search that product, the second, third thing you probably see in the Amazon Choice happens to be an Amazon brand. So there’s a huge trend there. These guys are on it early, again, well before I joined, launched Prince and Spring, our private brand. And then we went in 2016, 2017 and launched four fulfillment centers. What’s interesting though is the opportunity.
So, I didn’t realize this till I interviewed… When Chieh told me, I’m like, “Well, how big’s like bulk wholesales, like Sam’s, Costco’s, BJ’s primarily North America but they’ve expanded very quickly globally.It’s got to be like 50 billion?” I was very wrong. It’s a quarter of a trillion dollars as of 2015. Take a guess what percentage is online. Wild guess.
Five percent, seven, four? Now, of the 2%, guess how much is mobile. Yeah. I saw somebody who was saying zero. Zero. So, kind of crazy, right? We, at least, in the U.S., got our heads around buying diamond rings, we’ll buy homes, we’ll buy cars, but all that online, but some reason, we can buy lettuce and paper towel and toilet paper, that’s too much.
But we’ll buy a diamond ring online, no problem. What’s interesting too is people will say, investors, in fact, turned us down saying, “We believe in the Costco model. We’re like, “Well, they don’t even have an e-commerce presence. They just launched it two years ago.” This is in 2014, and we’d go to the investors and say, “What, are you crazy?Like e-commerce is the future. You see where it’s all going.” But yeah, but Costco is like the model, the numbers work. And yes, Costco is amazing.
I can’t shit on it. I have two sisters-in-law and they literally go to Costco every two weeks and I’m like, “You’re taking money out of my daughter’s college fund. Like just shop with us.Like it’s basically the same except you save a lot of time.” But they love going. If you’ve been to a Costco, it’s actually a pretty amazing experience. Free samples, they shop around, but they have five kids between them. So for them, it’s actually part of getting away from the house and spending a day there. That’s part of the experience.
But there’s a lot of other people like their kids, like me, that grew up with parents dragging them to Costco, dragging them to Bed Bath & Beyond, dragging them to Home Depot, and want no part of that. But what’s interesting is a lot of financial investors, a lot of Wall Street will say, “Costco…” They’re very bullish on Costco and brick-and-mortar specifically because of the model. But I kind of look at that and I harken back to 1999.
You guys remember what happened in 1999 with Blockbuster? First of all, how do many people know Blockbuster Video? Okay, good. I did this to my team the other day and no one raised their hand, saddened me a little bit, I’m like, “God, am I that old?” but Blockbuster Video was the Friday night, you go with your family, you rent a VHS. It was like an experience, right, a big thing. And you could go any Friday night, even a Monday night, it would be packed.
Now, where’s Blockbuster? But in 1999, the CEO of Blockbuster, who no one knows his name for a reason, Reed Hastings came to… Reed Hastings, the founder of Netflix, said, “Hey, I don’t know if I can do this.This is like really hard. You guys already have the footprint, thousands of stores. Would you buy us? Price tag: 50 million.” He said no. They didn’t even do due diligence.
They didn’t even go through the process. Said, “You know what, you guys are a fleeting thing.You keep doing your thing. We’ll keep building our stores.I think we can learn from what you guys are doing, but we don’t need to buy you.That 50 million, we can invest. Guess what we could do that 50 million?Put up 20 more stores.” Well, fast-forward to 2018, there’s no Blockbuster. The last one closed two months ago. I know, it’s sad. I heard someone say, “Oh, it’s sad.” But Netflix market cap is 140 billion.
They could have bought it for 50 million. And that’s like… There’s so many examples of that. And I’m not saying that’s going to happen Costco overnight, but 20, 25 years, maybe less. Think about your kids. Maybe think about you. Definitely your grandkids, they are not going to spend their whole day shopping for things like that, when they can easily get it delivered to your door. So the opportunity is pretty large.
But from a consumer standpoint, at the end the day, we sell bulk. We don’t want to sell retail SKUs because the moment we sell a retail SKU which is like one item, we’re Amazon. And we don’t want to go head-to-head with Amazon. That is a losing proposition. Amazon winning helps us, as long as we stay in our little bubble, we can benefit from them. But from a consumer standpoint, crackers, water, soda, you can get that anywhere, especially in the major cities, metropolitan areas.
We’re in all the 48 states. From San Fran to New York, you could go down the street, there’s a Duane Reade, there’s a Bodega, there’s a little mini mart, there’s a grocery store, and then there’s one of these options, either online and physical footprint. So as a start-up, the strategy can be very simply put, “Let’s just see what happens.” Right? You guys have all been here. Maybe most of you have been here at some point, maybe you’re already here now, we’re just trying things.
