What is Postmates?
Postmates is an on-demand goods delivery platform present in more than 100 metropolitan areas in the USA. Postmates enables people to get anything from local stores delivered at their doorsteps for a small amount of fee. The business model of Postmates is often said to be similar to Uber, but instead of taxis, Postmates enables a customer to get goods from local stores.
Postmates delivers goods with the help of their human courier networks which enables people to order anything from anywhere within the city. Just like Uber drivers, Postmates couriers get order notification on their mobile devices and the GPS is used by the company to match the demand and supply in the shortest possible time.
Postmates’ unique business model has gained a good amount of funding from investors and has helped the company acquire a large customer base. The company was launched in 2011 and in a short period of 4 years, it has come out as a huge success. It has established official tie-ups with Apple, McDonald’s, Starbucks, Walgreens, Chipotle and many other well-known companies.
Founders, Funding Received, and Facts
Sam Street, Sean Plaice and Bastian Lehmann are the founders of the Postmates. The company is headquartered in San Francisco, California. In terms of funding, the organization received $138M (as of November 2015). The company evaluates to $500M, having almost 7500 orders processed on a daily basis with the average order size of $40.
Salient Features of Postmates:
- Enables people to order anything from anywhere within the city.
- Postmates charges a nominal delivery fee, which depends on the distance covered from pickup point to drop-off point.
- Specially featured stores.
- The delivery people or couriers who work with Postmates are also called Postmates.
- Deliveries are made within 1 hour.
- Postmates is available 24 hours a day and 365 days a year.
- The minimum delivery fee is $5 but often there are offers in particular areas with an even lower delivery fee.
- The customer can track the location of the delivery person after placing the order.
Customer segments of Postmates
Postmates serves 3 different types of segments as explained below:
- Customers: Customers for Postmates are the ones who are willing to spend a little more than the exact price of an article in order to get it delivered at their doorsteps.
- Merchants: Postmates ties-up with local merchants and provides them with a platform with an opportunity to reach out to people who want goods delivered at their location. These merchants are happy to pay a percentage of the total billed amount to Postmates for their delivery service. Hiring own staff to make deliveries is obviously a costlier option as compared to paying a small percentage of the bill to Postmates.
- Delivery Persons: Delivery personnel or Postmates are the people who want to earn money by working according to their own schedule. These human couriers are called Postmates. According to the business model, delivery persons get 80% of the delivery fee and rest 20% is retained by the company. According to Postmates, a delivery person can earn up to $25 per hour.
Value Propositions
Postmates business model offers excellent value propositions for customers, delivery personnel as well as local stores. Let us understand the value provided by Postmates to these customer segments.
Users:
- Users can order anything from local partner stores.
- Postmates is available 24 hours a day and all 365 days a year.
- Get things delivered in as less as 1 hour.
Merchants:
- They get an extended customer base.
- They can serve their own customers at their doorsteps through Postmates.
- Postmates provides online visibility to the merchant through their platform.
Delivery Persons:
- They can work according to their own schedule.
- According to Postmates revenue model, delivery people get 80% of the delivery fee.
- The more they deliveries they make, the more they earn.
Postmates Business Model
Postmates operates a fleet of human couriers who can deliver anything at your doorsteps. Even though the company operates on a partnership model just like other on-demand startup, what separates Postmates business model from its competitors is the ability to order even from non-partner stores.
The 4-step Model about How Postmates Works
- Step 1 (Browse stores and products):
The first step in the business model of Postmates is about creating a demand. People have a smartphone app as well as a desktop application, which lets them request an article at their doorstep.
- Step 2 (Payment):
An order is received at Postmates only when it is paid. The delivery fee is added to the actual price of the order depending on the pickup and drop-off location. All payments are handled by Postmates.
- Step 3 (Matching):
As soon as an order is confirmed after payment, a notification about the order is sent to a Postmate (delivery person) who is stationed nearest to the store. He shops for your order and delivers it at your doorstep within one hour. Postmates travel by bike or by car. The matching process is such that all orders are processed within 1 hour period.
- Step 4 (Tracking, Receiving Order & Tips):
Another excellent feature in the Postmates business model is that a user is able to track the exact location of the Postmate who is on the way to deliver their order. Postmates has an option to send a text to the user in case of delays. Tipping a Postmate is upto the user. The company says that no tips should be given but a Postmate earns some tip in the majority of orders.
How Postmates Earns Revenue?
If you are looking forward to starting your own ‘on-demand delivery’ business, one important thing you might be interested in is the revenue model. Postmates business and revenue model have been the backbone for the company, which has led to its massive success. Let us see how Postmates earns money.
There are 3 main revenue streams for Postmates:
- Delivery Fee
Postmates charges users a small delivery fee for each processed order. This delivery fee normally starts from $5 but often there are specific ongoing offers where the company offers $3 or even lower delivery charges. However, 80% of the total delivery fee goes to the delivery person and rest 20% is Postmates revenue.
- Convenience Fee
Apart from the delivery fee (the majority of which goes to the delivery person), Postmates has a flat fee of 9% as convenience fee over each order. According to Techcrunch, there is no cap on this fee of 9%. People are happy to pay this convenience fee, as it is more convenient to get goods at their doorsteps without spending time and fuel. This adds up to Postmates revenue.
- Merchant Program
Postmates recently launched a merchant program where it ties up with local stores and signs an official agreement. The main purpose of this agreement is that the store pays a certain percentage of the total bill to Postmates for their service adding up to the company’s revenue.
Postmates Growth: How They Find Customers
You might be clear with Postmates business and revenue model but the main challenge for any startup in the delivery sector is to gain users and make some transactions. This brings us to a question ‘How does Postmates find its customers?’ Well, Postmates has become a widely known on-demand delivery startup by now and it has reached a stage where users come automatically (through word of mouth). In earlier days, Postmates had made use of digital marketing, offline advertisements and other marketing methods.
Commissions
Collaborating with Postmates opens the doors to a completely new digital on-demand world for the restaurants and other stores. They get more orders; ditch the credit card processing fee (all orders are processed by Postmates) and are able to concentrate on their core activities as the delivery is outsourced to Postmates.
Postmates has different contracts with different merchant partners. However, one thing that remains common is that the company charges a percentage for every order that comes from its platform. Postmates usually charges a commission between 15 and 30% on the pre-tax amount of the total product sold. The commission, however, varies for every partner depending on the contract they signed with the company.
The Future of Postmates
Postmates has constantly received a tough competition from Uber, GrubHub, Amazon, and even the small on-demand startups. However, the well-defined business model and business plan have made its way to the most influential on-demand delivery startup anyone has ever seen.
