Farmstead Reaches Key Online Grocery Profitability Milestone
SAN FRANCISCO, CA - With delivery services soaring in popularity, San Francisco, CA-based grocery delivery company Farmstead has announced that it is now contribution-margin positive, or profitable on a per-order basis, in its San Francisco base. The milestone was reached by the company without implementing service fees, markups, or delivery fees showing the skyrocketing market demand for delivery programs.
“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, Co-Founder and CEO. “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.”
While not imposing fees or markup increases, Farmstead has kept operating costs low through a variety of other measures. According to a press release, those include:
- Buying wholesale and selling retail, which allows for margins without fees or excessive markups
- Utilizing microwarehouses (dark locations), which have a delivery radius of 50 miles vs. 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
While continuing to finetune its Grocery OS software platform, Farmstead has seen its average basket size double since March of this year. The increase in efficiency and revenue, as well as the decrease in costs due to its innovative software and data, has led to Farmstead reaching its profitability goal.
This news comes after Farmstead unveiled $7.9 million in Series A funding its plans to expand into Charlotte and Raleigh-Durham, North Carolina; and a doubling of its Bay Area delivery radius. The company also plans to grow in 14 more markets throughout 2021.
As the world of grocery continues to expand in the delivery sector, AndNowUKnow will keep its ears to the newswire for updates.