Postmates Business Model – How does Postmates make money

In the 21st-century people have become highly busy. Don’t you agree? With more and more people joining the workforce and working towards their better future, their demands are also increasing. They need everything quick. Yup, you heard it right. Since they have a time constraint and put their work first, from shopping to watching movies they are doing everything from their couch.

Earlier people would have waited in lines to eat at their favourite restaurant. But now, unless and until it is a special occasion, people prefer ordering their food home. You see, it saves them from the effort of going out and standing in a queue to enjoy good food. While they receive the orders they can work on the other things.

Not only food, but people are also now spending their rest days at home and preferring online shopping. Yup, why do you think Amazon is becoming more popular with each passing day?

In this article, you will be knowing about a promising startup like Uber. Yup, you heard it right. With the title, you would have already understood that in this article you will be knowing about the Postmates business model and how it makes money. 

The core idea behind this quite simple. It delivers everything their customer’s order in their city within an hour for a small fee. Amazing idea, right? There are times that you’re super busy but you cannot go out to get the groceries or anything else. In such instances, you can rely on the Postmate to deliver your products without spending a lot of money. Not only delivery it also offers to pick up too. Now you see why their idea has become successful and brought them good profits. 

Wanna know more about Postmates? Then stick till the end of this article. 

Postmate Business Model 

Since its inception in 2011, Postmate has increased its network. Now they deliver around 2 millions products a month. Can you believe it? Currently, this company operates in more than 385 cities with around 2,00,000 delivery fleet and more than 250,000 partners. The thing about this startup is that it has more than one customer segment.

Other than that one thing you must understand is that it works more on a partnership model. Yup, they find it more beneficial than the employee model. If you want to understand their business model first and foremost you must understand their customer segment.

Their customer segment will provide you with a better understanding of the Postmate works. They have 3 tier customer segment.

Merchants

Customers

Postmate

Merchants

The merchants for the Postmate are the grocery stores, restaurants and all the other store that form a partnership with Postmate. Merchants will be benefited through this platform. Wondering how? If they partner with Postmate app they will naturally be on the radar and when customers need services they are offering, these merchants will be the first option. So the exposure for their business increases and they can grab the attention of more and more customers and improve their business.

Also, it saves them delivery cost, you see they dont have to separately hire a delivery person to deliver goods as Postmate handles it. So they save costs. They only have to pay commission to the Postmate, no other charges involved. The commission would range from 15 to 30%. Also, remember that commission percent depends on the contract between the merchant and Postmate.

Customers 

They are the end people, who seek the services of the Postmates. From grocery pickup to ordering items they usually use Postmate to get things done. They usually pay a small amount to get things delivered to their doorstep. 

Postmate

Dont confuse the Postmate with the platform name. Postmate here is the delivery personnel who partner with the Postmate to delivery goods to the clients. They work based on their own timings and schedule. Postmate receives 80% of the delivery fee for every order delivered. And the company keeps the remaining 20% of the fee. They deliver anything within the city limits within a small time at a reasonable fee. 

How do Postmate works?

As of now you have understood about the Postmate and their customer segment it is time to learn about how it works. They manage a chain of human couriers who deliver anything within city limits to the clients on-demand. But if you think the customers can only order from the partner merchants then this where you’re wrong. Postmate allows customers to order any necessary items from the non-partner stores too. 

The delivery model of Postmate includes five steps.

Browse

This platform has almost all the stores in the city listed on it. Although the partner stores are given more priority it doesn’t mean that you cant order from anyone else other than them. Users can browse through the stores in the Postmate and order anything they want through the app. 

Pay

One thing that customers must remember is that the order will be delivered until and unless the payment is made. Yup, you heard it right. They have to pay the price mentioned by the Postmate. The price includes the product price along with the service fee and the delivery charges. 

Order initiated

As soon the payment is made by the customer. The nearest Postmate will receive the notification relating to the order placed. They will shop for the order and delivery it using their vehicle.

Track 

The customers can track their delivery to know where it and when it will reach their doorstep. They will receive a notification as soon as the Postmate goest to the store to purchase their item. From that point on they can track the delivery.

Delivery successful

The last and final step of this delivery model is that the delivery of the product to the customer. Since they have already made the payment, all they have to do is receive the order and check whether it is what they want or not. Once they check and made sure everything is ok. They have an option to tip the Postmate and give them good ratings. The platform will not take any share in the tip, it solely belongs to the Postmate. 

