Online grocer Farmstead announced today that it is making its in-house grocery delivery software, Grocery OS, available to other national and regional grocers.
Farmstead’s pitch is that Grocery OS can help traditional grocers migrate from physical stores to online, working up through dark stores and into warehouse-only formats. In doing so, Farmstead says Grocery OS will also provide more delivery capacity and get retailers more e-commerce revenue.
Grocery e-commerce has experienced record growth throughout the year as the COVID-19 pandemic pushed more people into online grocery shopping. According to a recent Mercatus study, online grocery shopping will continue to grow, hitting $250 and accounting for 21.5 percent of total grocery sales by 2025.
“COVID shows there is pent-up demand for online grocery,” Pradeep Elankumaran, Farmstead Co-Founder and CEO, told me during an interview this week. Of course, this pent-up demand translated at first into delayed grocery delivery windows, often needing to be scheduled weeks out, as well as waitlists and other breakdowns in the process.
Though things have calmed down and plateaued in grocery e-commerce, the trick now for traditional retailers is to build a system that can scale to meet continued demand. As Elankumaran said, however, running a digital-first store is a lot different from running a traditional store that people go in and shop at.
That’s where Farmstead claims its Grocery OS software stack can help. Grocery OS, which Farmstead uses for its own operation, promises to help traditional grocery retailers boost their delivery capacity, manage inventory, picking and packing orders, and handle marketing.
But as Elankumaran pointed out, transitioning to e-commerce isn’t just about grabbing a bigger piece of the pie. It’s also a defensive move for existing retailers. “You also have a whole bunch of pressure from Amazon and Walmart driving pickup and delivery,” he said.
According to the press announcement, Grocery OS is already being used by one of the “top 3” national grocers in the U.S. As noted, it’s also been used by Farmstead as that company has weathered its own pandemic growth spurt. While he wouldn’t provide specifics, Elankumaran said that Farmstead has experience 6x growth in revenue over the span of three or four months, grew its team size by 3x and moved into a 17,000 sq. ft. facility from its former 3,000 sq. ft. warehouse.
But Farmstead isn’t giving up its own grocery ambitions. Elankumaran’s goal is to build and scale Farmstead into a national retail brand. And he’ll be using Grocery OS to do it.