You’re just hoping that it works. You’re spending a little bit of money here and there. You’re A/B testing the shit out of everything and like, “Okay, that’s the one that works, let’s go scale that.” But as you scale, as you take on more money, as you grow, at least as a startup, you cannot get to 300, 400, we passed 100 million a couple years ago, so decent size but nowhere near where we need to be to compete with those guys. As we scale, we need a clear core strategy that we can communicate, not only to investors but to our customer and it needs to be done in such a simple way that we create affinity and loyalty with them.
So for us, it really comes down to being relevant to them. As I said earlier, you might have heard this from the panel, we will never beat Walmart on price. No one will, just because of their buying power and especially when you add in all the properties underneath. We will never beat Amazon, nor do we want to, on same-day delivery. One, the scale, the cost is so expensive, what we’re shipping.
We don’t need to spend all that extra to ship it to you in same day. If you need 24 packs of macaroni and cheese within 8 hours, it’s a little odd, there’s probably a better place for you to get that. Within two days seems reasonable for us. So we really have to focus on what does personalization look, from acquisition to retention to loyalty, and I’ll talk about some of those examples. But, within that, there’s some core strategy as to how we differentiate.
One of the things I talked about earlier is product experience. Your product has to stand on its own. When I was at Chipotle, during the food crisis, the only reason we’re not one of those fast-food restaurants you’ve never heard about again is because the product was awesome. We had loyal fans come back to us, say, “You know what, I think I’ll be okay going back.” Now, they don’t come back to us, they don’t go back to Chipotle as much as they used to, we used to be at 10, 12 times a month, realistically, now they’re 2 or 3 times a month because there’s other options, but they came back.
And that’s the only thing that’s kept them hanging on for dear life as they had for last few years, the product experience. I’ll talk about heart and science in a little bit, the balance of data and actual instinct as a marketer, as a brand, as an organization, how important that is from the top all the way down to the intern, and anyone who steps foot in the doors. Knowing the customer, I also mentioned, talked about that a little bit.
One thing I like to hit on is in-house creative team, media team. I strongly believe the marketing functions that will survive and evolve will actually bring creative in-house. And I always say, “I want my Don Draper, I want my creative director on the couch overnight with me as we’re launching the new site, as we’re pushing out the new app features, as we’re launching a new exclusive product.” When they’re tied at the hip together, it’s amazing how close they get to the customer and how they think about the retention cycle and how you think about every piece of creative that goes out.
If you have an agency, I doubt your agency’s obsessing over every single email, every single push notification that goes out, right? They’re thinking about the big ranking they could put in their portfolio and then go on to the next meeting with Colgate or whoever the other client is that they have. So for me, it was really important to bring all that in-house. And then finally your values, which I referenced earlier, which I’ll talk about in a second as well. So we’ve talked a lot about the customer.
And when I started, I came from a larger brand, so, you know, for me, customer segmentation was important. My first meeting, I had this intake and I met with everyone in my team and I said, “Who’s our customer?” Right? I thought I’d get a pretty clear concise answer, but I forgot, three years into a startup, you don’t really spend a lot of time really fine-tuning those details. It’s more like, “They look like this, they look like that. Let’s just go get as many as we could, and honestly, let’s get anyone who’s willing to pay, you know, 50, 60 bucks on an order,” right?
I mean, you’re just in survival mode. But as it grew, as we got more investment, we had the opportunity to refine our customer base and we hadn’t done that yet. And everyone kept telling me, “millennial mom.” I’m like, “Well, first off, millennial mom on Facebook is the most expensive audience to bid on.” So if anyone’s on the acquisition side, you know how expensive that gets. Secondly, you know, a millennial mom in the suburbs in the U.S. who’s had two kids and is 23 is very different than a partner at a law firm who’s 36, living in Manhattan having her first kid.
I mean, they couldn’t be more different, but technically, they’re millennial moms, right? So how do we break down who our real core customer is and how do we go after them? I had that unenviable task of going to pitch my board on doing a segmentation with Kantar Group, one of the leading retail research firms in the world, because I wanted a name behind the buzz. We can go to CPGs, I was going to investors, potential on the IPO roadshow. I want to say, “Hey, we know our customer and we got the best to do it.”
It was a quarter million dollars, $250,000. That is not an easy pill for any startup CEO or board to swallow. But I was like, “Guys, trust us, we have to do this.” Why can’t we just like look at our customers and find out where they live and like start doing… “No. We can do that secondary.” we need to start with who our prospective ideal customers are because in our funnel right now, we have a couple million people, that is such a small sample and that’s a consequence of how we marketed in the first two or three years, right, so let’s not…Make sure we’re not focused just on who we actually attracted on digital marketing which optimizes for a certain kind of customer.
Let’s look at the big funnel and prioritize. So we took a step back and they approved it. We started to look at the whole ecosystem. And basically, this is a picture of over the 12 months, we’ve qualified it by, “Have you bought one CBG product online?” So you would assume that’s a pretty wide base. Now you’re going to get everyone, this is kind of a just subset of 45 different segments.
