- Coca-Cola will introduce two new Smartwater products with Boxed, the manufacturer announced this week. The online bulk retailer will be the exclusive retailer of Smartwater’s alkaline and antioxidant-enhanced waters through March 2019, supporting sales insights and a launch party before the products hit store shelves later this year, according to Business Insider.
- "It came together because of what we're going at — being fast, being nimble, being easy to work with," Boxed CEO Chieh Huang told Business Insider. He added that other manufacturers have increasingly offered the five-year-old startup exclusive products or a wider variety than sold on Amazon.
- The news comes on the heels of a Wall Street Journal report stating that Amazon seeks to limit the sale of “CRaP” items, or those that “can’t realize a profit.” Such items include a 6-pack of Smartwater, the previous default order through Amazon’s Dash buttons; now the automatic re-order button defaults to a 24-pack that costs $37. Boxed has tried to fill this void by allowing customers to purchase a handful of smaller items with free shipping for orders over $49.
Boxed has gained fans, especially younger ones, for its easy-to-use bulk shopping platform that anyone can access. The “Costco for millennials” recently unveiled a Prime-like service called Boxed Up, which gives shoppers free shipping at $20 instead of $49 and 2% cashback rewards. Sam’s Club charges $55 and Costco $65 for an annual membership to shop at its brick-and-mortar stores, though non-members can shop online and pay a 5% surcharge at the latter.
Costco, the bulk leader, has managed to stay ahead of competitors, and membership hasn't suffered as competition has increased. But store locations overlap with the same middle-class to affluent areas that sign on in droves to Amazon Prime, making the fee-free Boxed an appealing option. The digitally native retailer has also proved to be more appealing to millennial customers, who comprise more than 60% of Boxed customers, CEO Huang told The Washington Post one year ago.
Smartwater is the leading brand in the red-hot enhanced water category, so parent company Coca-Cola's decision to launch exclusively with Boxed says a lot about the two companies' aspirations. Packaged food and beverage makers, many of which are starved for growth, are aggressively courting younger shoppers. Online retailers like Boxed, meanwhile, are eager to drive trial and lure shoppers away from the brick-and-mortar stores they're so used to visiting.
If Coca-Cola wants a new product to make a splash, it probably won’t succeed on Amazon’s crowded marketplace. In addition to hosting a launch party for Smartwater Alkaline and Smartwater Antioxidant, Boxed will also provide Coca-Cola with data from three months of exclusive sales — a service Amazon does not provide for its brand partners. As Amazon shifts gears to focus on higher-margin shipments, Boxed seems to be positioning itself as an alternative not just for consumers, but for manufacturers, as well.
Brands can’t afford to abandon or ignore Amazon because it accounts for a majority of online sales, but since turning a profit, the e-commerce giant has made moves to further pad its bottom line. Coca-Cola will be shipping those 24-packs of Smartwater directly to consumers, a move Amazon has pushed the beverage conglomerate and other manufacturers to make, according to WSJ. In response, manufacturers are altering their products not just for sale on Amazon but anywhere online, changing item size, packaging and even pricing.
Amazon might sell everything, but less than 20% of its customers shop for groceries — something that will change as the e-tailer continues to leverage its Whole Foods acquisition. Boxed, on the other hand, positions itself specifically as a bulk grocer stocked with the essentials and offers similar one- to three-day delivery on most items. It also highlights philanthropic causes and employee benefits, such as Huang’s decision to pay college tuition for employees’ children, that millennials increasingly demand from the businesses they frequent.