Dive Brief:

• Farmstead has extended its delivery footprint to cities south and east of its current service area in greater San Francisco, giving the California online grocer access to shoppers in Bay Area communities including Walnut Creek, Pleasanton, Livermore, South San Jose and Los Gatos for the first time, according to a press release.
• The expansion, which nearly doubles the breadth of Farmstead's delivery zone, was made possible by the online grocer’s newest microhub, which is located in Burlingame, California, and is six times larger than the company's previous microhub in San Francisco. 
• Farmstead, which has sought to distinguish itself from competitors by offering grocery delivery at no charge, launched the expansion in response to customer demand, said Farmstead CEO and co-founder Pradeep Elankumaran. “We’ve had thousands of requests from potential customers in the broader Bay Area, both before and during the pandemic," Elankumaran said in a statement.

Dive Insight:

Farmstead’s same-day delivery expansion to 32 additional zip codes beyond the San Francisco Bay Area reflects the booming demand the grocer has experienced in recent months and the rapid adjustments it has made in order to meet it. 

The online retailer said in July that its new microhub would allow it to quadruple its delivery capacity  So far, the new facility has only doubled its delivery capacity, which could signal the retailer has more expansions to come. 

The pandemic-driven spike in online grocery orders hasn’t always gone smoothly for Farmstead. Earlier in the COVID-19 outbreak, Farmstead’s order volume increased five times and its average basket size doubled. But the grocer couldn’t keep up with demand and received complaints from shoppers that deliveries were delayed. The company had to waitlist new shoppers while prioritizing loyal customers as well as high-risk consumers that required home service, Elankumaran said in a recent interview. 

In addition to adding new facilities, Farmstead has more than doubled its workforce to help fulfill orders, Elankumaran said. The grocer offers same-day delivery as well as weekly orders and recently expanded a program that offers customers savings on items they regularly buy.

As it looks to grow, Farmstead faces stiff competition from companies such as San Francisco-based online grocer Good Eggs, which recently moved to a new warehouse to increase capacity, and national companies like Instacart, Shipt, Amazon and Walmart.