Postmates, founded in 2011 and headquartered in San Francisco, California, is a third-party delivery service acquired by Uber Technologies, Inc.
It operates in about 3,000 cities across the United States and has evolved from a local courier service into a platform for on-demand deliveries of food and various goods.
Users can browse stores, order items, and receive deliveries quickly, which makes Postmates unique in providing not just food but also groceries, pharmaceuticals, and other necessities.
As a pioneer in the on-demand delivery industry, Postmates competes with major players like GrubHub, DoorDash, and Uber Eats.
Let’s learn about the various aspects of Postmates' business and how it operates.
Customer Segments Served by Postmates
Postmates targets three key customer segments that benefit from its business model:
1. Users
Users are individuals who may be too busy to shop or prefer staying home rather than going out.
These people are willing to pay extra for the convenience of having food, groceries, and other items delivered directly to their doorstep.
2. Retail Merchants
Retail merchants include store owners who sell a variety of products, such as groceries, pharmaceuticals, and ready-to-eat meals.
They partner with Postmates to expand their customer base through home delivery and increase their visibility to potential customers.
3. Delivery Providers
Delivery providers are typically students or individuals seeking part-time work or supplemental income.
For each delivery, these individuals earn money on a flexible schedule, either part-time or full-time.
How Postmates Works?
Postmates’ business model connects customers with local retailers through a network of delivery partners.
Here’s how it works:
1. User Interaction
- Order Placement: Customers browse various stores on the platform, select items, and add them to their cart.
- Checkout Options: They can choose to get delivery or opt for in-store pickup. Payment can be made at checkout or upon delivery.
- Order Tracking: Customers can track their orders until delivery and rate their experience afterwards.
2. Merchant Interaction
- Order Notification: Once a user places an order, the respective store is notified to prepare the items.
- Request for Delivery: After the order is ready, the store requests a delivery partner through the platform.
3. Delivery Partner Interaction
- Delivery Request: Nearby delivery partners receive notifications for available orders, which they can accept or decline.
- Order Pickup: Upon accepting a request, the delivery partner receives the order details and picks up the order from the store.
- Delivery: After collecting the order, the partner delivers it to the customer's location and receives payment, if not already settled.
Value Propositions Offered to Customers
Postmates delivers distinct value propositions tailored to each of its customer segments:
Value Proposition for Users
1. Variety of Goods
Users can order a wide range of products from local retailers on the platform.
2. 24/7 Availability
The service operates around the clock and allows users to place orders even at midnight as long as stores are open.
3. Speedy Delivery
Users can receive their orders within an hour of placing them. Real-time order tracking is also available.
Value Proposition for Retailers
1. Increased Exposure
Partnering with Postmates provides retailers—who range from convenience stores to local eateries—with valuable advertising that can help them attract new customers from the platform.
2. Delivery Solutions
Retailers can offer delivery services without needing to hire their own delivery staff, as Postmates handles this and customers pay the delivery fee.
Value Proposition for Delivery Partners
1. Flexible Scheduling
Delivery partners enjoy the freedom to choose when they work, which allows them to make deliveries at their convenience.
2. Earnings per Delivery
Delivery personnel earn money for each delivery they complete. This makes it an ideal side hustle for students or individuals with other jobs looking to earn extra income whenever they need it.
What Does Postmates Do?
Postmates engages in several key activities to keep its business and platform running smoothly:
1. Platform Maintenance
Postmates maintains its web and mobile apps regularly in order to ensure that the platform is strong enough to support smooth transactions and operational efficiency
2. Retail Partnerships
They maintain strong relationships with retail merchants, so they can provide a diverse product offering and enhance user experiences.
3. Delivery Partner Recruitment
The platform works on recruiting and managing a fleet of delivery partners to meet the demand for quick deliveries.
4. Customer Acquisition
Postmates invests in marketing efforts to attract new users and retain existing ones.
Key Partners and Resources of Postmates
Postmates relies on a network of key partners and essential resources to deliver its services effectively.
Key Partners
1. Retailers
Restaurants, local stores, and other retailers form the backbone of Postmates’ supply side. They provide a variety of goods available for delivery and offer a diverse selection to users.
2. Delivery Partners
These individuals are crucial for fulfilling orders. They pick up items from retailers and deliver them to customers to ensure timely service.
3. API Partnerships
Postmates launched an API that allows businesses like Starbucks, Target, and Instacart to integrate Postmates’ delivery capabilities into their applications.
This expands Postmates' reach and partners it with well-known retail chains.
Key Resources
1. Partnerships
Postmates' partnerships with retailers and delivery partners are essential for efficiently delivering its value proposition.
These collaborations ensure a consistent supply of products and reliable delivery services, which enables the platform to effectively meet customer needs.
2. Technology Platform:
Postmates’ website and mobile apps help users, retailers, and delivery partners communicate and complete transactions. They are essential for ensuring smooth operations.
Cost Structure of Postmates
Postmates’ expenses primarily consist of the following:
- Technology Development: Ongoing maintenance and updates to the web and mobile apps to enhance the user experience.
- Employee Salaries: The company incurs costs for compensating full-time employees.
- Payments to Delivery Partners: Earnings are paid to delivery personnel for each completed order.
- Operating Costs: General expenses are related to running the business and maintaining daily operations.
- Insurance: Costs associated with protecting the business and its assets, including liability and coverage for delivery partners.
Revenue Model of Postmates
Postmates generates revenue through several key channels:
Let's take a look at how they do it.
- Delivery Fees: The company charges a minimal fee for each order processed, retaining 20% of the total delivery fee, while 80% goes to the delivery partners.
- Convenience Fees: A flat convenience fee of 9% is added to each order, reflecting the value of having items delivered directly to customers' doors.
- Dynamic Pricing: Postmates implements increased pricing during periods of high demand, which creates a financial incentive for delivery partners to be available when needed most.
- Postmates Unlimited: The subscription service allows members to waive service fees and avoid surge pricing, which generates additional revenue through membership fees.
Channels of Postmates
In its early days, Postmates employed a variety of marketing methods to attract its target audience. These strategies included:
- Digital Marketing
- Offline Advertisements
- Discounts & Promotions
Once it established a customer base, word of mouth became its most effective channel. This organic promotion helped the platform reach a wider audience and expand its offerings.
Is Postmates’ Business Model Successful?
Yes, Postmates' business model has proven successful since its launch in 2011.
The platform effectively engages users through social media and provides strong online support.
By actively seeking feedback, Postmates built a loyal customer base within four years.
The company established partnerships with major brands like Apple, McDonald's, Starbucks, and Walgreens and enhanced its market presence.
Following its acquisition by Uber in 2020, Postmates benefited from improved resource sharing and technology integration, which led to greater efficiency and innovations like delivery robots.
Overall, Postmates has implemented a successful business strategy that positions it well for ongoing growth in the on-demand delivery market.