How Does Postmates Make Money? Postmates Business Model In A Nutshell

Postmates is a food delivery service built as a last-mile delivery service platform connecting locals with shops. Postmates makes money by collecting fees (commission, delivery, service, cart, and cancellation fees). It also makes money via its subscription service (called Unlimted – $9.99/month or $99.99 annually) giving free delivery on every order of more than $12.

Table of Contents

Origin story

Postmates is a North American food delivery service. The service was founded in 2011 by Bastian Lehmann, Sean Plaice, and Sam Street after the trio unsuccessfully tried to get hot dogs delivered to their residence.

Three short years later, Postmates released a merchant interface allowing small businesses to compete for delivery of consumer goods with larger players such as Amazon.

Shortly after this release, the company announced that it had completed 1 million deliveries with 6,000 drivers in its delivery network.

During the height of the COVID-19 pandemic in June 2020, Postmates was acquired by Uber for $2.65 billion. The company continues to operate under the Postmates banner today, serving approximately 3,500 U.S. cities or 70% of the total population.

Value Proposition:

Convenient Food Delivery: Postmates offers a convenient food delivery service, allowing customers to order a wide range of food and grocery items from local shops and restaurants and have them delivered to their doorstep.
Diverse Fees: Postmates provides transparency in its fee structure, offering various fees such as commission, delivery, service, cart, and cancellation fees. This flexibility allows customers to choose delivery options that best suit their needs.
Subscription Savings: The “Unlimited” subscription service provides value to frequent customers by offering free delivery on orders over $12, potentially saving them money on delivery fees.
Wide Coverage: With a presence in approximately 3,500 U.S. cities, covering 70% of the total population, Postmates offers broad geographic coverage, ensuring accessibility for a large customer base.

Customer Segments:

Consumers: Individuals and families who want the convenience of having food and groceries delivered to their homes make up the primary consumer segment. This includes those looking for meal delivery, late-night snacks, and everyday essentials.
Local Businesses: Postmates partners with local restaurants, shops, and merchants, serving as a delivery platform for these businesses. Local businesses benefit from reaching a wider customer base without establishing their delivery infrastructure.

Distribution Strategy:

Mobile App: Postmates primarily operates through its mobile app, available for both iOS and Android devices. Customers can browse menus, place orders, and track deliveries through the app.
Website: Postmates also offers an online ordering platform through its website, allowing customers to access its services via web browsers.

Marketing Strategy:

Partnerships: Postmates collaborates with local restaurants and shops to expand its range of offerings and promote its services to a broader audience. Special promotions and discounts may be part of these partnerships.
Customer Loyalty: Postmates promotes its “Unlimited” subscription service as a way for customers to save on delivery fees, encouraging loyalty among frequent users.
Referral Programs: Postmates may run referral programs, encouraging existing customers to refer new users in exchange for discounts or promotional offers.
Social Media: The company utilizes social media platforms to engage with its audience, share promotional content, and highlight popular dishes and local partners.
Email Marketing: Postmates sends promotional emails to its user base, informing them of discounts, special offers, and new restaurant additions to the platform.
In-App Promotions: Postmates may run in-app promotions and pop-ups to encourage users to try new restaurants, use the “Unlimited” subscription, or participate in limited-time deals.

Postmates revenue generation

Postmates drive revenue through the collection of various fees and a premium subscription service.

Following is a look at each.

Fees

For every order placed on the Postmates platform, the company collects a host of fees including:

A commission fee – or a percentage of the total sale price dependent upon the type of product sold and the agreement with the affiliated partner. For example, a supermarket such as Walmart may pay Postmates a small fee because of its very slim margins. A family-owned restaurant, on the other hand, may pay as high as 20% on every order.
A delivery fee – or $0.99-$3.99 for partnering merchants and $5.99-$9.99 for all other merchants.
A service fee – which is charged for the ancillary services delivery drivers perform, such as selecting items from supermarket shelves.
A cart fee – which applies when a Postmates order does not meet the minimum threshold. This cart fee equates to $1.99 per order.
A cancellation fee – when a consumer cancels their order, Postmates charge a fee depending on how advanced the order process is. The fee also depends on the particular merchant and the dollar amount of the order.

