Explained: Postmates strategic Business model and Revenue sources
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Explained: Postmates strategic Business model and Revenue sources

Dileep Gupta
By Dileep Gupta| Wednesday, September 12, 2018 13:32 PM |5 min read
Postmates strategic Business model and Revenue sources

Postmates is an on-demand food delivery services provider company that lets customers order anything from anywhere in the city. They work in more than 100 metropolitan cities in the USA. Postmates business model is often compared to other similar service providers like Uber and Lyft but have a unique way of delivering the goods i.e. through human messengers. The network of human couriers is connected via an app and GPS and whenever a customer wants something delivered, the messengers are notified.

Postmates business model is quite unique and has attracted many investors towards them. After being launched in 2011, Postmates saw great success in the next four years which shows that postmates for business was a good idea. Because of their great work, Postmates has been able to collaborate with Apple, Starbucks, Chipotle, etc. To understand what does Postmates do, let’s break their business model in small segments.

FUNDERS AND FOUNDERS

Founders: Sam Street, Sean Plaice, Bastian Lehmann.

Founded: 1 May, 2011

Headquarters: San Francisco, California, United States

Funding received: $138M (as of 2015)

Postmates valuation: $800M

Daily orders: 8500 (as of 2016)

Average order size: $45

Fund Timeline

Due to the failure of a similar Uber-based program, Postmates had difficulty gaining funds. But slowly that changed and ever since Postmates has received funding from time to time. The most recent funding has made Postmates increase to $800M valuation. The image below shows the fund timeline.

Postmates Funding Timelines

What makes Postmates stand out?

Apart from the fact that Postmates for business worked out great for the founders, there are some exceptional features that make the success more obvious. Since the beginning, the business model was aimed to make it stand out in the market. The only reason why Postmates saw this limelight was because of its uniqueness and the striking features they brought for the segments they served. These are the features that stand out in the market:

  • Lets people order anything from anywhere in the city.
  • Includes special stores for customers.
  • Postmates delivery fee is quite nominal which depends on the distance from the pick up to drop off points.
  • They are able to deliver the product within an hour.
  • $5 is the minimum Postmates delivery fee but sometimes offers include lesser fee.
  • The customers can track the location of the messenger through GPS to know how far the product has reached.
  • The latest launched feature of Postmates is the ‘Pick up’ option that was launched with the motive to expand.

Postmates customer relationship

For any business, having a strong customer relationship is crucial for growth. Postmates – an on-demand food delivery company, has a great customer support service that helps with any queries or complaints. Their website also has answers to multiple FAQs like ‘What is Postmates?’, ‘How does Postmates work?’ and ‘How much does Postmates cost?’.

Another way Postmates has won hearts is through their strong social media presence. Social media is a great way to create brand awareness and direct the followers to become customers. Also, customers love to see what the businesses are upto and keeping them up to date is the best way to retain them.

It is no wrong to say that people get inquisitive about how Postmates for business became successful and how much do Postmates make out of it. These questions are also answered by the messengers on various websites which gives a clearer picture.

Feedbacks are the direction for any business for the reason that they can learn what their customers think about the business. Postmates has given the opportunity to its customers to give reviews, feedbacks and ratings.

The three segments Postmates serves

Postmates serve majorly three segments: Customers, Merchants and Delivery Persons.

Three Segments Postmates Serves to their Users

Customers: For Postmates, customers are those who are willing to spend extra in order to get products delivered at their doorstep. This saves customers the time and energy with just a few extra bucks and these extra bucks go into the Postmates pay structure.

Merchants: Postmates collaborate with merchants to give them a platform to reach the huge audience. Merchants are more than happy to pay a small amount of the total bill to contribute to the Postmates revenue. This is how does Postmates work with merchants. In the part of merchants, they find it more economical to share a small sum with Postmates rather than hiring a delivery boy.

Delivery Persons: Customers often wonder what is Postmates fleet made of and the answer is the delivery persons. Postmates keep a 80-20 rule with messengers. The Postmates pay structure: 80% of the delivery fee is given to the delivery guys and 20% is kept by the company. The delivery guys can earn upto $25/an hour. This ratio answers how much does Postmates pay its messengers.

