Shelf Engine has raised $41 million in a Series B funding round, allowing it to expand its automation solutions so food retailers can better manage inventory and improve forecasting while helping cut down on food waste.
According to the company, average grocery profits hovered around 2% prior to the pandemic, largely due to store and supply chain inefficiencies. Shifting product demand and rollercoaster sales further compounded these issues, with stores throwing away one-third of their fresh inventory. This over-ordering not only costs profitability, but forces retailers to increase prices to make up for these losses.
Launched in 2015, Shelf Engine uses machine learning to forecast demand for highly perishable foods, reducing waste and out-of-stocks. Shelf Engine's business model handles the entire ordering process, from vendor management to shelf optimization, saving retailers money and reducing risk by buying back any remaining unsold items.
Its system is currently being used in more than 2,000 grocery stores nationwide to generate the most accurate orders, increasing sales and margins while reducing the 43 billion pounds of food that the industry wastes every year.
(Register here for our March 23 webinar in which we'll talk with Shelf Engine execs on the six sources of grocery food waste and how to fix them.)
"Grocery retailers today need to innovate quickly, or they'll put their companies at risk," said Stefan Kalb, co-founder and CEO of Seattle-based Shelf Engine. "We're reducing waste, while simultaneously increasing sales, and that goes straight to the grocer's bottom line. We're helping grocers to make much more money, better positioning them to gain market share and offer competitive prices – especially important as tech giants and other disruptors are entering the market. This latest round will enable us to further meet the demand from our customers to launch into thousands of new stores in the next 18 months."
According to Shelf Engine, buyers at major retailers traditionally use computer-assisted ordering and SaaS solutions that require significant upfront hardware and software investments to manage their inventory. However, these solutions often fail to account for on-hand inventory data and high volatility in sales patterns, such as with pandemic or weather-related buying, leading to wasted time and inaccurate orders.
Conversely, grocers who use Shelf Engine's order automation solutions benefit from an average profit margin increase of more than 50%, while reducing food waste by as much as 32%. By analyzing historical orders and sales data – alongside real-world considerations such as holidays, school schedules, local events and weather – Shelf Engine creates the optimal order for every single product every day, automates the order submission process and minimizes stockouts by 90%, thereby increasing sales and margins.
Shelf Engine even guarantees the sale of every item it manages and orders for a grocer, buying back all unsold products and virtually eliminating the grocer's inventory risk.
The latest funding round was led by General Catalyst, with follow-on investments by Series A lead GGV Capital, along with Foundation Capital, 1984 Ventures, Correlation Ventures, Founders' Co-op, Soma Capital, Firebolt Ventures and Initialized Capital.
"Shelf Engine's business model hits the trifecta of simultaneously benefiting retailers, consumers, and the environment. That degree of stakeholder alignment is a rare accomplishment," said Kyle Doherty, managing director of General Catalyst, which has offices in San Francisco; Palo Alto, California; New York; and Boston. "That the company has been able to help transform ordering and inventory management for thousands of grocers in just a few short years is a testament to CEO Stefan Kalb's instincts and the strong, data-driven team he's built."
"The grocery industry is on the precipice of monumental change, with few companies driving the same level of innovation as Shelf Engine," said Hans Tung, managing partner of Menlo Park, California-based GGV Capital and Shelf Engine board member. "GGV looks to support companies with the potential to create significant impact on the efficiency and evolution of existing industries. Shelf Engine has the ability to overhaul the entire supply chain, providing direct, tangible benefits for both the grocery industry and the environment."
Besides continued expansion, the latest funding round, which brings Shelf Engine's total funding to date to $58 million, will enable the company to further invest in its growing team of engineers, data scientists and supply chain automation experts.