Postmates is a food delivery service built as a last-mile delivery serviceplatform 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.
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.
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.
Deliveroo is a British online food delivery company founded by Greg Orlowski and Will Shu in 2013. Shu developed the platform in response to a lack of high-quality food delivery in London.
Deliveroo makes money by collecting 25-45% of every order it facilitates. It also charges delivery fees and onboarding fees for restaurants that wish to be featured on the platform.
Deliveroo for Business is a service designed for corporate clients needing to order food in bulk. The company also charges a higher commission to businesses that utilize a network of digital kitchens to process orders.
DoorDash is a platform business model that enables restaurants to set up at-no-cost delivery operations. At the same time, customers get their food at home, and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.
Glovo is a Spanish on-demand courier service that purchases and delivers products ordered through a mobile app. Founded in 2015 by Oscar Pierre and Sacha Michaud as a way to “uberize” local services. Glovo makes money via delivery fees, mini-supermarkets (fulfillment centers that Glovo operates in partnership with grocery store chains), and dark kitchens (enabling restaurants to increase their capacity).
Grubhub is an online and mobile platform for restaurant pick-up and delivery orders. In 2018 the company connected 95,000 takeout restaurants in over 1,700 U.S. cities and London. The Grubhub portfolio of brands like Seamless, LevelUp, Eat24, AllMenus, MenuPages, and Tapingo. The company makes money primarily by charging restaurants a pre-order commission, and it generates revenues when diners place an order on its platform. Also, it charges restaurants that use Grubhub delivery services when diners pay for them.
Lyft is a transportation-as-a-service marketplace allowing riders to find a driver for a ride. Lyft has also expanded with a multimodal platform that gives more options like bike-sharing or electric scooters. Lyft primarily makes money by collecting fees from drivers that complete rides on the platform.
OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems. The company was acquired by Booking Holding back in 2014 for $2.6 billion. Today OpenTable makes money via subscription plans, referral fees, and in-dining with its first restaurant, as an experiment in Miami, Florida.
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 orders of more than $12.
Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner, and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay small delivery charges and, at times, cancellation fees; Drivers earn through making reliable deliveries on time.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
