Farmstead notches up online grocery profitability milestone
US online grocer Farmstead says that its service is now profitable on a per-order basis at its San Francisco hub.
It adds that it achieved this without markups, service fees or delivery fees, and in the most competitive and highest cost market Stateside.
The keys to keeping Farmstead’s operating costs low have been buying wholesale, selling retail.
It is also utilising microwarehouses (dark locations), which have a delivery radius of 50 miles vs. five miles for traditional stores and cost 1/10th as much to build, the startup claims.
Also important is its proprietary Grocery OS software for automatically procuring inventory while cutting food waste, and orchestrating order picking/packing/delivery.
The news comes on the heels of Farmstead’s Series A funding announcement, and its expansion to both Charlotte and Raleigh-Durham, NC. The plan is 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,” says Pradeep Elankumaran, Co-founder and CEO, Farmstead.
“When you sell perishable products online, higher volume usually means higher losses and negative profits. In contrast, our 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.”
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