We got the dude in the man bun, no offense if you have man bun, those are cool, but he was one guy. We had frat fraternity bros there, college bros there. We got the nice families here. But half these segments are my sisters-in-law. They love Costco. They go all the time. So we’re never…we could be selling our products for $2 compared to a $25 SKU in Costco, they’re still not going to shop with us, right?
So we have to say, “Listen, there’s Costco diehards that we’re not going to get to.” But within all those other segments, there might be some unique opportunities for high value, high likelihood to repeat, high likelihood to refer type customers. We narrowed down to five. These were two of the biggest ones I’m going to focus on. This is, I like to call, my hashtag adulting. We tried to avoid the alliteration from the big brands, you know, and I was there too, in branding these, where it’s like a nice cute name doesn’t really mean anything, I wanted to relate to our employees.
Hashtag adulting, this might be some of you guys or your friends. This is essentially a young couple, they just got engaged or married, they just bought a place, they just got a puppy, and/or had a baby. And they’re going through a life stage, and I see some of you smiling so I feel like this is you, so I’ll start looking at you who are smiling. This idea that like, “Okay, I’m leaving my last life behind a little bit. I still like to go out once or twice a week with my friends, but I have a mortgage, I do have a baby, I have to start thinking about how I want to spend my money and my time,” and that’s a big life stage.
Generally when people are shopping in life, there’s three points in life where unanimously, you’ll reassess all your shopping behaviors. It’s when you graduate college and get a job, when you get married, and when you have a kid. So those last two are really critical, oftentimes combined. So what a great opportunity for us to enter into your life and say, “Hey, you don’t have as much time as you used to, you probably don’t want to spend $100, $150 extra going to the grocery store over and over again. We represent a great option.”
Right? What’s interesting about this audience is they’re also struggling with like, you know, the separation of their single life, doing whatever they want, traveling whenever they want, and this new life, so there’s opportunity for us to engage with them from a creative standpoint, emotionally, kind of say, “Hey, we’re here with you. We understand it. We know what you’re going through. Here are some products that might make it easier for you to host at home with your other friends, who have kids,” for instance.
What’s also interesting is they transition into this nice lovely family here, we call them the Joneses. So the Joneses essentially are what they look like, married. Now they’ve gone from a Brooklyn condo, they need more space. I was just talking to someone earlier about this exact idea. Now they go to Jersey, I’ll be using the New York reference, Jersey, Connecticut, Upstate, they have a backyard, they have 2,500 square feet, they’re living the life, right?
Like oh my gosh, I have more space, less time. They’re not less lazy. They’re definitely still busy. They have a kid who’s four, they have another kid who’s eight. The last thing they’re thinking about is spending five hours at a Costco. So how do we engage them knowing that they started like that, but now they’ve come here, but they grew up in Amazon. They probably have a Plated or Blue Apron meal kit and they have some kind of third subscription.
So we know there’s an opportunity to complement those other solutions and still provide them extra time and convenience and value at the same time. And which also means we can then ignore some of these other customers, because these are our highest LTV…highest potential customers to come in and also, just human nature. Their friends look like them, meaning they are likely to refer their friends who will then get into our fun, would tell their other friends and so forth.
It’s like that moment when Airbnb and Uber both had it, when it felt like everyone around you was saying, “Use Airbnb.” I remember too, someone said, “Hey, use Airbnb.” I’m like, “I’m not going to stay on someone’s couch.Like, I’m going on a trip. I’m going to get a hotel.” He goes, “That’s not what it is.” I didn’t believe him. I thought it was just some small startup like a couch-surfing startup. And then two weeks later, must have been like four or five people within the same time frame, it was the weirdest thing, really, “Airbnb, Airbnb.”
And Uber had that same moment. The reason that happens is awesome product experience, very clearly targeted audience, in their case probably early adopter, who then are around other people who are very similar to the audience they are going after, who start talking about it and sharing because the experience is so on point and it solves a big problem. Exact same thing here. If we really narrow down who our customer is, they know other people like them, they’ll talk to them, they’ll tell their friends and they’ll get them in the funnel.
And my CAC now went from $35 to zero, right? So it pays for itself in a lot of ways. But, as a startup, you know, and I’d… Again, I came from those large brands where…and you guys, right, know this experience, the segmentation lives. It’s 105-slide deck. It’s beautiful, great photos, someone spent tens, hundreds of hours on it, but it’s sitting in a Dropbox or sitting in an archive folder.
No one’s actually using it. And once a year, someone presents it. They do an update to it and then it’s gone, right? No one’s actually applying it to digital acquisition. No one’s applying it to retention, brand, creative team are barely referencing it. So for me, it was really important that we integrate it into all the points of the journey, when it comes to how we market and also how we bring products live from a private brand standpoint, from a UX standpoint, loyalty retention, cross selling, product organization, everything.