[Extra: Know about the details of the different segments that are present in an on-demand app like Postmates here – How to build a successful on-demand delivery app]

Values by Postmates

What does Postmates do for the different segments? Postmates offer valuable incentives to all the three segments it serves. Take a look at the remarkable value propositions:

Users:

  • Postmates services are available 24 hours a day and 365 days a year.
  • Customers can other from anywhere in the city.
  • The products will be delivered within an hour of the order placed.

Merchants:

  • The merchants get a huge platform to sell their products.
  • They have to pay an appropriate sum to the delivery guys for the work.
  • They can also serve their own customers at the doorstep.

Delivery Persons:

  • Flexibility in work schedule.
  • According to Postmates revenue model, messengers get 80% of the total delivery fee.
  • Messenger’s earning depend on how many deliveries they make.

The Business Model: How it works?

How Postmates Business Model works

The 4 step guide on how Postmates works:

Step 1: Finding or creating the need. That is the first step of how does Postmates make money. With great mobile app development companies like Appinventiv, applications are created for businesses to track the needs of the customers.

Step 2: Payments are made at the time of order. The delivery fee is added to the total bill depending on the distance between the pick up and drop off points and the final result shows how much does Postmates costs.

Step 3: The third step is matching. What is Postmates fleet responsible for? Once the order is placed by a user, the notification along the details of the product is sent to the messenger close to the shop. The details are properly matched by the messenger while buying the product so that they get exactly what the user has demanded. The order must be bought and delivered at the doorstep of the user within one hour.

Step 4: Another excellent feature of Postmates is that the users can track where the messengers are with their products. The users also have the option to send feedback after the completion of orders. There is another option for users to tip the delivery guys which totally depends on the users. That is one of the ways how does Postmates make money for its delivery persons.

What is Postmates Revenue model?

The revenue model reveals an estimate of how much do Postmates make. Every business should have a strong revenue model for massive success. The reason behind the Postmates valuation of $800M is its strong and strategic revenue model.

Let’s have a look at how they built it:

  1. Delivery fee: The users have to pay a small delivery charge of $5 which reduces to $3 or even less during occasional offers. Whatever the amount of charge is, 80% of it is paid to the messengers and 20% goes to the company. The delivery fee has always decided how much does Postmates pay to the delivery persons. 
  2. Convenience fee: Postmates charges 9% convenience fee which the users are happy to pay in order to get goods delivered at their doorstep. Unlike the delivery fee maximum of which goes to the delivery guys, convenience fee goes straight to the companies accounts. 
  3. Fee by merchants: Postmates recently launched the collaboration with local merchants. This benefits both the parties since the merchants get an extended customer base and the Postmates gets paid by the merchant a small percentage on each order.

[Extra: Know how much money can your app make]

How does Postmates find its customers?

For any business customers are like gems, the more the better. It is because of the customers that a business can flourish or can go downhill. Even after getting the attention of an large audience, converting them into users becomes yet another challenge for businesses.

In the beginning, Postmates – On-Demand Food Delivery App used a lot of marketing tactics to gather a customer base. They had used digital marketing, online and offline advertisements, promotions and other marketing options as well. As the digital marketing funnel shows, getting the attention is the first job businesses must do.

The second step in the funnel is to engage the customers and make them understand the business. This is where the business has to persuade the viewers into let-me-try-it-once attitude.

Once Postmates gathered customers through traditional and modern techniques of marketing, their audience began growing automatically. One of the biggest ways it grew was through word of mouth. Word of mouth is highly beneficial for businesses especially the startups but to earn it, businesses have to maintain the quality and constantly upgrade their services.

Now that you have acquainted yourself with how Postmates Works and Earns Revenue, it is Time to Know How Much Would it Cost to Develop an App Like Postmates. Here’s a Guide Answering That – How Much Does it Cost to Develop and Maintain a Mobile App.

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Continue exploring the landscape of product design with these helpful resources: on-demand app developmentPostmates Business model and Revenue sources
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Dileep Gupta
About The Author

Dileep Gupta, the Chief Delivery Office at Appinventiv is someone who having worked with hundreds of clients worldwide, knows what they need in terms of product and service delivery. Having acknowledged himself with both the human and technical side of an app, Dileep is someone who gets things done to make an app reach its people and then the world, on time and above par met expectations.

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