How Does Postmates Make Money

how does postmates make money

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How Does Postmates Make Money

The on-demand food delivery industry went through some major changes. Due to the transforming consumer behavior, food delivery companies are expanding convenience and choice. This enables consumers to easily order food from a wide selection of restaurants using a mobile application.

One such good example is Postmates, a thriving food and goods delivery platform recently acquired by Uber. As a leader in the on-demand delivery space, Postmates has set itself a strong foundation in the United States.  

In this blog, we’ll discuss the business and revenue model of Postmates as well as why building an app for your business may boost profitability.

What is Postmates: How Does it Work?

You might have already heard of Postmates but maybe you aren’t sure exactly what it is or how it works. Below is an overview of what this mobile application or delivery service is all about.

how postmates work

About Postmates

In 2011, founders Bastian Lehmann, Sam Street, and Sean Plaice launched Postmates at their San Francisco headquarters. In July 2020, Uber bought Postmates in a $2.6 billion all-stock deal.

Postmates is one of today’s successful on-demand delivery companies that provides online delivery services. Customers can order food, beverages, and other items, and deliver them to their homes, offices, hotels, or wherever they want.

From Starbucks to liquor and grocery, users can order just about anything using the Postmates app.

In addition to food delivery service, Postmates offers a pick-up service, which allows customers to order from the Postmates app, and then pick up the order in-store.

Using the Postmates’ pick-up feature is pretty straightforward. Users just have to open the app and click on the ‘Pickup’ button.

The pick-up feature is a great way to save money and time. What’s more, there are no phone calls needed and no delivery fees.

The Postmates food delivery services have many useful features including:

  • Online payments
  • Real-time order tracking
  • Contactless delivery
  • In-app tipping option

While customers can use the platform to find restaurants 24/7, it is not a 24-hour delivery service.

This online food delivery platform starts delivering breakfast at 7:00 AM. Many restaurants take an order and deliver it until 10:00 PM.

How late Postmates deliver food depends on the hours of operation of its merchant partners.

How Does Postmates Work?

Postmates is an online courier services company that uses web and mobile app technology.

Through their Postmates account, users can order whatever they want. Orders are delivered anywhere in the US and Mexico.

how postmates work
Image Source: Postmates

So this is how Postmates work. When customers place their order, the platform will then place a temporary authorization on their accounts.

A temporary authorization confirms that a user’s Postmates card is active and that there is enough available balance to cover any transaction. And then, a Postmates driver picks the item up and delivers it to the customer.  

Working for Postmates

Working for Postmates can be a great way to earn extra money during free time. The current pandemic has boosted delivery jobs and on-demand delivery companies are hiring.

Postmates business model
Image Source: Postmates

People who are looking to make money with Postmates may join the fleet. One of the big advantages of gig delivery jobs is flexibility. And being on the Postmates Fleet allows people to work when it’s more convenient for them.

Postmates couriers are independent contractors. Meaning, they are being paid per delivery instead of receiving a salary.

Interestingly, Postmates drivers are addressed as ‘postmates’. And thus, a Postmates delivery driver is also known as a ‘postmate’.

Here’s the job review:

  1. The Postmates driver accepts the delivery request with the Postmates Fleet app.
  2. He or she picks up and drops off the orders to the customers’ whereabouts.
  3. Sometimes, the delivery person will use a prepaid card to pay the order at the restaurant.

Delivering for Postmates

Again, delivering for Postmates is an excellent way to earn extra cash. Postmates drivers get paid every week.

But they also have the option to get paid daily via Postmates’ Instant Pay feature. The good thing is that there’s no limit as to how many times a postmate can use the instant payout.  

How Much Do Delivery Drivers on Postmates Make Per Hour?

According to Glassdoor, the average base pay for Postmates couriers is $13 per hour.

Still, how much Postmates drivers make depends on the amount of time they spend on the app to make deliveries. And so, earning $25 per hour is possible.

Providing great customer service can be a big help when working in this business. A good delivery person with excellent customer service skills can earn more money from bonuses and customer tips. The platform allows couriers to keep 100% of the tips earned during deliveries.

