Since launching in late 2014, San Francisco-based Postmates has had its own grand vision. This plan includes disrupting the way products get from any restaurant or store to their ultimate destination.
Competing in a SRO category, which includes UberEats, Amazon, Grubhub, and specialty delivery companies, such as Drizly, requires more than a fleet of drivers with good GPS. Postmates approach to what it calls urban logistics combines utilizes some standard industry practices such as advanced fleet management. The company diverts from the pack by expanding its delivery menu to include non-food items, experimenting with robotics, and focusing on niches such as liquor delivery to build a differentiated market profile. The big selling point to consumers and merchants is the aim to bring delivery costs down with a tighter relationship between buyers and sellers.
“We have a dream that there is a world with zero delivery fees,” Postmates CEO Bastian Lehmann told Fast Company in 2016. “That’s where we want to move toward.”
According to Postmates, it has 6,000 partners on its platform who pay a 20% commission on orders made within the company’s app. For consumers, who rely heavily on delivery services for food and other goods, the company launched a subscription service for $9.99 per month for unlimited deliveries for orders over $25 from Postmates’ partner merchants. Lehmann believes that the subscriber-partner connection acts as a direct, targeted advertising/marketing channel for merchants who can save on acquisition costs by collapsing the sales funnel. At some point, those partner savings can be passed on to customers, bringing down delivery costs close to zero.
“It’s the company’s job to recruit more merchants to participate [as partners] so that delivery gets more and more attractive to customers,” Lehmann added.
As of January 2017, Postmates eliminated the need for drivers to schedule their active times in advance. According to the company’s website, “… as weekly demand continues to increase, the scheduling system has become increasingly ineffective.” The company does suggest times when ordering is at its peak which will allow drivers to maximize their time and even take advantage of what it calls “blitz pricing”—a supply to demand calculation. As the company’s site explains, “When there are not enough Postmates (drivers) to fulfill demand, the delivery price increases by a multiple. When enough Postmates come on the platform, then the price comes back down.”
Postmates interaction with its fleet varies from others in the space with the issuance of a prepaid credit card. The card is used by drivers for deliveries that need to be paid for at pickup. Drivers are given the option of accepting cash-only deliveries for which they are reimbursed within a few days. Tipping is accepted, but the company recommends customers add gratuities via the app or website rather than offering cash.
Another leg of Postmates’ stool is to look at what it believes are underserved categories which brings new partners to its fold. Even as the number of delivery services solely focused on alcohol grows, Lehmann sees his company’s subscriber-based, unlimited delivery model having a leg up on its competitors. This year, Postmates expects to generate $10 million in revenue from alcohol sales alone.
Postmates is looking to robotics to expand its delivery fleet, a sign the company is looking to technology to fuel its path forward. Starship Technologies, with its autonomous delivery robot, has launched a pilot program for on-the-ground robots to deliver goods for Postmates in Redwood City, California. The robots will deliver small products they can carry in their storage units while human remotely monitor their performances for the trial.
Beyond the lofty view of its future, Postmates will have challenges in getting from its current position to leadership in the delivery/logistics space. As of late 2016, the company has raised $278 million in eight rounds from 26 investors making any sort of strategic pivot difficult. Well-funded competitors including GrubHub ($3.2 billion market cap), Amazon ($414 billion market cap) and Uber ($8.81 billion capital raised) are positioned to easily replicate any successful venture Postmates undertakes. Also consider GrubHub and UberEats have a global footprint while Postmates is only available in the United States.
While it might not be its stated goal, Postmates is evolving into an attractive addition to either a competing delivery service seeking an alternative for expanding its product mix beyond restaurants, or a large grocery chain wanting to add a more robust home delivery service to its arsenal. The evolving economic climate will determine whether the company’s future includes an IPO, partnership, buyout or some other exit strategy.
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Image credit: Flickr user Matthew Scott under creative commons license.