Close Ad

The Spoon

Daily news and analysis about the food tech revolution

Postmates

CES: Toyota and Ford Push Autonomous Delivery Vehicles

If two recent announcements at CES live up to their promise, you could soon have self-driving cars pulling up to your driveway to deliver pizza, groceries and more.

Yesterday, Toyota announced its futuristic “e-Palette” autonomous electric vehicle. Think of it as a white label mobility as a service. The e-Palettes are basically sleek, see-through, self-driving containers that companies could customize to deliver everything from food to fountain pens to flu shots. While this concept may seem fantastical now, the carmaker showed it is very real and announced it was working with the likes of Amazon, Pizza Hut and Uber.

Then today at CES, Ford announced a partnership with delivery service Postmates to test out self-driving deliveries. The two will do a pilot program throughout this year to see how well the technology works. Postmates joins existing Ford partner, Domino’s Pizza, and was a chance for the car company to show how it’s pivoting towards being a “mobility” company and how autonomous vehicles can be used to generate revenue.

When any of these dreams of autonomous delivery will become a reality remains to be seen. There are tons of technological, logistical and legal hurdles to overcome before roaming wood fired pizza or self-driven Slurpee deliveries arrive at your doorstep.

But all of this news points to a delivery-driven (pun intended) future of food retail. Amazon, Walmart, Albertsons and Target are all ramping up same day deliveries, and even smart-lock makers are creating in-home delivery platforms for when you’re away.

Drones can’t deliver big boxes, and smaller robots work better in dense, urban areas. Autonomous cars will have greater reach into the ‘burbs, and can get there fast. Plus if all a person in a self-driving delivery car has to do is run packages to and from the car to the front door (until the robots can do it), that shaves seconds and even minutes off of each delivery. Those small bits of time translate into much bigger efficiencies for a company with Amazon’s scale.

While the technology races headlong into achieving an autonomous delivery future, there are still big hurdles, not the least of which being municipal governments. Just look at San Francisco, which recently put the brakes on sidewalk robots. Creating safe spaces for speedy self-driving delivery cars will be a challenge.

Hopefully it’s a challenge we can all get behind and resolve quickly. Toyota hopes to have e-Palettes scurrying around town in time for the 2020 Olympics in Tokyo.

The Food Delivery Boom Comes At A Price

Food delivery startups have been all the rage, dominating food tech investment for the last several years. In what has become an extremely crowded market, there are signs that the market is shifting, with companies like Square reportedly looking to sell off its food delivery business Caviar and competitors like Postmates struggling to raise more funds.

But even with the consolidation, food delivery startups have added a level of convenience to ordering takeout that consumers are now used to. But at what cost?

The New Food Economy, a non-profit publication that publishes long form pieces on the forces that are changing food as we know it, published a piece looking at the dark side of food delivery and the challenges it presents to small restaurant owners.

The business models of companies like Seamless, UberEats, Yelp Eat24 and Postmates goes like this: hungry customer goes online to order food. Instead of going to a specific restaurant’s website and ordering through their system or picking up the phone (an antiquated notion these days), they visit a food delivery website that gives them menus, pricing, online ordering and delivery options for all the area eateries. The GrubHubs of the world then turn around and charge said eateries 10-30% of each order. The lowered margins aren’t desirable, but the idea is that the increased volume from the food delivery site will make up for it.

Except that’s not always the case. Working with these services requires the business to have a tablet on site that takes orders and it can get overwhelming to track different orders from different services. And then there’s the matter of profit – when Teddy Roland, a restaurant owner profiled in the New Food Economy piece, tried to raise his delivery prices, Postmates and DoorDash refused.

“How is that different from the Mafia in the 70s saying, ‘I’m going to take 200 bucks not to break your legs?’” he says. “‘We’re going to take 20 percent of your money and you have to live with 80 percent.’ – Roland

The longer piece is worth the read. It’s not surprising that consumer appetite for more convenience comes at a price. Lower-priced clothing is made by workers making unlivable wages in deplorable conditions, cheap meat is produced by giant factory farms and quick food delivery services take profits from take out joints who are often small businesses.

Some restaurants are fighting back and using tactics to encourage customers to take the extra step and keep their money in the restaurant. Says Roland, ““I’m asking a little more out of my customers,” he says. “You want to be lazy and just use your thumbprint and GrubHub app, you’re going to pay more for it, that’s all.”

Analysis: How Postmates Tackles the World of Urban Logistics for Restaurants and Beyond

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.

Why don’t you subscribe to our free weekly newsletter to get great analysis like this in your inbox?

Image credit: Flickr user Matthew Scott under creative commons license.