Dive Brief:

• Online grocer Farmstead announced Tuesday it's expanding its Refill & Save program to same-day delivery customers. Previously, the program was only offered to customers in the San Francisco Bay Area who placed orders weekly.

• The program offers discounts on certain staples like milk and eggs that customers have purchased before, bringing prices on those items below average for grocery stores in the Bay Area. Weekly members only have to purchase an item once for it to be eligible for Refill & Save and can remove or add refilled items as many times as they want. Same-day delivery shoppers must purchase the same item at least once in their last two deliveries in order to be eligible.

• Farmstead uses artificial intelligence to predict demand and supply its micro warehouses accordingly. It offers home delivery within an hour.

Dive Insight:

Farmstead launched its Refill & Save program last year in order to offer competitive pricing for its customers, most of whom ordered the same staple items week in and week out. With the help of artificial intelligence, the company is able to predict demand levels on hundreds of products, which generate cost savings the company then passes along to shoppers.

According to Pradeep Elankumaran, Farmstead's co-founder and CEO, nearly three-quarters Farmstead’s customers are weekly customers, and 80% of them are currently using Refill & Save. When the grocer first added Save to its Refill program, shoppers rushed to claim the benefits, he said, while the company signed on local as well as national suppliers. By September, nearly 30% of the company's assortment was eligible for discounts under the program.

Refill & Save is Farmstead’s version of a loyalty card, Elankumaran noted, as it encourages customers to purchase the same products exclusively from Farmstead. The retailer takes the predictions and data from Refill & Save to its vendors to show that customers will buy the products from Farmstead consistently in hopes of securing favorable deals.

By adding same-day delivery shoppers, he said, customers' savings could increase even more.

“We predict how much inventory to bring in, we predict how many people we will need on a daily basis to pick and back up so will predict, how many drivers we will need to deliver that to your doorstep,” he told Grocery Dive. “Most of these predictions are done using machine learning models and these machine learning models are directly tied to customer data.”

Farmstead recently announced it will expand operations the Carolinas, and Elankumaran said it will make Refill & Save available to customers when it comes online there. The company told Grocery Dive it will be available in the region by the end of its second quarter.

Same-day delivery is on the rise, with Mckinsey predicting it will grow to around a quarter of all retail orders over the next several years. Grocers have increased their same-day order capabilities in markets across the country, and Amazon recently noted its delivery orders through its Fresh service Whole Foods Market stores doubled over the past year.