How Does Postmates Make Money | App Development | Dom&Tom (2024)

The on-demand food delivery industry wentthrough some major changes. Due to the transforming consumer behavior, fooddelivery companies are expanding convenience and choice. This enables consumersto easily order food from a wide selection of restaurants using a mobileapplication.

One such good example is Postmates, athriving food and goods delivery platform recently acquired by Uber. As aleader in the on-demand delivery space, Postmates has set itself a strongfoundation in the United States.

In this blog, we’ll discuss the businessand revenue model of Postmates as well as why buildingan appfor your business may boost profitability.

What isPostmates: How Does itWork?

You might have already heard of Postmatesbut maybe you aren’t sure exactly what it is or how it works. Below is anoverview of what this mobileapplication or delivery service is all about.

About Postmates

In 2011, founders Bastian Lehmann, SamStreet, and Sean Plaice launched Postmates at their San Francisco headquarters.In July 2020, Uberbought Postmates in a $2.6 billion all-stock deal.

Postmates is one of today’s successfulon-demand delivery companies that provides online delivery services. Customerscan order food, beverages, and other items, and deliver them to their homes,offices, hotels, or wherever they want.

From Starbucks to liquor and grocery,users can order just about anything using the Postmates app.

In addition to food delivery service,Postmates offers a pick-up service, which allows customers to order from thePostmates app, and then pick up the order in-store.

Using the Postmates’ pick-up feature ispretty straightforward. Users just have to open the app and click on the‘Pickup’ button.

The pick-up feature is a great way tosave money and time. What’s more, there are no phone calls needed and nodelivery fees.

The Postmates food delivery services havemany useful features including:

• Online payments
• Real-time order tracking
• Contactless delivery
• In-app tipping option

While customers can use the platform tofind restaurants 24/7, it is not a 24-hour delivery service.

This online food delivery platform startsdelivering breakfast at 7:00 AM. Many restaurants take an order and deliver ituntil10:00 PM.

How late Postmates deliver food dependson the hours of operation of its merchant partners.

How DoesPostmates Work?

Postmates is an online courier servicescompany that uses weband mobile app technology.

Through their Postmates account, userscan order whatever they want. Orders are delivered anywhere in the US andMexico.

So this is how Postmates work. Whencustomers place their order, the platform will then place a temporaryauthorization on their accounts.

A temporary authorization confirms that auser’s Postmates card is active and that there is enough available balance tocover any transaction. And then, a Postmates driver picks the item up anddelivers it to the customer.

Working for Postmates

Working for Postmates can be a great wayto earn extra money during free time. The current pandemic has boosted deliveryjobs and on-demand delivery companies are hiring.

People who are looking to make money withPostmates may join the fleet. One of the big advantages of gig delivery jobs isflexibility. And being on the Postmates Fleet allows people to work when it’smore convenient for them.

Postmates couriers are independentcontractors. Meaning, they are being paid per delivery instead of receiving asalary.

Interestingly, Postmates drivers areaddressed as ‘postmates’. And thus, a Postmates delivery driver is also knownas a ‘postmate’.

Here’s the job review:

1. The Postmates driver accepts the delivery request with the PostmatesFleet app.
2. He or she picks up and drops off the orders to the customers’whereabouts.
3. Sometimes, the delivery person will use a prepaid card to pay theorder at the restaurant.

Delivering for Postmates

Again, delivering for Postmates is anexcellent way to earn extra cash. Postmates drivers get paid every week.

But they also have the option to get paiddaily via Postmates’ Instant Pay feature. The good thing is that there’s nolimit as to how many times a postmate can use the instant payout.

How Much Do DeliveryDrivers onPostmates MakePer Hour?

According to Glassdoor, the average basepay for Postmates couriers is $13 per hour.

Still, how much Postmates drivers makedepends on the amount of time they spend on the app to make deliveries. And so,earning $25 per hour is possible.

