Postmates Pricing Model and The New Pay Model Explained

Last Updated on June 24, 2022

The on-demand delivery industry is highly competitive and in order for a business to survive successfully in the market, it is of utmost importance for the businesses to keep evolving and bring a new freshness to the table so as to attract a wide range of customers.

Nevertheless, this innovation needs to take place within the realistic boundaries of the business model to make sure the ideation is successfully implemented in the business. Many strive to think out of the box, however, the key to success in the on-demand delivery industry is to make use of whatever you can find within the box.

See also:

• Instacart Business Model
• DoorDash Pricing Model

Introduction to Postmates

Postmates is one of the top grocery delivery apps that has greatly grasped this concept and offers the customers the choice to order anything from any place within the city. The services are available in more than 100 metropolitan cities in the United States of America. The delivery service is highly cherished among the masses because of the wide horizons of delivery it offers. Whether it is the groceries, food delivery from restaurants, or even alcohol, you name it and Postmates delivery service will get it for you. Another fascinating aspect of the delivery service is the unique mode of delivering food that it has opted for. Postmates makes use of human messengers for delivery. A meshwork of human messengers work in coordination with the help of a GPS-enabled mobile application. When the customers require anything to be delivered, the human messengers receive a notification. According to Business Of Apps, Postmates was making 5 million deliveries per month as of 2020!

The unique business model of Postmates has been successful in attracting numerous investors which led to the successful launch of the delivery service app in May 2011 by Sam Street, Sean Plaice, Bastian Lehmann with $138 million as the total funding received as of by 2015. In the first four years of its existence, the app made tremendous progress which further resulted in collaboration with multi-million brands like Apple, Starbucks and more. 

Features of Postmates

Even though the unique and innovative idea of increasing the range of products to be delivered is the primary reason for the success of Postmates, there are addition striking features have made it possible for the app to stand out in the on-demand delivery industry. The following is a list of pointers explaining the unique features of Postmates delivery services which segregates it from the rest of the on delivery service apps. Without any further ad, read on to plunge into the details.

• The application enables the customers to order anything within the city as an attempt to eradicate the geographical constraints that play a strong role in the on-demand delivery industry.
• Considering the inclination of the customers in general, special stores have been included.
• The delivery fee is quite reasonable as it can vary depending upon the distance from the pickup and delivery point.
•  There is a high probability that the estimated time of arrival of the product that you are expecting is usually less than an hour.
• Postmates offers its customers with an enticing pay structure. It has a minimum $5 delivery fee which can further vary depending upon the distance that needs to be covered in order to get the product delivered.
• The application offers you with GPS so that you can determine the live location of your product and track it at the same time.

The delivery service caters to four stakeholders. Hence, it was required for the app to exhibit different feature sets so as to offer better compatibility and functionality. The four stakeholders are.

• Restaurant 
• Customer
• Delivery Personnel
• Admin Side

The following is a list of pointers to provide you with a better idea as to what features entail each of the stakeholders. Without any further ado, read on to plunge into the details.

For the customers:

• Login page for the customers to add his or her respective account.
• A customized search menu to explore better.
• A cart to add all the products that the consumer wants to get delivered.
• A payment integration which includes all the leading payment options.
• Tracking your order with the help of GPS to get the live location after placing it.
• A provision to rate and review your experience so that the application and services can be better optimized.
• In case of any inconvenience or problem with your order, a customer support system to take care of it.

For the restaurant

• Separate login credentials for different restaurants.
• A customizable menu management plan so that new deliverables can be added to the menu.
• Push notification alert so that the restaurant does not miss out on any orders.
• A provision to check the ratings and reviews by the customers in order to optimize the services in the best possible manner.

For the delivery personnel

• Registration so that orders can be assigned to the delivery personnel.
• A provision to manage the orders so as to come up with the most convenient route plan.
• Timely updating of the order status.

For the admin

• Login credentials for the admin.
• Management of the restaurant, application, payment gateway as well as the customer portals.
• Addition of discount offers and coupons to attract more users.
• Offering technical assistance in case of any inconvenience or failure.

Related Read: Grocery App Features List

How Postmates works?

In order to understand the functioning of Postmates completely, it is essential to take account for the entities involved. The following is a list of pointers explaining the three serving entities of Postmates.

The 3 entities are:

Customers: Customers are the primary source of income for the company. Since Postmates has tie-ups with merchants and businesses, on receiving an order from the customer, the company, merchants and the delivery personnel earn a certain amount of money from the particular order. The amount of money earner by the entities may vary from one to another, however, it is primarily obtained from the customers only.

Merchants: Postmates is an on-demand delivery service that strives to collaborate with merchants as well as other businesses to present their valuable customers with a platform to order anything and everything. When the retail circle is shortened, merchants are able to contribute to the Postmates revenue in order to explore more business opportunities. Thus, working with the merchants turns out to be a much more economical option. 

Delivery Personnel: It is the delivery personnel involved in the business which forms the backbone of Postmates and helps it in standing out when compared to other on-demand delivery applications. The messengers are offered with an 80-20 rule. 80% of the total delivery fee is offered to that of the delivery personnel whereas 20% of it goes to the company. This way, the delivery personnel can earn up to $25 per hour and the company also gets to take a cut out of the total delivery fee to keep it up and running.

The following is a stepwise explanation as to how the Postmates delivery service actually works to provide you with a clear idea. Without any further ado, read on to plunge into the details.

Related Read: Top 5 Grocery Delivery Business Models

The 4-step guide on Postmates workflow:

Step 1: The first step is to determine the need of the consumers. Various online surveys are conducted so as to come with the idea to innovate the mobile application and alter the current frame structure.

