SAN FRANCISCO, Dec. 14, 2020 (GLOBE NEWSWIRE) — Farmstead, the first online grocer to offer fresh, high-quality groceries, delivered for free, at better prices than local supermarkets, announced today that it is now contribution-margin positive in its San Francisco hub (meaning the service is profitable on a per-order basis). Farmstead achieved this milestone without markups, service fees or delivery fees, and in the most competitive and highest-cost market in the US.
The keys to keeping Farmstead’s operating costs low have been:
- Buying wholesale, selling retail, which allows for margins without fees or excessive markups.
- Utilizing microwarehouses (dark locations), which have a delivery radius of 50 miles v. 5 miles for traditional stores and cost 1/10th as much to build.
- Its proprietary Grocery OS software for automatically procuring inventory while cutting food waste, and orchestrating order picking/packing/delivery to ensure cost-effective, reliable daily operations.
Since March, Farmstead’s average basket size has doubled, while it’s continued to perfect its Grocery OS software platform. This increase in revenue and efficiency, and decrease in costs driven by software and data, helped Farmstead reach this important profitability milestone. The news comes on the heels of Farmstead’s Series A funding announcement, and its expansion to both Charlotte and Raleigh-Durham, NC. Farmstead plans to expand to at least 14 more markets in 2021.
“The key to our becoming contribution-margin positive at this early stage has been our ability to programmatically predict our immediate future and also be hyper-efficient in our operations,” said Pradeep Elankumaran, Cofounder and CEO of Farmstead. “When you sell perishable products online, higher volume usually means higher losses and negative profits. In contrast, Farmstead’s Grocery OS stack helps cut perishable food waste to best-in-class, single-digit numbers, and transforms higher volume into lower pick and delivery costs. This means we reach per-order profitability faster. If we can do this in the expensive Bay Area market in under two years, we believe we can reach per-order profitability within one year in our expansion markets, where our operating costs are much lower. No other grocery e-commerce startup is taking this approach.”
Farmstead is the first online grocer to offer fresh, high-quality groceries, delivered for free, at better prices than local supermarkets. Using AI technology, Farmstead has reinvented the grocery buying experience and rewired how food moves across the country, to significantly reduce food waste and fulfill its mission of making high quality, locally sourced food accessible to everyone. Visit https://www.farmsteadapp.com or follow @farmsteadapp.