How to Get Started to Become a Postmates Driver?

Here’s a list of Postmates courier requirements. The driver must:

  • be at least 18 years old if the mode of transportation is a bike and 19 years old for those who drive cars and motorcycles
  • own a smartphone (iOS or Android) to access the Postmates Fleet app
  • have car insurance, a valid driver’s license and Social Security Number, which is a requirement for the background check

What is the Postmates Business and Revenue Model?

Postmates’ income is a combination of several revenue models such as:

  • Marketplace business model
  • Fee-for-service (FFS) business model
  • Transaction-based business model
  • Commission based business model
  • Software as a service (SaaS) business model

Postmates Funding, Revenue, and Valuation

On the 1st of May 2011, Postmates raised its first seed of funding at $750 thousand.

Since then, the on-demand delivery service has raised $763 million in over 11 rounds of funding. This was before Uber acquired Postmates in December 2020 for $2.65 billion. As of late 2019, Postmates had a valuation of $2.6 billion.  

Postmates Income: Sources of Revenue

As of 2021, Postmakes generates revenue in 5 ways.

1.Postmates Unlimited (Subscription Service)

Postmates Unlimited was rolled out in 2016. Since then, customers subscribing to the service have grown over 300% year after year.  

Customers have the option to pay monthly or annually, which saves them less than 16.6% of the original cost. On every order over $12, customers enjoy the perks of no delivery fees, which can range from $0.99 to $9.99.  

Other Postmates benefits for Unlimited members include:

  • Reduced fees of eligible orders
  • No blitz pricing at peak hours
  • Special offers exclusive for Unlimited subscribers
  • Access to giveaways and events just for members

2.Commissions from Partnering with Merchants

Postmates has partnered with 75,000 restaurants across 4,200 cities in the US. In 2019, the company handled over 35 million deliveries worth more than $6.6 billion in transactions. DoorDash took a portion of each transaction, which was made possible through their own food ordering marketplace.  

3.Selling Products Through Their e-Commerce Store

Postmates also makes money by selling merchandise through their online store. Many of the items are for Postmates’ delivery drivers. The prices of the items range from $1.95 to $19.

4.Fees (delivery, small cart, and service fees)

Their fee structure is another way Postmates earn money. The on-demand delivery platform charges things such as delivery, small cart, and service fees.

Delivery Fee

Postmates adds a delivery fee for every eligible order. The cost may vary depending on if the restaurant is a partnering merchant or not. There is no delivery fee for Unlimited subscribers with orders over $12.

Small Cart Fee

There is a small cart fee of $1.99 for all customers (Unlimited members and non-members). Postmates tacks on a fee to every order under $12. The small cart fee may vary depending on location.

Service Fee

Postmates charges a fee applied for every purchase of an item, in which the percentage may vary depending on several factors.

5. Gift Cards

how postmates works
Image Source: Postmates

Postmates offers gift cards to users to purchase for their family, friends, colleagues, etc. Gift cards are available online and on the Postmates app.

Solo gift cards are available in $25, $50, $100, and $200 denominations. Gift cards available for Postmates Unlimited members cost $9.99 a month or $99.99 a year.

Blitz Pricing (Surge Pricing)

The platform has a surge pricing feature that may raise Postmates’ income from the aforementioned fees. It is a dynamic pricing method that allows multiple price increases. Blitz pricing applies when demand for deliveries surpasses online courier supply.  

This feature motivates delivery drivers to go online, log on to the app, and start taking orders to meet the demand (of drivers). Blitz pricing creates a strong financial incentive for delivery drivers.

Since Postmates drivers will make themselves available when customers need them the most, the payout will be higher because customers are willing to pay more. Simply put, dynamic pricing allows a Postmates driver to make more money when the demand is high.

How Much Money Does Postmates Make?

Here, we have gathered some stats regarding how much Postmates generate revenue.