So every piece of the funnel and every owner within Boxed had to really understand this segmentation so it wasn’t like I just presented to them. I actually brought them in early on with the research team and I was a little nervous. Because bringing your CTO in and bringing your head of merch and your head of ops in, and even your finance team in that early can really take a conversation on customer segmentation down the wrong path, but it was important to have that buy-in early, so we can apply it through every piece of the business.
So what we netted out, as we started digging a little bit, because we have the first-party data, it’s such a powerful thing, right? Right now, Instacart has an amazing position because what do they have? They have all the data from all the grocery stores that are willingly given to them. So they own the customer. Five, 10 years from now, those grocery stores are going to feel like Toys “R” Us 10 years ago with Amazon, right?
They’re going to be, “Shit, what’d I just do?” Same thing with Postmates and DoorDash, they own all the data. So it’s a short-term gain, right? Wall Street’s happy, investors’ happy. Great, you’re an e-commerce. Guess what? You’re literally giving them your customer.
So five years from now, Postmates goes to Chipotle and says, “Hey, pay me a $20,000 a month license for your customers. I’ll reengage them for you, I’ll do all these things for you.” Chipotle’s, “No fucking way. I’m not doing that.” “Great, I’ll go to Qdoba, Taco Bell and sell them your customer,” and you can’t do a thing about it, right? So we knew the first party data is such a powerful tool. We’re in such a great position. What else can we do with it, besides sell it? That can actually be advantageous internally.
So on top of the segmentation, we did an analysis over who our best customers were. We looked at low likelihood to use a promo. We looked at high referral rate. We looked at shopping across multiple categories, because for us, because we’re curated SKU, if you’re only shopping beverages and we lose a couple of water products, then you’re gone for good, right, because that’s all you bought from us. So looked at a few categories and we netted out on her.
How many of you guys have seen “Modern Family,” the show? Okay, this is Claire. I didn’t watch that often, but apparently, she’s an awesome character, but my creative and brand team worked with me on this. She is what we call Jen and we call her Jen because in the late ’70s, early ’80s, Jen was the most popular female name. I didn’t know that. But if you know people born late ’70s or early ’80s, you probably know a lot of Jens. What’s also interesting it she’s not Gen Z, for sure, she’s not Gen Y, she’s Gen X.
Gen X, ironically enough, is like the most forgotten Gen X but yet half the CEOs in the U.S. are Gen X-ers. They have a huge amount of money they have no time to spend. They’re growing families. They’ve been waiting for the Baby Boomers to retire so they can kind of step up in their careers and no one’s marketing to them, but they grew up on tech. They grew up in a balance of tech and the omni-channel, really, experience.
So what we found with our customers is yes, 80% of our customers are Millennials but about 15%, specifically our best customers, the ones who come back often, spend three to four times what our average customer does annually are Jen, actually early 40s, so not as sexy as like, “Oh, we have the 31-year-old urbanite,” yeah, that’s an important customer, but it’s actually the Joneses, Jen, she’s busy.
And CBG’s always said this thing of Jen or the mom, their mom target was the COO of the household, right, she ran the family. Our Jen is actually a COO. She’s COO of her company and she’s married and has two or three kids, so extremely busy, has no time. And I talked about how she’s successful, busy and cool. I mean, she’s cool but she’s not too cool. She’s like Pandora-cool not Spotify-cool, if you know I mean, like 2015, not 2018.
And that’s okay, like we embrace that. There is something about that. She’s an early adopter but not so early. But when she says, “Hey, I bought this thing from here, I have this product,” her friends, her neighbors, all the people she influences listen to her. So we started digging a little bit into her. What does she do? What is her behavior?
So we could impact specifically the retention cycle. How do we engage her and when? So unlike Amazon, you can go to Amazon two or three times a day if you have Prime and you’ll shop. I’ve done this many times, like, “Oh shit, I forgot this, I forgot this.” Well, it’s Prime, free shipping, no minimum shipping. I’m getting it within 24 hours anyway, so common behavior, right? Two, three times a day, no big deal.
That would crush us because…just because of the nature of our scale. Big products, we need people to come check out with big, big products, $100-plus orders. When you’re talking about $100-orders of this size, you know, 20-pack mac and cheese, 15-pack of paper towels, it takes a few days. You’re probably talking with your significant other about, “Hey, what did you buy? When are we going to run out of something? I want to get two things, but I want to wait till we run out of peanut butter.Little Johnny has a fruit snack, so let’s wait two or three days.”
So there’s a lot of conversation going on. And with Jen, our best customer, three and a half days from the moment she adds the first thing in the cart to the moment she checks out. She also starts on mobile app, ends on desktop. And what does that tell you? It’s interesting, right? It tells you that she’s probably at a place like this, at a conference. She’s at the doctor’s office, she’s at her office.
