Postmates Business Model and Revenue Sources Explained

Originally published September 12th, 2018, updated July 25th, 2019

Postmates is a delivery services 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 UberEats but has 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 strategic 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 like food delivery app development do, let’s break their strategic 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.

What makes Postmates like app 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, Postmates business model was aimed to make it stand out in the market. The only reason why the app 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.
• The Postmates pay structure is another thing that attracts users towards it. $5 is the minimum Postmates delivery fee but sometimes offers include a 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 Features Set

The feature set that Postmates like app comes with is divided into four parts – 

1. Restaurant Side 
2. Customer Side 
3. Delivery Person Side. 
4. Admin Side

Here are the features that each of them entails –

Customer Side:

Login

Search Menu

Cart

Payment Integration

Order Tracking

Rating and Review

Customer Support 

Restaurant Side:

Login

Menu Management

Push Notification

Checking rating and review 

Delivery Side:

Registration

Order Management

Updating the Order Status 

Admin Side:

Admin Login

Restaurant Management

Application Management

Payment Management

Discount Offers and Coupons

Technical Assistance 

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 its strong social media presence. Social media is a great way to create brand awareness and direct followers to become customers. Also, customers love to see what the businesses are up to 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.

Customers: Postmates collaborate with merchants to give them a platform to reach a 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.

Merchants: Customers often wonder what is Postmates fleet made of and the answer is the delivery persons. Postmates keep an 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 up to a $25 per hour. This ratio answers how much does Postmates pay its messengers.

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 order from anywhere for a completely different location, compared to their physical present.
• 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?

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.

Now that we have looked into how Postmates work, let us get into the earning part of the model. 

The revenue model that Postmates like apps function in are devised in a way that the cost of food delivery app development you paid is earned back in a matter of few delivery cycles. 

Here’s the model we are talking about. 

What is Postmates Revenue model?

The Postmate 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 a 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]

Postmates Marketing Strategy: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 a large audience, converting them into users becomes yet another challenge for businesses.

In the beginning, Postmates 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.

FAQs About Postmates Business Model

How much does Postmates pay an hour?

It depends entirely on how many deliveries rounds a driver makes along with the tips they get. But normally, an experienced Postmates driver is known to make $25 per hour, on an average. 

How much is Postmates delivery fee?

The Postmates delivery fee is in the range of $0.99–$3.99 for the Partner Merchants and around $5.99–$9.99 for other merchant types. The delivery fees automatically rise at the time of surge demand. 

How to make an app like Postmates?

The process of making an app like Postmates would take you through a number of steps like finalizing an app development company, the feature set that would be present in the app, the technology stack that would go into developing the application, etc. 

How does Postmates make money?

There are three primary ways through which Postmates make money –

• Delivery fees
• Convenience fees
• Fees paid by the merchants.

How does Postmates work?

The working of Postmates is pretty straightforward. The user makes an order from within the app after looking into multiple food items and restaurants. Once they have paid for the order (or have chosen the pay at home option) Postmates appoint a driver to collect the order from the restaurant and deliver to users’ doorsteps. 

How much does Postmates cost?

It can be very difficult to give you a range for Postmate like app development cost because it ultimately depends on a series of factors like feature set, required team size, technology stack, geography you are getting the app developed from, etc.