Unlimited

Unlimited is the name given to a subscription allowing Postmates customers to save money on deliveries.

The company charges $9.99/month for the Unlimited subscription or $99.99 annually.

Once on the plan, the consumer gets free delivery on every order of more than $12 as well as access to events and promotional giveaways.

While Postmates claim the plan saves consumers about $185 per year, there is potential for individuals using the service frequently to make the scheme unprofitable in the long term.

Key takeaways:

Postmates is a North American food delivery service. It was founded in 2011 after three friends tried unsuccessfully to get hot dogs delivered to their residence.
Postmates generate revenue through a multitude of order charges, including a commission fee, delivery fee, cart fee, and service fee. There are also charges for those who choose to cancel an order already in progress.
Postmates also offers a subscription service where consumers save money on delivery and get access to certain member perks. However, whether the subscription service is ultimately profitable for the company long term is debatable.

Element	Description
Value Proposition	Postmates offers a compelling value proposition to its users, including: – On-Demand Delivery: Providing convenient and fast delivery of food, groceries, and various products. – Wide Variety: Offering access to a diverse range of local restaurants and stores. – Flexibility: Allowing users to order from multiple merchants in a single delivery. – Contactless Delivery: Ensuring safe and contactless delivery options. – Real-Time Tracking: Providing real-time tracking of orders. – Membership Benefits: Offering Postmates Unlimited for free delivery on eligible orders. – Availability: Operating in numerous cities across the United States.
Core Products/Services	Postmates’ core products and services include: – Food Delivery: Delivering meals from local restaurants to customers’ doorsteps. – Grocery Delivery: Providing grocery delivery services from various stores. – Retail Delivery: Delivering products from retail stores, pharmacies, and convenience stores. – Alcohol Delivery: Offering alcohol delivery in certain markets where legally permitted. – Custom Delivery: Allowing users to order almost anything, including non-food items. – Postmates Fleet: Engaging a network of independent couriers for deliveries. – Mobile App and Website: Offering a user-friendly platform for ordering and tracking deliveries.
Customer Segments	Postmates serves a diverse range of customer segments, including: – Consumers: Individuals and households looking for convenient delivery options. – Restaurants: Local eateries and restaurants seeking additional delivery services. – Retailers: Stores and businesses interested in expanding their delivery capabilities. – Grocery Stores: Supermarkets and grocery chains partnering for grocery delivery. – Alcohol Retailers: Liquor stores and wine shops participating in alcohol delivery. – Couriers: Independent couriers looking for delivery opportunities. – Small Businesses: Local businesses leveraging Postmates for deliveries.
Revenue Streams	Postmates generates revenue through various revenue streams: – Delivery Fees: Charging customers delivery fees based on the order value and distance. – Service Fees: Levying a service fee on each transaction to cover operational costs. – Merchant Commissions: Earnings from partnering restaurants and stores through commissions on orders. – Subscription Model: Revenue from Postmates Unlimited subscriptions offering free deliveries. – Small Cart Fees: Charging additional fees for small or low-value orders. – Promotional Partnerships: Earnings from advertising and promotional partnerships. – Alcohol Delivery Fees: Extra charges for alcohol deliveries where permitted.
Distribution Strategy	Postmates employs a strategic distribution strategy to connect users with merchants: – Courier Network: Utilizing a network of independent couriers (Postmates Fleet) for deliveries. – Mobile App and Website: Providing a user-friendly platform for order placement and tracking. – Restaurant and Retail Partnerships: Partnering with local restaurants and stores for delivery services. – Alcohol Retailers: Collaborating with liquor stores and wine shops for alcohol delivery. – Delivery Algorithms: Using algorithms to optimize delivery routes and reduce delivery times. – Marketing and Promotions: Running marketing campaigns to attract users and merchants. – Geographic Expansion: Expanding its services to new cities and markets. – Customer Support: Offering customer support for order-related inquiries and issues.