She’s everywhere but home because she’s busy and she’s like, “Oh shit, we need this.” An hour later, thinks about something, “Oh, we need this.” Next morning, she thinks about something else and is adding constantly on mobile, but when she gets home, she’s sitting with her significant other and they’re actually going through the house, literally, and we know this from a lot of our customers, taking the app, going to the kitchen, going to the bathroom, going to baby’s room, saying, “What else do we need?” and adding and they check out on web, ironically enough, over 3.5 days.
Also from the point of my retention team, because if they trigger an abandoned cart message within that first two hours, Amazon, that works, right, because you likely bought the Head & Shoulders somewhere else, because of our nature, she’d probably be pissed, she’d be like, “Dude, you should know me. It’s going to take me three or four days to build this thing up.” So our abandoned cart actually customizes for each cohort based on the data we know about them. Two days, more likely for a one-and-done or a potential one-and-done, or someone who’s early, we need to get them before our third day because there’s a chance they went to the bodega or the grocery store and got everything.
But with Jen, because she’s so important and we get to fourth or fifth day, now it’s panic. Right now, it’s like, “Shit, do we throw a promo code? What do we to pull that revenue forward?” Like what do we do, right? You start working through the magic because we cannot afford to lose her. So that really becomes an important trigger, literally and figuratively for the CRM team in terms of how to communicate, but also shows her that we know her and we’re engaging her very specifically to her habits without being creeps about it, which is important.
So, I have other data slides on that too and I’m happy to share those later on, on who she is and what she does. The other piece about Jen and why AI is so important to our retention, and this isn’t something we use for acquisition because it’d be hard to convey nor would it be of value to a new customer. Everyone talks about voice ordering, right? I do think voice ordering is the future in a lot of ways, the voice activation Alexa and Echo and so forth.
But if you heard about what the top three or four searches are, it’s really never around purchases. It’s around weather, it’s around music. It’s everything but purchase, right? Now, that might change eventually, but you know, our thesis is for things like toothpaste and water. you don’t want to think about it. These are low consideration products. You can’t run out of it.
Like, I can’t run out of my three-year-old’s pouches in the morning. My life is hell. I will not get her out the door. She’s falling on the ground screaming. I look like I’m an abusive father, it’s so bad. So I know I need to have my pouches there. I cannot run out of it.
However, I don’t want to think about it, right? So how do I think about that in the cycle of my customer? Well, we talked about 20 minutes versus 3 hours in Costco, how about if I gave you those 20 minutes back? I’d argue that our family, the one I talked about, even 20 minutes, is 20 more minutes at work, with her family, in the park, whatever she likes to do, so everyone talks about, “Hey, we want to get more people on site, time on site spent, time in the app,” I would say, “Never come back to my app, never come back to the web,” because if I have a predictive model, it says, “Hey, you’re about to run out of toothpaste, peanut butter, and, based on you and people who look like you, bread, you should stock up now, Press Yes, press 1, respond back to me and we’ll refill it.”
Oh and by the way, there’s incremental upsell here. If you’re buying all these things, why aren’t you buying jelly?” Right? So a great opportunity for us to engage you and it’s sort of Subscribe & Save, but customized to you. How many times you got in Subscribe & Save on Amazon, and be like, “Shit, came way too early.” Now you’re stuck with all these extra things. You don’t want to cancel it because you need it, and you can’t customize those order dates very easily because your frequency changes. Well our data science and AI team knows that about you and all those other people who looks like you so it allows us to now infiltrate your experience so you never have to come back to the site.
And I would say, if I can even give you 20 minutes back, let alone three hours, that’s a good experience. You know, finally, when we think about integrations and partners, this is an important one in terms of how we not only acquire but retain, so we work closely with Venmo, PayPal, all the credit card companies because they’re all trying to figure out, “Hey, how to rob Peter to pay Paul,” right? How do I get someone to stop using Amex, to start using Venmo? How do I learn more about your demographics because we think you have more of a Venmo customer than Costco does or Walmart does.
So they actually fund campaigns for us to actually get people to switch or start using their Venmo. And it’s interesting, Venmo’s doing some really, really cool things, one of my favorite companies right now, and some of the things I’ve heard they’re going to do is, I think, revolutionary for mobile commerce. So we partner with them as well as Google and Android to get first billing on the App Store. If you guys who run app companies, you know, when you got that first billing on the App Store, there is nothing like it.
You cannot pay your way to get in there and it is one of the best places to be and in exchange, we give them a lot of data and insights back into kind of App Store performance and what we’ve seen between the two. So it’s a really interesting place for us to play and it’s actually much cheaper than some of the other channels. This last one over here is an example I talked about, people going through the house, this is actually how we launched the app experience if you’re new.
When you download the app, you actually go through your house and pantry because you hear a lot of customers say, “This is exactly how I shop at home, so can you mirror that experience?” We actually changed our app experience so that people can go through all the places in their house and refill and restock up as a result. I talked earlier about the heart, and this is a big, big, big difference maker, in my opinion, why I joined Boxed coming from Chipotle.