Postmates Revenue and Usage Statistics [2022]

On its launch in May 2011, the founders of Postmates marketed the app as the new Craigslist. People in San Francisco could order anything from the app. Postmates deliver orders, from food to goods, in 2 to 4 hours.

Postmates originally targeted small businesses. The company pivoted to consumers a few years after the launch.

Postmates survived payment to payment for the first 2 years without today’s annual billion-dollar rounds. In 2013, Founder’s Fund legitimized the industry by investing $5 million dollars into Postmates, leading to a wave of further investments.

A few months later, both Postmates competitors Instacart and DoorDash would land large Series A Rounds.

Postmates shouldn’t have survived in the on-demand food delivery industry. Originally, its delivery fee was $9.99 flat, which was higher than rivals DoorDash and Grubhub. Interestingly, many customers in California were willing to spend more on delivery charges for their favorites.  

2015 saw Postmates finally lowering their delivery fee to $3.99 exclusively for preferred merchants.

Moreover, Postmates was the first in the industry to launch a pro service called “Unlimited”. For $9.99 a month, this pro service will waiver the delivery charge for all orders over $30.  

Unfortunately, Postmates’ market share tumbled as more and more companies launched their on-demand delivery services, especially when DoorDash and Uber Eats superseded Grubhub.

And while Postmates saw continued growth in certain cities such as Charlotte, NC, and Los Angeles, it was far behind the top rivals in total US market share.

In an attempt to fend off Uber Eats and Grubhub, DoorDash tried to merge with Postmates in 2018. But instead, DoorDash acquired Square’s on-demand delivery service, Caviar, when Postmates declined the offer.

Two years later, Uber acquired Postmates for $2.65 billion, which eventually led to the laying off of 15% of Postmates employees.  

Postmates Key Statistics

  • In 2018, Postmates reached over $1 billion in total sales. (CNBC)
  • In 2019, Postmates had revenue of $500 million. Although Postmates did not disclose any official numbers, many believed it increased to $880 million in 2020.
  • In 2020, Postmates was acquired by Uber for $2.65 billion.
  • A staggering 10 million monthly active Postmates app users order over 5 million products a month.
  • Postmates have over 600,000 merchants as partners on the platform.
  • The portion of Postmates’ customers subscribed to its premium service is around 23%. (Second Measure)  

Postmates Funding (Total)

Year Funding (total)
2019 $902 million
2018 $577 million
2016 $277 million
2015 $137 million
2014 $22 million
2012 $1.2 million

Source: Crunchbase

Postmates Revenue

Year Revenue
2019 $500 million
2018 $400 million
2017 $250 million
2016 $135 million
2015 $55 million
2014 $8.6 million

Sources: TechCrunch, Recode, The Information

Postmates Profit

Year Profit
2017 ($75 million)
2016 ($60 million)
2015 ($47 million)
2014 $1 million

Source: TechCrunch, QZ, Recode

Postmates Valuation

Year Valuation
2020 $2.6 billion
2019 $2.4 billion
2018 $1.8 billion
2016 $0.6 billion
2015 $0.4 billion

Sources: Business Insider, Crunchbase

Why Build a Profitable On-demand Delivery App Like Postmates?

The current global pandemic has caused a rise in the demand for food delivery services. It rose even further as the people follow social distancing principles.

Even before that, the rising demand for food delivery is already making restaurant sales grow. Likewise, millennials seem to prefer food delivery services and takeout rather than dining in a restaurant.  

While more and more companies report a decrease in their revenue after the COVID-19 outbreak, delivery services became more in-demand. Postmates, in particular, became more profitable and powerful.  

From a simple minimum viable product (MVP), Postmates grew into a very successful app. Would you like to build your own on-demand food delivery app like Postmates? We can help.

Choose Dom&Tom to Build a Profitable App Like Postmates

The last thing you need is a qualified expert to bring your brilliant app idea into reality.

Dom&Tom has been working on the mobile, web, and app development market for a long time. We have managed to win the reputation of a trusted digital partner that can accelerate growth and transform your business.

Feel free to contact us if you have any questions about food delivery app development today.

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