The pickup model is also quite similar to the delivery model. It was recently released by them to gain competitive advantage. The idea behind this model is that the customers can order ahead of time. Yup, you heard it right. You can take the Postmate help to order ahead of time at your favourite restaurant or store. If you want to understand then check out these steps.

Order

With Postmate the customers can place their request ahead of time so that order can be ready for you by the time you reach the store. Also, one thing to remember is that these pick-orders dont carry any extra fees.

Track & Reach

Once your order is placed you can track the order and get the real-time updates about the order. The customer can go to the store when their order is ready. They dont have to worry about standing line as they can just reach the store and take their order.

As of now you have understood Postmate works are you not curious to know how it makes money? Yes, then let’s continue.

How does Postmate make revenue?

As you have understood about the Postmates business model, it is time to learn about its sources of revenues. Here they are

Fees

As you already know that Postmate charges their customers a fee to pick up their order. That is one of the sources of income to this platform. Until and unless the customer makes their payment the order will not be initiated. So there are different types of fees that Postmate collect. If you want to understand the revenue sources of this platform then you must check out each of these.

Service fee

While calculating the price of an order the Postmate includes both the delivery fee and service fee. So this is also one of the types of fees that are levied by the company. It is a variable percentage fee. Which is usually anywhere between 9%-19.99%. This is charged on each and every order. Also, this fee is not shared by anyone with Postmate. It is used to make sure that the company and its operations are running smoothly.

Delivery fee

As you already know along with service fee delivery fee is also included in the basic price of the order. It charges a delivery fee of $3.99 for their partner merchants. But one of the best things about this platform is that even if you’re not purchasing from the partner merchants, you can still order things from non-partner merchants too. Also, they naturally promote their partner merchants more than non-partner merchants.

The difference can also be felt on the delivery fees too. Yup, when you order delivery from partner merchants, you know that it is $3.99. However, in the case of non-partner merchants, they charge between $5.99- $9.99. As you also know that they pay 80% of the delivery fee to the Postmate and the company only gets 20% of the delivery fee. However, this is also one of the main sources of income for them as their business model is mostly about the deliveries. 

Small cart fee

As you see the point of this platform is to deliver orders to the customers at a smaller fee. However, if they charge the same for small order or a huge order it will be unfair right. So if you’re cart value is less than $12 then you have to pay $1.99 as a small cart fee. The company says that they charge this fee to make sure that customers always get what they want.

Surge pricing

Like other startups that are doing amazing, this platform also uses the dynamic pricing algorithm. To put it in simple words, surge pricing. Yup, everyone would have experienced this on a busy day trying to book an Uber. Postmate also has surge pricing. Whenever the deliveries they have to make exceeds the supply of couriers. So at the times of rush or busy hours, the Postmate will make good money. 

Postmates unlimited

Postmates have also incorporated the subscription-based business structure too. Yup, you heard it right. This unlimited subscription service offers many benefits to users such as you will be eligible for the free delivery if you order value exceeds $20. If you think that it is the only benefit that comes with it then you’re wrong. There will be no surge pricing, you dont have to worry about minimum basket fee.

Lastly, you dont even have to worry about paying service fee when you’re ordering from the partner merchants. This strategy not only helps them in getting a loyal customer base but also increase their revenue. As you see if you’re someone who is regularly using the platform to order thing it would be beneficial subscribing to this plan.

Commissions 

Partnering with the partner merchants opens the door for both the company and the merchants. The partner merchants get more orders and they dont have to worry about delivering as the Postmate does it for them. As you see the company charges commission from the partner merchants, they have different contracts with different merchants. The commission usually ranges between 15 and 30% on the pre-tax amount of the product. But one thing to remember is that it varies based on the contract they signed.

Partnerships

The Postmate also has an API. yup, you heard it right. With this API the apps can include their local delivery platform into their app. Many businesses are partnering with the Postmate to deliver their couriers. So you can note that this is an excellent source of revenue. Some of the renowned companies that are using this API are Walmart, Instacart, Starbucks, etc. 

Wrapping up

Postmates is one of the most brilliant ideas that has seen the light of the day. And it has seriously flourished and has been on the path towards success since its foundation. Hope you have understood about the Postmate business model and how it makes money. If you’re interested in knowing more about such business models you can check out other articles in Zeen

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