You know, Chipotle was driven by value. If you know the Chipotle story, it was food with integrity, right, the idea that we’re going to change the way you think about fast food. It’s all fresh. Part of the reason they got the E. coli is that you’re doing fresh food, no process, right, that’s a trade-off. But the idea is it’s fresh. It was cooked that day you’re eating it. It’s not healthy, we never said healthy.
That’s high carbs, by nature, right, but it’s food that you know, you can buy it at a Whole Foods or Trader Joe’s or a Mexican grocery store and you can pronounce every ingredient. Boxed is driven by values, two very different things. Right? Driven by value and food integrity, values at Chipotle, eh, but this value as a company is what we care about. Boxed, we have a set of values that we care about and that has nothing really to do with the product but actually has everything to do with the product, and that’s our employees, that’s our community, and that’s our customer.
So, I’ll start with the community and customer. Are you guys familiar with the tampon Tax in the U.S.? How many hands? A handful. So for those who don’t know, tampons and feminine hygiene products in the U.S. are taxed as a luxury, similar to alcohol, at almost 20%, in some cases, 25%. So if you live in Arizona, you will literally pay upwards of 20% to 22% more for your tampon because it’s treated like a bottle of rum.
Kind of crazy, right? So when Chieh heard about this, he’s like, “This is effed up.” He asked his wife, she didn’t know about it. He has a daughter too, so kind of hit him a little more than maybe someone else and actually, it came from someone from my team. Before I joined, she’s like, “Hey, this is really messed up.” He say, “Yes, it’s messed up.” We went to our COO who runs product.
It was like, “Jared, dude, this is messed up.” And Jared’s not married. He doesn’t have any women in his life, really, but he’s like, “Yeah, that’s messed up. I didn’t know it was an issue, clearly.” And when I heard about it, I told my wife and she actually didn’t know about it because New York doesn’t have the tax. But you talk to anyone who’s shopped in any of those other states and they definitely know about this. And its really screwed up. But this is the benefit being an e-commerce startup.
We can change it. And they changed it within 40 hours on the site, detecting your IP address, if you come in from any one of those 30-plus states, we’ll refund that tax back to you.. We still have to pay it. We can’t just not charge you, but we actually take it as a loss to us. It’s a six-figure loss annually, and it’s not like we’re Walmart here. We’re not making billions of dollars, far from it. But it was something that Chieh and Jared and the founders are like, “Listen, we’re going to start a company, we’re going to do it on our terms. This is something that made sense.”
And sure, there’s a PR benefit. I’m not going to sit up here and BS you, but that’s not why they did it. That was a nice side benefit of it. But they did it because someone on the team raised it, said, “This is important.” A lot of people at the company are like, “Yeah, this is kind of important.” It’s not like we’re going to stand for every possible cause, but this is a cause that we did want to make a difference on. It was CBG-related, it made sense for our product and we did it.
And we’ve been doing it for like now almost two years. The one on the right is about employees, and I talked about this earlier in the panel. How many times you’ve been in a Uber or a Lyft or a Via or a Juno and the driver will voluntarily… I think it’s gotten better now with Dara as the CEO, I think he’s done a great job. But up until about a year ago, will voluntarily tell you how shitty Uber is. And like I literally have my headphones in, no intent to talk to the dude, he’s like, “Let me tell you about Uber.”
I’m like, “I didn’t even ask.” He starts telling me about how horrible it is or how bad of an experience it was as, you know, an employer, but really, all four or five of those are commodity choices, right? Juno, Via, Lyft, you know, you don’t really have a reason to choose one or the other. But when the driver or an employee tells you that, even though he’s driving for all the others, now you start to think about what that brand means, right? Like I said, I think they’ve done a better job of changing it, but employee experience is everything.
Now with us, you may never actually engage with an employee. I might be the only employee you ever talk to from Boxed because that’s all D2C, right? Hopefully, you don’t have a customer service issue, otherwise, you never talk to anyone. But what happens at the warehouse when you need your diapers or you need your…that baby food I referred to earlier or you want your soda, not dented, or you actually want everything in the box, it’s pretty frustrating when you’re hosting a party and the plates don’t come, right? That happens all the time. So what Chieh realized was, “I’m going to build a company that’s different. I’m going to take care of everyone, from corporate to warehouse.”
So he went into the office one day, a warehouse one day, we had a shitload of orders coming in from Amex, about 5,000 additional orders, which was a lot at the time, it’s like our second year in business. And he’s like, “Where is everyone? I saw no cars in the parking lot. I only saw two cars,” and we usually have about 50 people working, walked to the back, didn’t see anyone, and walked to the front, and literally the place is buzzing like normal, even more people than normal. He’s like, “How do you guys all get here?I only saw like two cars there.”
