PostMates Business Model Analysis

By September 13, 2017Business Model
Postmates

What Exactly is PostMates?

Basically, it is a logistic company that is an on-demand, 24/7, goods delivery platform that operates locally in the US. As of now, it operates in several U.S cities. For a small fee, it enables a person to get anything from the local market/store delivered at home.

A customer buys some goods from the local store and a human courier from Postmates delivers the goods. When a customer requests for a delivery of the goods bought from the nearby local store, the delivery person gets a notification on the mobile device and a company deployed GPS is used to match supply and demand in the shortest time-period possible.

All You Need To Know About How Postmates Works:

It has a business model that is similar to Uber, but it works on facilitating people with goods and not taxis.  In a Postmates business model case study, you’ll come to know about some aspects that were unknown to you before.

So, let’s have the Postmates business model explained, shall we? But, first:

INCEPTION OF POSTMATES

 

It was founded on May 1, 2011, by Sean Plaice, Sam Street, and Bastian Lehmann. The idea of Postmates captivated many investors and it enticed them so much that large funding rolled in a short time.  The company’s headquarters is established in San Francisco, California. The company decided to come with an average order fee of $40.

FEATURES OF POSTMATES

  • It enables people to order anything from local stores from anywhere within the respective city
  • Postmates delivery fee charges depends on the overall distance covered from the pickup point to the delivery point
  • Postmates delivers within 1 hour
  • It is available 24/7, 365 days
  • The minimum delivery fee is just $5, it can decrease, depending on the area
  • The location of the customer can be tracked by the courier once the order is placed

HOW POSTMATES WORKS (4-STEP MODEL)

PostMates business model analysis lets us know that there are four major business steps that Postmates follows:

STEP 1 – BROWING STORES AND GOODS

The first step revolves around browsing nearby stores and products. It is mostly about creating a demand and since people have smartphones, the application of Postmates makes it more convenient for them to request any goods at their doorstep.

STEP 2 – PAYMENT

The whole payment system is handled by the Postmates and an order is considered to be received once a payment is made by the customer. The delivery fee is added to the amount which also depends on the distance covered by the courier (from pickup to drop-off location).

STEP 3 – THE CLOSEST MATCH

As soon as the customer pays for the order, a notification is sent to the Postmates (courier) who is stationed near the store. That person shops for you the required goods and delivers them to you in a timeframe of 1 hour. The delivery guy can use any means of travel, as long as it takes less than 1 hour to deliver the product.

STEP 4 – TRACKING THE CUSTOMER AND DELIERVING THE GOODS

One of the prominent features of postmates is enabling the user to track the pinpoint location of the delivery guy who is coming to the user’s place to deliver the order. The postmates can send a text message and inform the user if he is going to be late. Upon receiving the product, the user can give a tip, though it depends whether the user wants to give it or not.

HOW POSTMATES EARN MONEY

The revenue model of any company plays a pivotal role in its success, and one thing that everyone needs to comprehend is that the business and revenue model needs to be given the utmost importance of all. Both are the backbone of the company and they play an integral role in its massive success. Let’s get to know how Postmates earns money by looking at their simple yet impressive revenue model:

  • DELIVERY FEE

PostMates Business Model

In every order that is processed, Postmates charges users a small fee that covers the delivery charges. Normally, the delivery fee is $5, but it can vary depending on the distance. The company also takes a $3 or even lower delivery fee depending on the areas. Out of the fee, the company takes 20% and the rest of 80% goes to the delivery guy. This way, company generates an income of 20% on every order that is made. The delivery guy gets most of the fee and this way it is a win-win situation for everyone.

  • CONVENIENCE FEE

Since 20% of the delivery fee goes to Postmates and the rest of it (majority) goes to the delivery guy, there is a flat convenience fee of 9% that the company charges over every order.

This flat fee does not fluctuate according to the situation and the users have to pay it. An important point to notice here is that people are not really bothered about paying the flat 9% convenience fee since it excludes spending fuel and time. So, when you can get the desired goods without having to go out, spend fuel and time, then what’s not to like!

  • PARTNERS WITH POSTMATES

Postmates decided to expand and generate revenue from other sources as well. The best way was to introduce a program that can benefit both Postmates and merchants.  According to the program, the merchants/stores have to pay a certain percentage to Postmates for their services.

This way, Postmates generates revenue out of it and the stores can generate revenue out of it too by expanding their footprints and gaining new customers each day. There are more than 4000+ businesses that decided to partner with Postmates. Another plus point is that more than local businesses come into play in more than 1 million deliveries.

Now, these three major role playing factors add up to create an intriguing revenue model. One thing is for certain that they have emphasized a lot on making Postmates good revenue generating a platform for everyone and they have not taken the doomed route to only benefiting themselves.

