Boxed.com Is Going Public To Keep Growing, Despite A Lack Of Profitability

Summary

Boxed.com will be going public by merging into a SPAC. Once the transaction is approved, SVOK will convert into shares of BOXD.

Boxed.com is an ecommerce platform that sells essential items to consumers and businesses, as well as providing software services to retailers.

Boxed.com will be raising over $300 million in fresh capital to invest in growth efforts such as customer acquisition, inventory assortment, marketing, fulfillment network, among other areas.

Revenue growth has been quite strong, but profits are nowhere to be seen. Profitability is the biggest challenge, which causes valuation and outlook to be highly uncertain.

Taking market share in a highly competitive industry will not be easy.

anyaberkut/iStock via Getty Images Seven Oaks Acquisition Corp. ( SVOK ) is a SPAC that will be taking Boxed.com public. In about two weeks, on December 7 th , 2021, SVOK shareholders will vote to approve the transaction. If approved, SVOK shares will convert into Boxed.com and will trade under BOXD, an event often referred to as De-SPACing (pronounced de-spacking). Boxed.com: The Business

Boxed.com is an e-commerce platform that sells bulk items to businesses and consumers. Boxed.com focuses on selling essential items such as paper towels, toilet papers, non-perishable foods, bottled water, among other products. These are all high-repeat, quick consumption items that have been generating a consistent flow of revenues for Boxed.com.

The key difference between Boxed.com and major competitors such as Costco ( COST ) is the lack of physical stores. Boxed.com sells exclusively online and does not currently plan to open any stores. It plans to grow market share by opening new fulfillment centers optimized for e-commerce and grow inventory assortment.

Boxed.com’s GMV (gross merchandise volume) was ~$200 million and generated $187 million of revenues last year. The company expects to grow GMV at double-digit rates by investing in its fulfillment network and new product segments, which in turn will drive revenue growth. The idea is to grow both GMV and revenues above $1 billion over the next 3-5 years.

Boxed operates in three broad segments: B2C (business-to-consumer)

B2B (business-to-business)

Software & Services (the most interesting segment)

B2C

B2C is the largest segment capturing approximately 75% of total GMV. This business looks quite interesting as it is widely popular among millennials and has grown strongly in 2020 because of the pandemic. This segment will be a key growth driver. Source: Investor Presentation

Boxed.com will invest in marketing to attract new customers into the platform, which should lead to higher revenues. The target customer can be split in four categories, and Boxed.com offers a strong value proposition to all four categories. Source: Investor Presentation

A large addressable market and low penetration rates create a long runway to grow, if customers like the value proposition. Boxed.com has positioned itself as an alternative to Costco for customers who prefer no monthly membership fees, don’t particularly enjoy shopping in person, and like the value of buying in bulk. That seems to be a good strategy.

Boxed.com also offers a subscription service for customers with different needs, including potentially lucrative auto-ordering incentives. Part of the growth plan is to grow subscribers.

Boxed.com’s product assortment can improve to attract a wider net of customers. Boxed.com sells approximately 2,000 items across 66 product categories, which is lower compared to the typical 4,000 items found in wholesale clubs. This provides an opportunity for Boxed.com to generate higher revenue by investing in wider variety of inventory.This is the opportunity the executive team is pitching to investors, and it is one of the key reasons for going public. Part of the capital raised will be invested in customer acquisition, marketing, and fresh inventory to support higher sales and higher earnings, mainly by expanding addressable market, as shown below. Source: Investor PresentationIt’s important to keep that in mind that competition won’t be easy, and competitors will not easily give up market share. Competitors will include Walmart ( WMT ), Amazon ( AMZN ), Target ( TGT ), Costco, and other wholesalers.It is not guaranteed that Boxed.com will win this competition, and if the gains in market share are not realized, then the stock is likely to fall behind. B2B The B2B segment is smaller and accounts for ~25% of total GMV. It has suffered declining GMV and revenues in 2020 due to COVID-19 pressures, so it has not proven to be pandemic resilient. The recovery of this segment could be a post-COVID play for investors.While Boxed.com has some blue-chip business accounts such as United Airlines ( UAL ), most accounts are […]

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