Come to find out a lot of employees, they do have cars but…and we pay pretty competitive wages, but they were struggling with basic needs because Jersey and New York are not cheap places to live and they have to use their cars to take their significant other to their jobs or their kids to school, so they try to save on gas every moment they can. So they carpool. Three or four to a car or they take public transportation and walk another like half-mile in some cases.
Some cases, a little shorter. And he kept hearing the stories. It was, literally, like half the warehouse. And it kind of like blew him away because he’s like…he didn’t come from a lot but he came from son of immigrants like me and he’s like, “You know, my family didn’t have a lot here as well,”and that was something that really moved him. He said, “You know what, I can change this. I can’t do a lot about everything here, but I do know that some of these life stages are really important to these folks, two of them… One of them being…I’ll talk about the other one, being college education for kids and a lot of these folks had kids, so he created a college fund for all the employees’ children, warehouse included, 40-hour, you don’t have to be full-time but 40-hour.
So if you have a kid going to college, it could be Harvard, it could be Georgetown, or it could be community college, up to four years, he’ll pay for tuition. He won’t pay for room and board, and you have to apply for financial aid. And if you haven’t been to the states and you don’t know the education system there, college is not cheap. It is extremely expensive, but he’ll pay for it, even Harvard which can be upwards of, you know, a couple of hundred thousand bucks over four years, with the only exception, you have to still apply for financial aid.
Right now, seven kids are going to college on his… So it’s his own money too. It’s not out of Boxed money, so he doesn’t have to go to investors, his own equity pool. One guy has twins, so totally gaming the system. I think his third kid is like 16, so he’s not going anywhere. And this next example is better said from Chieh. It’s a video from him. It was same concept, right?
What are some of the other life moments that we all know and we can all relate to that really cause pain, stress, and anxiety? And this one’s universal, no matter what country you’re in. And this is him, he showed it to us shortly after the college fund. – [Chieh] So we’ve got a big announcement to make today. A lot of people here, a lot of expectations, no one knows what’s about to happen.
Neither do I. I just hope it goes well. Thank you everybody for coming. Any guesses on what we’re going to do? Not at all? Okay. It’s been a long ride for all of us.
You guys have all started to become part of the family. We thought about what else can we do and what else can we kind of offer to people. Sorry if I get a little emotional. So Marcel, just the other day, Marcel ended up crying at the packing tables, during the middle of his shift. We found out later on that Marcel’s mom is not doing very well, right, and so you know, he’s worked seven days a week, double shifts, trying to pay for a wedding that he wants his mom to attend, even though she’s not doing so well, right?
– [Marcel] Yeah.
– No one that works at this company should feel pain like that. I thought about what can we really do to help you guys, and help other people in the company. And so we got you to come out of work and we got all these people here because we want to tell you that we’d love to pay for your wedding so that you guys can have it.
– Thank you.
– Everyone here, we’re paying for your weddings in the future, so good luck with finding the person to marry. Congratulations, Marcel. Congratulations, Tara. Welcome to the Boxed family. This is how we treat our own.
It’s going to be an awesome wedding and we can’t wait to all be there to crash your wedding. Bye.
– Many, many times, it still chokes me up because if you’ve ever seen Chieh [inaudible], if you’re lucky enough to meet him, he’s just a genuine dude. He could be talking to an investor, a CEO of Target or Walmart, me, an intern, anyone at the company, he’s the same dude. Like he’s just this goofy, awesome, down-to-earth guy, but it’s what he believes, it’s how he thinks.
Full caveat, because I like to be very transparent. I don’t like to sugarcoat anything. It’s only up to 20,000 bucks. Two Boxed employees can’t get married and get 40, which I think is fair. And someone asked me this a few weeks ago, it was a good question. They said, “What happens if you get the wedding fund, get married, get divorced and get remarried all the time you’re in Boxed? That’s an awesome question for HR.
So I pointed over it to our HR email which…but no one… It hasn’t happened yet, knock on wood. We’ve had nine weddings, eight or nine weddings, I think, paid for. One interesting fact is this does backfire. When we launched it, we got some press around it. Again, it was a great marketing but wasn’t why we did it, but it turned out really great. “Today” show talked about it and that was amazing, but we had the number one page of our site that got the most traffic, as you can imagine, wasn’t our products.
It wasn’t checkout, which would’ve been amazing. It was Careers. And what we found is we had a lot of people applying for jobs and some of them are actually really qualified, like I would love to hire you but it’s really clear in the interview process, you’re getting married soon and you want this wedding fund. We had a couple that we did hire and we paid it all upfront and then they left. So we had to put into like a five years over…5K over four years kind of increment because otherwise, people were taking advantage of us, and you know, because we’re a startup, we couldn’t just hand out wedding funds.
But I think it was a fair compromise. A couple of last slides for me, as I think about customer acquisition and engagement, this is another thing we do, called the Creativity Kit. So we work with our CBG, sometimes we don’t, to make the box into something. So the one thing that we have, we’re lucky enough to have, being D2C, is we can get you a box and because our box is colorful, if you’re walking down the streets of New York, you’ll often see it and it stands out, even compared to Amazon.