Providing great customer service can be abig help when working in this business. A good delivery person with excellentcustomer service skills can earn more money from bonuses and customer tips. Theplatform allows couriers to keep 100% of the tips earned during deliveries.

How to Get Started to Become aPostmates Driver?

Here’s a list of Postmates courierrequirements. The driver must:

• be at least 18 years old if themode of transportation is a bike and 19 years old for those who drive cars andmotorcycles
• own a smartphone (iOS or Android) toaccess the Postmates Fleet app
• have car insurance, a validdriver’s license and Social Security Number, which is a requirement for thebackground check

What is the Postmates Business and Revenue Model?

Postmates’ income is a combination ofseveral revenue models such as:

• Marketplace business model
• Fee-for-service (FFS) businessmodel
• Transaction-based businessmodel
• Commission based business model
• Software as a service (SaaS)business model

Postmates Funding, Revenue, and Valuation

On the 1st of May 2011, Postmates raisedits first seed of funding at $750 thousand.

Since then, the on-demand deliveryservice has raised$763 million in over 11 rounds of funding. This was before Uber acquiredPostmates in December 2020 for $2.65 billion. As of late 2019, Postmates had avaluation of $2.6 billion.

Postmates Income: Sources of Revenue

As of 2021, Postmakesgeneratesrevenue in 5 ways.

1.Postmates Unlimited (SubscriptionService)

Postmates Unlimited was rolled out in2016. Since then, customers subscribing to the service have grown over 300%year after year.

Customers have the option to pay monthlyor annually, which saves them less than 16.6% of the original cost. On everyorder over $12, customers enjoy the perks of no delivery fees, which can rangefrom $0.99 to $9.99.

Other Postmates benefits for Unlimitedmembers include:

• Reduced fees of eligible orders
• No blitz pricing at peak hours
• Special offers exclusive forUnlimited subscribers
• Access to giveaways and eventsjust for members

2.Commissions from Partnering with Merchants

Postmates has partnered with 75,000restaurants across 4,200 cities in the US. In 2019, the company handled over 35million deliveries worth more than $6.6 billion in transactions. DoorDash tooka portion of each transaction, which was made possible through their own foodordering marketplace.

3.Selling Products Through Theire-Commerce Store

Postmates also makes money by sellingmerchandise through their online store. Many of the items are for Postmates’delivery drivers. The prices of the items range from $1.95 to $19.

4.Fees (delivery, small cart, andservice fees)

Their fee structure is another wayPostmates earn money. The on-demand delivery platform charges things such asdelivery, small cart, and service fees.

Delivery Fee

Postmates adds a delivery fee for everyeligible order. The cost may vary depending on if the restaurant is apartnering merchant or not. There is no delivery fee for Unlimited subscriberswith orders over $12.

Small Cart Fee

There is a small cart fee of $1.99 forall customers (Unlimited members and non-members). Postmates tacks on a fee toevery order under $12. The small cart fee may vary depending on location.

Service Fee

Postmates charges a fee applied for everypurchase of an item, in which the percentage may vary depending on severalfactors.

5. Gift Cards

Postmates offers gift cards to users topurchase for their family, friends, colleagues, etc. Gift cards are availableonline and on the Postmates app.

Solo gift cards are available in $25,$50, $100, and $200 denominations. Gift cards available for Postmates Unlimitedmembers cost $9.99 a month or $99.99 a year.

Blitz Pricing (Surge Pricing)

The platform has a surge pricing featurethat may raise Postmates’ income from the aforementioned fees. It is a dynamicpricingmethod that allows multiple price increases. Blitz pricingapplies when demand for deliveries surpasses online courier supply.

This feature motivates delivery driversto go online, log on to the app, and start taking orders to meet the demand (ofdrivers). Blitz pricing creates a strong financial incentive for deliverydrivers.

