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Farmigo Thought It Could Kill Off Supermarkets. Here's What It's Trying Next.

Back in 2015, Microsoft veteran Benzi Ronen boasted that Farmigo, his online farmer’s market, was going to help kill off supermarkets. People would soon use their mobile phones to order non-perishables like toothpaste and toilet paper from Amazon and buy their humanely raised lamb chops and locally foraged ramps from Farmigo.

Farmigo Thought It Could Kill Off Supermarkets. Here's What It's Trying Next.

Launched in 2009 and backed by $26m in venture capital, Brooklyn-based Farmigo built a software platform where shoppers could place orders with local farms. Farmigo also handled logistics, transporting food from farms to one of three warehouses and then distributing it to pick-up spots in schools and community centers. It operated in three locations, Seattle-Tacoma, the Bay Area, and greater New York City, and made its money on the 35-percent markup it charged on food purchases.

But in July 2016, a year after Ronen made his bold claims to Forbes, he shut down the logistics end of his business, closing Farmigo’s warehouses and laying off 100 staffers, leaving just 20 employees who continued to work on the company’s software.

Part of Ronen’s prediction, that food shoppers would shift their purchases online, is coming true (a January 2017 Food Marketing Institute study said a quarter of U.S households bought some food online in 2016, up from 19 percent in 2014). But he concluded Farmigo would never be able to compete with Amazon, whose AmazonFresh service offers same-day delivery.

Though he says a new investor he won’t name offered him an additional $20m to expand Farmigo’s logistics arm, he figured it would cost far more than that to beat Amazon’s giant network of warehouses and finely-honed logistics operation. “To compete with the convenience Amazon was gunning for would have been incredibly costly and maybe even impossible,” he says.

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Launched in 2009 and backed by $26m in venture capital, Brooklyn-based Farmigo built a software platform where shoppers could place orders with local farms. Farmigo also handled logistics, transporting food from farms to one of three warehouses and then distributing it to pick-up spots in schools and community centers. It operated in three locations, Seattle-Tacoma, the Bay Area, and greater New York City, and made its money on the 35-percent markup it charged on food purchases.

But in July 2016, a year after Ronen made his bold claims to Forbes, he shut down the logistics end of his business, closing Farmigo’s warehouses and laying off 100 staffers, leaving just 20 employees who continued to work on the company’s software.

Part of Ronen’s prediction, that food shoppers would shift their purchases online, is coming true (a January 2017 Food Marketing Institute study said a quarter of U.S households bought some food online in 2016, up from 19 percent in 2014). But he concluded Farmigo would never be able to compete with Amazon, whose AmazonFresh service offers same-day delivery.

Though he says a new investor he won’t name offered him an additional $20m to expand Farmigo’s logistics arm, he figured it would cost far more than that to beat Amazon’s giant network of warehouses and finely-honed logistics operation. “To compete with the convenience Amazon was gunning for would have been incredibly costly and maybe even impossible,” he says.

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Farmigo Thought It Could Kill Off Supermarkets. Here's What It's Trying Next.