How Postmates Works: Business Model and Revenue Sources Explained (2024)

How Postmates Works: Business Model and Revenue Sources Explained (1)

What is Postmates?

Postmates is an on-demand goods delivery platform having a presence in more than 100 metropolitan areas in the USA that enables people to get anything from local stores delivered at their doorstep for a small 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 device and GPS is used by the company to match demand and supply in the shortest possible time.

Postmates unique business model has fetched a good amount of funding from investors and has helped the company acquire a large customer base. Postmates was launched in the year 2011 and in a short period of 4 years, it has come out as a huge success. Postmates has got official tie-ups with Apple, Mcdonalds, Starbucks, Walgreens, Chipotle and many other well-known companies.

Founders, Funding Received and Facts

Founders: Sam Street, Sean Plaice and Bastian Lehmann.

Company Headquarters: San Francisco, California.

Funding received by Postmates: $138M (As of November 2015)

Company Valuation: $500 M

Number of daily orders processed: 7500 (As of 2015 start)

Average order size: $40

Postmates Funding Timeline:

How Postmates Works: Business Model and Revenue Sources Explained (2)

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 pick up point and drop off point.
  • Special featured stores.
  • The delivery guys 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 even lower delivery fee.
  • Customer can track the location of the delivery guy after placing the order.

Postmates 3 customer segments explained

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 doorstep. People

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 personals for 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, postmates driver get 80% of the delivery fee and rest 20% is kept by the company. According to Postmates, a delivery guy can earn upto $25 per hour.

Value Propositions

Postmates business model offers excellent value propositions for customers, delivery personal as well as local stores. Let’s 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 doorstep 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 guys get 80% of the delivery fee.
  • The more they deliveries they make, the more they earn.

Postmates Business Model Canvas

We here at Juggernaut made a Business model canvas for postmates on the lines of the business model generation canvas proposed by Alexander Osterwalder. You may go through the following canvas:

How Postmates Works: Business Model and Revenue Sources Explained (3)

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 said to be received at Postmates only once 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 guy) 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 time frame.

  • 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. Postmate has an option to send a text to the user in case of delays. Tipping a postmate is entirely upto the user. The company says that no tips should be given but a postmate earns some tip in majority of orders.

How Postmates earns revenue

If you are looking forward to start your own ‘on demand delivery’ business, one important thing you might be interested in is the revenue model. Postmate’s business and revenue model have been the backbone for the company which has led to its massive success. Let’s see how postmates earns money.

There are 3 main revenue streams for Postmates:

1.Delivery Fee

Postmates charges users a small delivery fee for each order processed. This delivery fee normally starts from $5 but often there are specific ongoing offers where the company offers $3 or even lower delivery. However, 80% of the total delivery fee goes to the delivery guy and rest 20% is Postmates revenue.

2. Convenience Fee

Apart from the delivery fee (majority of which goes to the delivery guy), 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 doorstep without spending time and fuel. This adds up to Postmates revenue.

3.Merchant Programme

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 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 reach some transactions. This brings us to a question ‘How does Postmates find customers?’ Well, Postmates has become 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 has made use of digital marketing, offline advertisements and other marketing methods.

Here’s a growth graph of Postmates. (As published on TechCrunch).

How Postmates Works: Business Model and Revenue Sources Explained (4)

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How Postmates Works: Business Model and Revenue Sources Explained (5)

In recent developments, Postmates has taken the leap to go Public. Catch the insights here. 

How Postmates Works: Business Model and Revenue Sources Explained (2024)

FAQs

How Postmates Works: Business Model and Revenue Sources Explained? ›

Postmates makes money by charging customers delivery and service fees for each order. The delivery fee is typically around $5, while the service fee is 9% of the total order value. In addition to these fees, Postmates also charges merchants a commission on each order they fulfill. This commission ranges from 18-30%.

What type of business is Postmates? ›

Postmates is an on-demand food and good delivery services company that lets customers order anything from anywhere in the city. They work in more than 100 metropolitan cities in the USA.

What is the summary of Postmates? ›

Postmates operates as an on-demand delivery service that connects customers with local couriers who can deliver items from any restaurant or store within a city.

What is Postmates unique value proposition? ›

Many people ask “What is postmates and how does postmates business model work?” Postmates offers a unique value proposition to its customers: the ability to have anything from anywhere delivered at any time.

What are the core values of Postmates? ›

Postmates Values
  • Trust.
  • Oneness.
  • Innovation.
  • Growth.

What is the revenue model of Postmates? ›

Postmates makes money by charging customers delivery and service fees for each order. The delivery fee is typically around $5, while the service fee is 9% of the total order value. In addition to these fees, Postmates also charges merchants a commission on each order they fulfill. This commission ranges from 18-30%.

How profitable is Postmates? ›

Postmates made an estimated $730 million revenue. It last reported revenue of $500 million for the full year 2019.

What is special about Postmates? ›

Postmates' business model is similar to that of Uber, the taxi service, except that Postmates allows users to get things from local retailers. Postmates courier boys, like Uber drivers, receive notifications on their mobile devices and then deliver the order as quickly as feasible. Delivery App Today!

What is your unique selling proposition answer? ›

Your USP (Unique Selling Proposition) is the unique thing that you can offer that your competitors can't. USP Analysis is a useful way to understand how people are competing in your industry. And it's essential for identifying your USP, so that you know what to build upon and sell to your customers.

Why does Postmates exist? ›

History. Postmates was founded in 2011 by Bastian Lehmann, Sean Plaice, and Sam Street. In December 2014, Postmates opened its application programming interface to merchants to allow small businesses to compete in the business of consumer goods delivery with larger companies such as Amazon.

How do Postmates work? ›

Postmates is an on-demand delivery app which offers two alternatives to the users. Delivery and Pickup. Using it, users can order anything from the city to get it all delivered to their doorsteps. The other option is pick-up.

Who is Postmates target audience? ›

As we observe established apps like Uber changing their positioning to more generalised services, Postmates positions itself ideally for the millennials, their major target audience, by being a company that powers local, on-demand logistics focused on fast deliveries from type of merchant at scale.

What is the mission statement of Postmates? ›

"Postmates' mission is to enable anyone to have anything delivered on demand, and that goes well beyond prepared food. Now more than ever, we want to provide a solution to local retailers to help them get back to business and reach new customers."

What type of business is DoorDash considered? ›

Doordash is considered self-employment, which means you'll pay taxes using 1099 forms. It also means you're able to write off business expenses that could help you save on your tax bill.

What type of business is Uber and DoorDash? ›

Its revenue is expected to reach $466,472 million by 2026 in the USA. Two brands, Uber Eats and DoorDash, are the biggest contributors to the food delivery industry.

Is Postmates a Uber company? ›

Although referred to as a “merger,” the deal is, in effect, a full-on acquisition. Uber now fully owns Postmates, after transferring $2.65 billion in Uber stock to Postmates.

What is the job description for Postmates? ›

Postmates drivers earn a living by delivering food, convenience items, and small office goods to local consumers. Most of the time, Postmates' customer service reps place delivery orders, so the driver's responsibility is to pick up and deliver items; other times the driver must make the necessary purchase.

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