Farmstead taps AI to bring grocery prices down
Farmstead launched in 2016 in the San Francisco Bay area touting its ability to use artificial intelligence to efficiently source and deliver food to homes at prices on par with local supermarkets. Now, a new delivery option from the company promises to bring prices below the average cost for the Bay area.
On the sourcing side, Farmstead contends that pen and paper systems are still largely used in the industry to order products and account for perishability, a practice that results in 35 to 40 percent of all perishable foods being discarded and depressed grocers’ margins.
Farmstead says its self-learning predictive models combine historical sales data and current trend data with consumer recommendations and external factors, such as holidays and product sell-by dates, to predict customers’ future orders. The system uses machine learning to process these data points and help Farmstead source only what it will sell, avoiding overstocks. Farmstead said its perishable food waste is under 10 percent.
Farmstead’s selections are also limited to basic staples to reduce food waste.
On the delivery side, the AI-driven models optimize routes, incorporating real-time traffic information to save time and conserve fuel. Farmstead also offers weekly discounts and free delivery to incentivize households on the same delivery route to join the program, further decreasing last-mile costs.
The newly-launched program, Refill & Save, seeks further savings through recurring orders. Farmstead automatically queues up customers’ recurring weekly orders — customers can then add or delete any items for the week or cancel a weekly order entirely up to an hour before their delivery window.
“Most households buy many of the same things every time they grocery shop,” said Pradeep Elankumaran, founder and CEO of Farmstead, in a statement. “In Farmstead’s case that helps us predict demand, reducing our costs and improving efficiency. In light of that, we were able to reduce our prices on certain staples while still making the business profitable.”
Farmstead offers free weekly delivery in three-hour windows for orders over $30, and free, same-day delivery for order over $35. Seventy percent of its customers receive free delivery. The company continues to focus on the Bay area but plans to expand to additional markets this year.
- Online Grocer Farmstead First to Deliver Fresh Grocery Staples at Prices Lower Than Local Supermarkets – Farmstead/Globe Newswire
- Farmstead Launches New ‘Fresh AI’ Platform That Applies Artificial Intelligence To Help Food Companies Reduce Waste And Improve Margins – Farmstead
- Farmstead is an ambitious grocery delivery startup with plans to defeat Instacart – TechCrunch
- MATCHMAKERS The Startup That’s Using AI To Take On The Grocery Giants – PYMNTS
DISCUSSION QUESTIONS: What do you think of the potential for AI to optimize the sourcing of perishable food and grocery delivery routes? How would you rate Farmstead’s expansion potential? What questions or concerns would you have about its business model?