Step 2: When the order is received from the customers, a push notification is received by the restaurant end of the application. Once the restaurant confirms the availability of the product, the human messenger in the closest proximity is reached out for. The delivery fee is added to the total amount and the orders are prepaid only.

Step 3: After giving a heads up, the human messenger heads to the restaurant in order to pick up the parcel.

Step 4: While the delivery personnel is on the way to deliver the parcel, the customers can make use of the GPS installed within the application to determine the estimated time of arrival.

Step 5: On reaching the destination, the customers can give rating and reviews for the service offered.

Related Read: Guide To Build An App Like Postmates

Value Incentives of Postmates

The set of value propositions offered by any business is what truly determines then the contribution of the business for different segments. The value incentives of Postmates are as follows.

For users:

• It is a service that is available for the users round the year.
• As a customer, you get to order anything from anywhere without going through the hassle of being physically present at the premises to collect.
• In case of any exception, the product will be delivered within an hour of placing the order.

For merchants:

• A reliable platform to sell their products.
• A window to explore the online on-demand industry.

For delivery personnel:

• Flexibility in work schedule.
• The delivery personnel get to keep 80% of the total delivery fee.
• The more number of deliveries you opt for, the higher the monetary gains you will obtain.

The business model of Postmates

Key Entities

• Users
• Merchants/ Restaurants/Retail Stores
• Delivery Personnel

Key Activities

• Business Collaboration with merchants, restaurants, and retail stores.
• Local Market Management
• Customer Management
• Payment integration
• Working closely with individual contractors as human messengers.
• Delivery Services
• Processing transactions

Key Resources

• Technical Backend support
• Tie-ups with local stores
• Tie-ups with human messengers

Customer Relationship

• Support desk
• Feedback system
• Social media

Cost Structure

• Commissions to the delivery personnel
• Cost to keep the tech up and running
• Management Staff
• Salaries to permanent staff members

Revenue Sources

• Commission from the delivery fee
• Commission from the merchants and the retail stores.

Accessible Channels

• Website
• Mobile Application for android
• Mobile Application for iOS

Want to know more: Here is Postmates’ Business Model in detail.

Acquisition of New Customers

In order for a business to flourish, it is essential that the inflow of new customers keep regulating. The more number of new customers join the platform, the higher monetary gains can be attained. 

Even if a business is able to acquire the attention of a large consumer base, the conversion of leads into sales can be a tad bit challenging. The acquisition of the consumer base for Postmates is largely dependent on digital marketing. Other than that, Postmates tries to make the best possible use of online and offline advertisements, promotions and other marketing options as well. 

Once a considerable amount of leads are generated, then the next step requires offering the leads with a clear understanding of business, what is in the store for them and how can they benefit themselves by using the services offered.

Postmates Pricing Model & Revenue Streams

The revenue model of an on-demand delivery provides an estimation of much money does the company make out of as well as the key resources. A strong revenue model provides the basis for a successful business. It is because of the strong revenue model of Postmates, that it has been successful in achieving a whopping valuation of $800 million.

The following is a list of pointers to help you understand the revenue model of Postmates more comprehensively. Without any further ado, read on to plunge into the details.

Delivery Fee

Postmates charges a delivery fee from the customers to get the goods delivered. The fee is a nominal amount of around $5, which can even be reduced to $3 if you are able to get your hands on some coupons or for some particular occasions. However, 20% of the delivery fee goes to the delivery personnel and the company gets the rest of the 80%. 

The delivery fee can further be broken down into 4 components. These components are:

1. Pick up fee
2. Drop off fee
3. Waiting payment which is charged per minute.
4. For every mile that the delivery personnel covers to reach the customer is added.

However, one must understand that the delivery personnel would work with the customers as independent contractors and receive payments for all the deliveries they make. There are no fixed, hourly, or minimum wages 

Convenience Fee

The app charges the customers with a 9% convenience fee that the customers pay to get their products delivered at their doorsteps without going through the hassle of driving all the way to the store. This convenience forms a large part of the revenue for Postmates as no part of the convenience fee goes to that of the delivery personnel, unlike the delivery fee.

Commission from the merchants

In order to have a participation in the delivery business, the merchants, retail store owners and the restaurant owners are supposed to pay a certain amount of money as a commission to the company. This turns out to beneficial to both parties as this collaboration provides various offline business with an extended base of online customers without having to set up an entirely online business and the company ears a percentage of profit on each other to keep their business up and running.

Additional income for the delivery personnel

If the customer is highly pleased by the services offered by Postmates, other than the rating and reviews, the customers can give tips to the delivery personnel as well. This can be done through the application as well if you are not comfortable with handing over the tip to the delivery personnel. All you have to do is go back into the app and you will end up finding a provision to tip after the delivery has been completed. The app will hold on to the tip for a period of 24 hours which is considered as the processing time and then a day later it is passed on to the delivery personnel. You can go back to check as after being forwarded, it is updated on the application for you to see and make sure that the tip reaches to the person it is supposed to. Since you are able to tip after the delivery is completed. This offers the delivery guys with a great opportunity to positively direct the customers with the services being offered towards a better tip.

Changes in the new pay model

Postmates is an on-demand delivery service which strives to evolve constantly in order to make sure all the stakeholders in the business model are getting something out of the profit. Hence, Postmates keeps updating the pay model. The major changes in the new pay model are:

• The rates for per mile pay have been revised.
• The guaranteed minimum is no longer a part of the pay model so you can pay as much you wish.

Frequently Asked Questions for PostMates Pricing Model (FAQs)