Jet has a purple one, that stands out. But, ours really pops. So, we used to have yellow and pink as well. But how cool would it be… We kept looking at it, like what can we do with this? Like can we incentivize people to do something with it? And again, all before me, I just take credit for all the work that everyone else did. We created a Creativity Kit for free.
So every two or three months, up to about 10,000 customers can add this to their cart for free. And what it does is it gives you all the materials to turn the box into something with your kids. So first thing we launched was a fake aquarium. We did a Cornhole kit, if you guys know Cornhole, little game around tailgating and hosting with Pepsi. We did iPhone costume for Halloween, because we had…we know a lot of parents stress with… Halloween costumes can be kind of expensive and you don’t really want to pay if you don’t have the money, $60, $70 for a costume that kid might wear once a year and we knew that was a pain point, so we created a Halloween costume.
You could turn your kid into an iPhone for free. This one’s a gardening kit for Save The Bees. Honey Nut Cheerios does a lot with Save The Bees because the bees, the environmental impact of the bees being here is actually pretty large. I didn’t even realize until recently. Stay Well campaign, we turned the box into a garden. So it’s a cool cute thing to engage with your kids, but most importantly, it’s a marketing referral system. So think about what happens.
You make this with your kid, you spend what, three hours? If this was me, this would take seven hours, with my kid making this, I’m not throwing it away. Where does this sit? It sits in my freaking living room or outside of my porch or my stoop for weeks, maybe months. I literally could not ask for better out of home. My out of home, my CPM on that is so low, it’s so perfect. And what happens when friends come over around an occasion?
We try to tie it to an occasion when people are hosting, so Super Bowl, Halloween, holidays. So all of a sudden, friends, family come over, we go back to my point earlier about Jed having other friends like Jen, all the friends, family come over with their kids like, “What is this? Where’d you get this?What happened? What is this about?” And then all of a sudden, Boxed and now we’re starting to put referral codes, printed referral codes in those boxes for our best customers. So as soon as they get asked that, the natural inclination really, “Oh, here’s $10 off your first order.You should check it out. They do this thing every few months.My kids love it.”
So little things like that, that cost is really small, you’d be amazed. But the benefit of being D2C, having that box in someone’s home is outstanding. So we want to maximize that. I think there’s more we can do there too. But ultimately, the goal is to get to this, right? This is an Instagram post. Is this kind of love, this kind of engagement, like all the data in the world, all the money, marketing money in the world cannot replace this kind of love.
We did another thing recently with Nintendo Switch and Kellogg’s launched Super Mario Brothers cereal, limited edition. So for random 20 customers, it was only 20, who bought that cereal on one random day, we bought 20 Switches off Amazon, dropped in the box, so these people…We did, now, we did… We were smart. We looked at some emails, with just to get a sense of social.
We couldn’t scale it, so we just picked just pick two or three that had a decent Instagram following and the rest, just gave it to random customers, even if they’re not that loyal. And we had a couple people like blow up Instagram, like, literally like one person had like 60 comments and all the questions were exactly what we wanted. I mean, I couldn’t have scripted something better for the cost. It was, “Where did you get this? How do I get this? Who did this for you?Why did they do this?” It was that kind of series of questions and we dropped in a couple of comments, but the idea is to surprise and delight, right?
Like hey, we can do this randomly. We’ve done this now about five times. We did it with the Nest, you know, the Nest Thermostat. We did it with these coolers that really pop, YETI Coolers that people are going crazy over. Try to find these hard to find products. Around the holidays, we’re trying to source a couple of toys, if we can get it, it can be pretty big. But the idea is to surprise and delight and we would need and we want this response.
This is what creates ultimate loyalty, that small touch that actually isn’t that small for a customer, when you think about the e-commerce experience as it stands today. Now finally, as a brand, as a business, you know, this couldn’t be more simpler, but I think it really illustrates how we think about the business that we’re trying to build to evolve and grow and scale, even for doing a billion dollars, we would hope that these four tenets stay in there.
Great execution, I mean people overlook that, execution is everything. That’s one reason startups fail and don’t fail and succeed, it’s really lack of focus and lack of execution. Ease of use, right assortment, you know, assortment varies depending on your category for us at CBG. But assortment for an Uber could be the types of cars, the locations of drivers and so forth.
And a great service and that’s where I put the brand values I referred to, right, especially again, in the U.S. climate right now, consumers want brands to make a choice. They want to shop with brands that they can relate to, believe in. They’re not going to spend 50% more with you, but if it’s a buck more, two bucks more, yeah, they will spend a little extra if they know you’re doing something for the right reason, for the right cause, and you’re serving a higher purpose, whether it’s your employees, your customers or the community.
So for us, that’s how we think about everything when it comes to marketing. Thank you.