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How does Postmates work

How does Postmates work

Postmates is a logistics and delivery company that connects couriers with people who need things delivered. It provides buyers with an easy to use mobile app that can be used to request a delivery from a particular store in their city.

It delivers goods using their courier networks which allowing people to order anything from anywhere within the city limits. With this uncommon business model, it has been able to get huge funding from investors and has helped the company establish a large user base.[i]

3 different types of segments are being served by Postmates and they are as follows[ii]

  • Merchants

It ties-up with local merchants and provides them with a platform with an opportunity to reach out to people who want goods delivered at their location. Merchants have to pay a percentage of the overall billing amount to Postmates for their delivery service. Postmates provide with the cheaper option than hiring own staff by merchants to make deliveries.[iii]

  • Customers

Postmates consider customers as who are willing to spend a little more than the exact price of an article in order to get it delivered at their doorstep. 

  • Delivery Persons

Delivery personals are the people who want to earn money by working according to their own schedule. These delivery personals are called Postmates. As per the business model, 20% of the delivery fee is kept by the company and delivery persons get the rest. As per Postmates, a delivery guy can earn up to $25 per hour.

Business Model of Postmates

  • Browse products and stores

People can use the smartphone app as well as a desktop application to browse stores and products and request an article at their doorstep.

  • Payment

After the payment order is said to be received at Postmates. All payments are handled by postmates.

  • Matching

After payment, the delivery guy who is stationed nearest to the store receives a notification regarding the order, as soon as an order gets confirmed. Within one hour the delivery guy shops and delivers the order at customer’s doorstep. Postmates deliver by car or by bike and all the orders are processed within the 1-hour time frame.

  • Tracking and Receiving Order

The customer is able to track the exact location of the postmatei.e delivery person who is on the way to deliver the order. An option to send a text to the customer in case of any delay can be exercised by the Postmate. It is on the wish of the customer to tip the delivery person. Postmates discourages tipping but a delivery person earns a tip on most of the orders. 

Revenue streams for Postmates

  • Convenience Fee

A flat convenience fee of 9% over each order is charged by the delivery guy. Customers willing to pay this convenience fee as it is more convenient to get goods at doorstep without spending fuel and time.[iv]

  • Delivery Fee

The company charges customers a small delivery fee for each order processed. The delivery fee normally starts from $5 but often there are specific ongoing offers where the company offers $3 or even lower delivery.

  • Merchant Programme

The company signs an official agreement with local stores with which it had tied up, under the merchant program. The purpose of this agreement is that the tied stores pay a certain percentage of the total bill to the company for their service.





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