Since Postmates drivers will makethemselves available when customers need them the most, the payout will behigher because customers are willing to pay more. Simply put, dynamic pricingallows a Postmates driver to make more money when the demand is high.

How Much Money Does Postmates Make?

Here, we have gathered some stats regarding how much Postmates generate revenue.

Postmates Revenue and Usage Statistics[2022]

On its launch in May 2011, the foundersof Postmates marketed the app as the new Craigslist. People in San Franciscocould order anything from the app. Postmates deliver orders, from food togoods, in 2 to 4 hours.

Postmates originally targeted smallbusinesses. The company pivoted to consumers a few years after the launch.

Postmates survived payment to payment forthe first 2 years without today’s annual billion-dollar rounds. In 2013,Founder’s Fund legitimizedthe industryby investing $5 million dollars into Postmates, leadingto a wave of further investments.

A few months later, both Postmatescompetitors Instacart and DoorDashwould land large SeriesA Rounds.

Postmates shouldn’t have survived in theon-demand food delivery industry. Originally, its delivery fee was $9.99 flat,which was higher than rivals DoorDash and Grubhub. Interestingly, manycustomers in California were willing to spend more on delivery charges fortheir favorites.

2015 saw Postmates finally lowering theirdelivery fee to $3.99 exclusively for preferred merchants.

Moreover, Postmates was the first in theindustry to launch a pro service called “Unlimited”. For $9.99 a month, thispro service will waiver the delivery charge for all orders over $30.

Unfortunately, Postmates’ market sharetumbled as more and more companies launched their on-demand delivery services,especially when DoorDash and Uber Eats superseded Grubhub.

And while Postmates saw continued growthin certain cities such as Charlotte, NC, and Los Angeles, it was far behind thetop rivals in total US market share.

In an attempt to fend off Uber Eats andGrubhub, DoorDash tried to merge with Postmates in 2018. But instead,DoorDashacquired Square’s on-demand delivery service, Caviar, when Postmatesdeclined the offer.

Two years later, Uber acquired Postmatesfor $2.65 billion, which eventually led to the laying off of 15% of Postmatesemployees.

Postmates Key Statistics

• In 2018, Postmates reached over$1 billion in total sales. (CNBC)
• In 2019, Postmates had revenueof $500 million. Although Postmates did not disclose any official numbers, manybelieved it increased to $880 million in 2020.
• In 2020, Postmates was acquiredby Uber for $2.65 billion.
• A staggering 10 million monthlyactive Postmates app users order over 5 million products a month.
• Postmates have over 600,000merchants as partners on the platform.
• The portion of Postmates’customers subscribed to its premium service is around 23%. (SecondMeasure)

Postmates Funding (Total)

Source:Crunchbase

Postmates Revenue

Sources:TechCrunch,Recode,TheInformation

Postmates Profit

Source:TechCrunch,QZ,Recode

PostmatesValuation

Sources:BusinessInsider, Crunchbase

WhyBuild a Profitable On-demandDelivery App Like Postmates?

The current global pandemic has caused arise in the demand for food delivery services. It rose even further as thepeople follow social distancing principles.

Even before that, the rising demandfor food deliveryis already making restaurant sales grow. Likewise,millennials seem to prefer food delivery services and takeout rather thandining in a restaurant.

While more and more companies report adecrease in their revenue after the COVID-19 outbreak, delivery services becamemore in-demand. Postmates, in particular, became more profitable and powerful.

From a simple minimum viable product(MVP), Postmates grew into a very successful app. Would you like to build yourown on-demand food delivery app like Postmates? We can help.

Choose Dom&Tomto Build aProfitable App Like Postmates

The last thing you need is a qualifiedexpert to bring your brilliant app idea into reality.

Dom&Tom has been working on themobile, web, and app development market for a long time. We have managed to winthe reputation of a trusted digital partner that can accelerate growth andtransform your business.

Feel free to contactusif you have any questions about food delivery app developmenttoday.