A new online grocery service has started making deliveries in the already competitive Chicago area.
Farmstead, an app-based grocery start-up, aims to be the first online grocer to offer a range of food products rivaling traditional grocery stores delivered for free.
“We are unlike most online grocers,” Pradeep Elankumaran, co-founder and CEO at Farmstead, told the Chicago Sun-Times. “We really care about making fresh food a lot more accessible in the U.S.”
The California-based company offers locally sourced produce, national brands like Kraft, and local brands like Oberweis Dairy, Intelligentsia Coffee, Gino’s East Pizza and Vienna Beef.
The service delivers in a 50-mile radius of its Franklin Park warehouse — an area that includes the entire city of Chicago and stretches nearly to the Wisconsin border and as far south as Joliet — bringing groceries to customers’ doorsteps in two to four hours — without extra delivery charges.
So what’s the catch?
“In order to do all this — and sometimes it sounds too good to be true — we are providing a lot of software to really control the costs of operating these warehouses, so we can pass the savings on to our customers,” Elankumaran said.
Farmstead uses artificial intelligence technology to cut costs and reduce food waste by calculating how much fresh produce is actually needed, rather than over-buying and throwing away excess. This allows the company to rake in profits on their fresh produce offerings, according to Elankumaran.
Long-term, Elankumaran hopes customers will kick their in-person grocery shopping habits to the curb in favor of doorstep delivery options.
The company’s inventory of fresh foods and produce makes it a one-stop shop for larger grocery hauls.
“All the work we’ve been doing is to make it very possible for people to not break their budgets, save them a lot of time by not going to three or four separate stores, and save them a lot of money by giving them the stuff they normally buy at the prices they’re used to,” Elankumaran said.
Farmstead shoppers can sign up for a weekly “milkman” service that would regularly deliver products like eggs or milk. More than 70% of Farmstead customers at its existing markets eventually signed up for weekly deliveries, according to the company.
Ultrafast grocery delivery services have exploded in Chicago. Start-ups like GoPuff and Getir operate on the same assumption as Farmstead: Customers want their goods fast and they don’t want to leave their homes to get them. The convenience delivery services deliver products in as little as 15 minutes.
Farmstead sets itself apart by appealing to customers looking to satisfy more than just a late-night ice cream craving.
“Chicago has been lighting up recently with convenience players who are warehouse-only, but we’re not a convenience player but actually a grocer,” Elankumaran said.
Like GoPuff and Getir, Farmstead operates from a “dark store” — a small warehouse closed to customers. Delivery workers take from these locations instead of retrieving merchandise from retail stores.
The company isn’t just up against convenience services, but also traditional grocers, big-box retailers, and larger companies like Amazon that have already implemented fast delivery services. Walmart offers a two-hour-or-less express delivery service. Target owns same-day delivery service Shipt. Whole Foods offers two-hour delivery through Amazon Prime.
Founded in 2016, Farmstead has locations in the San Francisco Bay area, Miami, and Charlotte and Raleigh-Durham, North Carolina. Elankumaran said the new Chicago location has already been successful, with thousands of customers lining up on a waiting list ahead of the service’s launch. Elankumaran said he has plans to expand to even more locations nationwide.
