Farmstead, an online-only grocery store that typically offers free delivery within a 50-mile radius of its warehouse, is coming to the Triangle early next year, the startup said Tuesday.
It’s the California startup’s second East Coast expansion, after opening in Charlotte earlier this fall.
Farmstead CEO Pradeep Elankumaran said North Carolina is an attractive target for the company because it has a plethora of mid-market consumers (those spending about $100 per week on groceries), and they often go to multiple stores to find the best deals. North Carolina’s population is also growing quickly, which is a plus. Right now, the company has started a waiting list for new customers in the Triangle.
“About 15% of [grocery shoppers] primarily only shop at Walmart. And there’s another 10% of them who shop only at Whole Foods,” Elankumaran said over a video chat. “And then there’s a vast number of them in the middle — over 70% — that shop at multiple stores every single week.”
Farmstead is not, however, the only one trying to win those customers. The Triangle has an incredibly competitive grocery scene, with companies like Wegmans, Publix and Lidl continuing to open new stores here.
Locally, Walmart, Food Lion and Harris Teeter still have the largest market share, according to a 2019 Chain Store Guide analysis. But that is in flux as more stores open and others — namely Kroger — left the market altogether.
Unlike Walmart, Wegmans or Publix
Farmstead, though, is a different beast than those grocers.
The startup is a “dark store” online-only grocer. It doesn’t have any in-store shopping options for customers. Instead it runs microhub warehouses where it stocks food and then delivers through a network of drivers. It offers a mixture of local and national brands.
Focusing only on delivery and online orders allows the company to eliminate many of the fees and inefficiencies that traditional grocers run into, Elankumaran said.
Backing it all up is an artificially intelligent software that helps the company efficiently time orders and stock the right allocation of products. It is also selling that software to other grocers.
“Everything that we do as a technology company is really to predict what’s going to happen in the next few days, so we can be prepared for it,” Elankumaran said. “The software decides every day how much product is coming in the door.”
Elankumaran added that the company’s selection is also somewhat smaller than a traditional supermarket. But that is by design.
A smaller selection helps it cut down on food waste.
How shopping with Farmstead works
When it launched in Charlotte, the company started with around 4,000 products, Elankumaran said. The company’s research in its San Francisco market showed that its assortment was still wide enough to capture about 90% of the average customer’s weekly basket of products.
The company is still finalizing where its warehouse will be in the Triangle. Typically, its warehouses are between 15,000 and 30,000 square feet.
Founded in 2016, the company was in the online delivery game long before COVID-19 pushed many shoppers into adopting that method of shopping.
It usually offers free delivery to customers within a couple of hours. The company tries its best to group deliveries to make deliveries more environmentally friendly, and it often gives shoppers the option to time their order so that it can be delivered more efficiently with other orders.
It also has a free weekly subscription program, where customers can choose a time every week for the delivery of staple items. Elankumaran refers to it as their version of a milkman route, and customers can get discounts by choosing that option.
“It helps us predict our inventory … [and] we pass the savings on to you, and you get your delivery reliably once a week,” he said.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate
Zachery Eanes is the Innovate Raleigh reporter for The News & Observer and The Herald-Sun. He covers technology, startups and main street businesses, biotechnology, and education issues related to those areas.
