(Bloomberg)—Boxed Wholesale, No. 326 on the Internet Retailer 2017 Top 500, which sells snacks, paper towels and other household products in bulk, rejected a $400 million acquisition offer from Kroger Co. (No. 88) and will pursue a new funding round to remain private, according to a person familiar with the matter.
The New York-based startup’s board voted last week to reject the offer from the largest supermarket chain in the U.S., said the person, who asked not to be identified because the discussions were private. Boxed also had preliminary talks with Amazon.com Inc. (No. 1), Target Corp. (No. 20) and Costco Wholesale Corp. (No. 9), but Kroger was the only company to submit a bid, the person said. Boxed has a $470 million valuation, the person said.
The Kroger rejection puts Boxed back on the original path set out by CEO Chieh Huang, who has said he wants to remain independent and eventually go public. Boxed has differentiated itself from Amazon by offering a limited selection of household products in bulk sizes, as well as an inexpensive house brand of trash bags, paper plates and other items. The narrower scope lets the company sell more orders using fewer people and less space than a retailer with a bigger inventory.
Interest in Boxed intensified last year after Amazon’s $13.7 billion acquisition of Whole Foods Market Inc. signaled the world’s biggest online retailer was reinvigorating its push into the $800 billion grocery market. Walmart Inc. (No. 3), Kroger, Target and other retailers that rely on groceries to lure shoppers to stores are facing pressure to show they can adapt to the digital age and ward off Amazon.
Boxed and Kroger declined to comment.
Boxed has warehouses in New Jersey, Dallas, Las Vegas and Atlanta. It offers shoppers bulk-sized products like those found at Costco and other warehouse clubs, saving customers membership fees and the hassle of crowded parking lots and aisles. The average Boxed customer’s order is about $100 and includes 10 items, which appeals to companies looking for a cost-effective way to sell packaged household products online.
But competing with Amazon to sell household goods is a formidable task. Boxed has seen its fastest growth as a snack-and-supplies replenishment service for offices, a market Amazon is also targeting.
Boxed said it has raised about $165 million, including $100 million in 2016 that included GGV Capital and American Express Co. The company said it had sales of about $100 million in 2016, up from about $50 million the previous year.