BUSINESS MODEL: POINT-TO-POINT

In this section, you’ll come to know about the business model of Postmates in point-to-point basis

Key Partners

  • Retail stores and restaurants
  • Couriers (delivery personnel)

Key Activities

  • Creating new partnerships with retails stores and restaurants
  • User acquisition
  • Hiring of couriers (delivery persons)
  • Processing orders and managing them
  • Check and balance
  • Processing the transactions

Key Resources

  • Technology
  • Partner retails stores
  • Delivery persons

Value Proposition for Everyone

Users

  • They can order any product from the closest partner stores
  • Postmates charges for every order
  • Order is delivered in less than 1 hour
  • Postmates is available 24/7, 365 days

Partners

  • Customer base is extended
  • New customers
  • Online visibility and more exposure

Delivery

  • Earn good money, the courier can earn more than $25 an hour
  • Work according to their own schedule
  • Can earn as much as they want to
  • no time constraints for the delivery persons
  • High-chances of receiving tips from customers

Customer Relationship

  • Via social media
  • Availability of customer support
  • Review system
  • Rating & feedback system

Channels

  • App for Android
  • App for iOS
  • Live websites

Customer Convenience

  • User who are busy or who do not want to go out and buy stuff
  • People who want edible items at their doorstep
  • People who want items from their local store or market

Merchant Convenience

  • Retail stores with non-availability of home-delivery service
  • Retail stores that want to avail the opportunity of Postmates

Expenses

  • Running cost and technological setup
  • Salaries to all the permanent employees
  • Payments for the couriers

Revenue Stream

  • Delivery and convenience fee from the customer
  • Charging commission from the retail stores and restaurants

PROBLEMS WITH POSTMATES BUSINESS MODEL

There are some of the most prominent PostMates business model problems that cannot be neglected so easily. One of the postmates business model problems is that it creates a hostile environment between foodservice workers and couriers.

One such example can be given of the former bike courier driver of Postmates says that everyone resents each other from restaurant to customer and there are not enough tips that come your way. Another former Courier said that he never got tips and it can get really frustrating.

The question arises that why are couriers not getting so many tips and the answer lays beneath the silence of Postmates; they do allow tips but their mechanism is not clear enough and that is why not many users give tips.

The system previously deployed by Postmates required the users to sign for their order on the mobile device of the courier, but they have changed that system and now the user has three options to choose and one of the options states “no tip.” This saw a decrease in a number of tips that couriers got.

Another problem that Postmates has is not asking for permission from the restaurants whose food is delivered by the couriers of Postmates. Many restaurant owners have shown concerns about this fact and they even complaint about not trusting the couriers when it comes to handling their food.

Also Find Out What Has Made Airbnb Such a Successful Business Model.

Another concern by restaurant owners is that if the courier delivers the food late, then the customer won’t be able to enjoy the food and this can affect the customer’s views about the restaurant. Many restaurants have asked Postmates to remove their name from the app and though these restaurants such as Lost Lake and Seattle’s restaurants such as Tango, Local 360 and Niko’s Gyros have asked Postmates to remove their names from the app, postmates wasn’t able to do it.

When asked by one owner of the restaurant, he was told that it was impossible to remove the names because the Postmates use a Foursquare-Linked design.  So, many restaurants have a complaint that Postmates is representing their brands.

POSTMATES BUSINESS MODEL ANALYSIS

Now, we know different aspects of the business model. It comes down to PostMates business model analysis, something that can give you the best idea about what is happening here:

  • Make the whole experience good and memorable for the user
  • Do not try to launch it globally, since there are still flaws in the system and it is best that Postmates take care of the flaws and then launch it globally
  • Make the restaurants happy, because they are certainly not happy with the services of Postmates and many of them are asking for their names to be removed from the app. So, it is best that Postmates make them happy and win their trust
  • Postmates need to make some sort of arrangements so that their couriers get more tips. This is an issue that can play a role in imminent future. Postmates need to mention in their orders that at least $1 tip needs to be given to the couriers (they traveled all the way, just to ensure that you don’t have to go out in the cold or rain, they deserve a tip!)
  • Treat everyone in the best way that you can. You need to cherish your providers, users, and couriers because they are the one that are the wheels of your business. you need to take some steps that can encourage the providers (retail stores and restaurants) and couriers to perform better and with more devotion
  • Do not try to overcharge your customers and it is best that you charge them only that is fair
  • Try reducing the convenience fee to about $6. This way, more customers will come your way
  • Another option is that you give 1% to the couriers

All in all, the Postmates business model innovation is something that can be enhanced for a greater success. It is an impressive innovation and ever since it was launched in 2011, it has gained wide popularity in America, but it has also faced some criticism along the way. It can be expected that Postmates will learn from its mistakes and strive for a better performance in the future.