Postmates is an on-demand delivery service founded in December 2011. Headquartered in San Francisco, the company operates in 28+ markets in the US with over 13,000 couriers. Currently, their business focuses primarily on restaurant takeout with an underlying delivery logistics model that takes advantage of Uber-like service sharing. Postmates is a privately held company and has raised $138 million to date, most recently $80 million in its Series D offering earlier this year.
Business and Operating Models
Postmates, similar to some of its competitors like Door Dash and GrubHub, provides this on-demand food delivery for a fee. The ecosystem is housed within mobile applications for iOS and Android (and recently, web), beginning with a list of all restaurants, liquor stores and other delivery services available. They have non-food delivery options including household items from what they call “The General Store”. Once the user has selected her items, the application prompts a checkout and payment option, after which a “Postmate” is dispatched to retrieve and deliver the item to the customer within a short window of time.
The beauty of the application is its simplicity of the user interface – the customer can see menus, prices, and even track the Postmate on the delivery journey. There are also options to select back up orders in case something is not available, and you can save food preferences.
The business model is relatively simple: Postmates charges a delivery fee based on distance between pickup and delivery. Fees start at $5 and can go upward of $20 depending on the city and travel time, similar to a taxi cab’s fare system. Postmates also marks up the price of the items, charging up to a 9% convenience fee. Tips for the couriers are customary, but not included in the order. These fees are dynamic, and can be increased or decreased depending on popularity and time of day, similar to Uber’s surge pricing model. The company pays its couriers 80% of delivery fees and tips, retaining 20% for itself. On average, Postmates collects approximately $4-$8 per order.
In addition, Postmates has several strategic partnerships with large fast casual retailers like Chipotle. For these partnerships, Postmates charges a lump sum fee for premium placement within the application, and for reduced delivery fees for the customers.
Underlying this business model is a detailed web of logistics that keeps the process operating. To become a Postmate, one must undergo an hour or two of training at the company, after which the courier is eligible to sign up for a shift on the company’s scheduling application. Trained Postmates are allowed to turn on their delivery availability at any time, but couriers with pre-scheduled times are given preference. Postmates are then assigned to deliveries based on current location and priority, and can accept or reject the opportunity. That courier is dispatched to place the order and pick up the food, and then deliver the food to the customer’s requested location. There is no limit to how many Postmates can be on the road accepting deliveries, which makes the supply and demand of the market maximally efficient.
Payment is also a tricky part of the operating system. Postmates couriers are given pre-loaded debit cards on which to pay for the food. If Postmates has to pay for the meal up front before receiving money from the recipient, they charge an additional fee to offset the Stripe processing fees. Couriers are also expected to pay out of pocket for travel costs, fuel, gas, etc.
Why Postmates is winning
This business model only works when there is a crowdsourced ability to get civilians to leverage their transportation mechanisms and location to get food for others. In order to have a decentralized delivery system that focuses on a whole territory instead of one retailer, the logistics part of the operation must run smoothly. As a result, Postmates is able to retain its competitive advantage because it takes advantage of the mobilizing a 13,000+ person courier base in a synchronous, organized fashion. By utilizing a collaborative workforce model, Postmates can service deliveries from an extremely diversified base of restaurants and deliver to customers far and wide.
Its competitors, like Seamless and GrubHub, instead take advantage of restaurants’ own delivery services, and therefore, not all restaurants can participate in those offerings. By tapping into a community and operating its own courier services, Postmates is not limited to servicing the universe of restaurants that already employ delivery workers. While Postmates might be more expensive, the company transfers the economic burden to the customers, who are signed up and willing to pay the added cost.
Feedback and customer service
In addition, Postmates stands out as a winner in this logistical operating model because of its emphasis on communication and transparency. Many of these frameworks are built directly into the application: once an order is placed, the customer is able to track the entire delivery process on the application. In addition, Postmates couriers are encouraged to call or text whenever there is a discrepancy or a question. Finally, by having a two-way feedback loop within the application, the customer and Postmate are able to rate their experiences. This rating ensures customer satisfaction for future experiences, keeping customers loyal to the service.