In-House, Go Head-to-Head Against Amazon’s National Expansion

A bag of produce with Farmstead logo on the bag

Written by James Shea

Hot on the heels of Amazon’s “delivery-only” store launch in Brooklyn, online grocer Farmstead announced today that in addition to expanding its own “Farmstead” brand nationally, it’s now making its in-house grocery delivery software Grocery OS available to other national and regional grocers, to help those grocers combat Amazon’s national threat.

Grocery OS instantly boosts the delivery capacity and profitability of any grocer-controlled pickup/delivery fulfillment operation (whether from an existing public store, new dark store or delivery-only warehouse). It also enables grocers to manage their own marketing, order picking, packing and delivery operations.

A Top 3 US grocer has already implemented Grocery OS, which helped them rapidly and inexpensively expand delivery capacity in multiple regional markets on the East Coast.

“As COVID-19 drives skyrocketing online grocery adoption, many grocers are realizing that a new way forward is required immediately,” said Pradeep Elankumaran, Co-founder and CEO of Farmstead. “Existing third-party delivery options increase customers’ costs to levels approximately 20% higher than what the typical US household can support each week, and increase grocers’ fulfillment costs to unsustainable levels. New robotics options increase grocers’ expenses dramatically without actually driving the additional growth required to get to profitability.”

In response to these problems, the grocery industry has begun recruiting their own pick and delivery workforces, while turning to “dark grocery” options — supermarkets or warehouses closed off to customers offering only delivery — in an effort to increase delivery capacity while refining costs, with Amazon leading the charge. “Unfortunately, controlling costs in dark grocery environments require substantial technology improvements and orchestration that to date have been inaccessible to national grocers,” said Elankumaran.

Farmstead’s systems have been built from the ground up to improve the economics of perishable-focused delivery operations, and have underpinned Farmstead’s own rapidly growing Bay Area grocery delivery customer experience over the last four years. Grocery OS gives grocers access to cutting-edge demand generation, predictive analytics, and labor and driver orchestration tools – focused on the single goal of helping grocers attract and retain their in-store customers using the latest online business models and tactics.

By easily integrating into grocers’ existing operations and workforce, Grocery OS enables grocers to bring their online grocery fulfillment costs under control and pass the savings down to customers while charting a new operational course for cost-effective, high-capacity daily deliveries to doorsteps. On day one, each existing supermarket location can unlock an additional 100-150 orders/day in capacity while offering the exact same selection and prices as stores, with free delivery to customers. Dark stores can increase capacity to 1,000+ orders/day using GroceryOS. With custom warehouses, GroceryOS can support up to 10,000 orders/day tied to space and SKU selection.

Grocery OS reduces transaction costs to grocer by 10-15x relative to existing options. It includes:

  • Local market digital demand generation that connects to grocer’s existing apps, helping grocers find, attract and retain their in-store customers on the online platforms they spend the most time in, with customer acquisition costs in the low double digits.
  • Inventory control, competitive pricing intel, and assortment curation to cut food waste from over 35% to sub-5% and high customer baskets.
  • Custom-built tech for pick/pack of online orders inside dark grocery locations, supermarket locations and warehouses that cuts costs by half. Orders are picked by the grocer’s own workforce using Farmstead’s software with pick rates in the hundreds of items per hour.
  • Last-mile 1-hr (5-mile radius) and batched same-day delivery (50-mile radius) for very low (or zero) delivery fees to customers by the grocer’s own drivers and no additional per-order fees to customers, with delivery cost to grocer typically under $10/order.
  • Customer pickup features and orchestration, with cutoffs as low as 20 minutes before the customer arrives.
  • Analytics to drive increased customer baskets and CPG marketing.
  • Strategic expansion support from Farmstead’s business and operations teams for grocers who don’t have their own pick/pack or last-mile delivery workforces.

Other articles you may like

Online grocery sales increase 17%

Online grocery sales increase 17%

Inflation has impacted the entire food and beverage sector, and the grocery industry is no exception. According to the...