How Postmates Works

Postmates is an on-demand goods delivery platform. The company was founded in 2011. It has three co-founders. Sam Street, Sean Plaice, and Bastian Lehmann. Bastian Lehmann is the CEO. The company headquarters are in San Francisco, California. They have since expanded to multiple cities all over the US.

Their main goal is to connect customers to local couriers so that they can order anything they want from any store or restaurant in their city and receive it within minutes of placing the order. Their services are available 24 hours a day, 365 days a year.

Postmates Subscriptions

There are two types of subscriptions programs currently available to potential customers. Paid and unpaid. The paid plan is an Amazon Prime-style loyalty program. It is called Postmates Plus Unlimited. This program appears to be an upgraded version of what used to be called Postmates Plus.

Plus Unlimited costs $9.99 a month.The benefits are as follows:

  • No delivery fees on orders over $20
  • No peak hour blitz pricing.
  • Your order is automatically accepted and moves to the front of the line.

If you are not subscribed to Postmates Unlimited plan, you can still save money on the delivery fee if you choose to order from their merchant partners. More on that below.

How Postmates Makes Money

Postmates has three different revenue streams. They are as follows:

  • Delivery Fees
  • Convenience Fees
  • Merchant Program

Delivery Fees

For each order processed by Postmates, there is a delivery fee assessed. The fee is a flat rate. Currently, that rate is $5.99. If you choose to order from one of Postmates partners the delivery fee drops to $2.99/$3.99.

The delivery fee is then subjected to an eighty-twenty split. 80% of the total fee goes to the courier/delivery guy and the other 20% goes to Postmates.

The Postmates delivery fee is also subject to surge pricing much in the same way that Uber does it. At Postmates surge pricing is referred to as blitz pricing.

Convenience Fees

On top of the delivery fee, Postmates charges a convenience fee. It's a flat fee and amounts to 9% of the order. It factors things like delivery distance and size of order.

Merchant Program

The merchant program is a partnership with select companies where the customers who order from these companies get charged a lower delivery fee in return for that company selecting Postmates as their preferred delivery partner. Postmates gets a cut of the customers total order and those companies are tagged as preferred on the app.

This gives the companies an opportunity to grow their market base.

Postmates FAQs

How Postmates Works

Postmates is completely app based. Once you download the app the next steps are highlighted below.

Step 1 - Selecting what you need

The first step is identifying what you need from a varied list of options. Examples include - Alcohol, American cuisine, Bakery, Barbecue, Breakfast, Clothing, Coffee etc.

Step 2 - Pick the provider and select needed items

Once you indicate what you are looking for, you will then be directed to the next screen that shows you who is offering it. You will select the store or restaurant and then proceed to the select the items you need.

Step 3 - Actions to take if unable to complete the order as requested

This third step is for you to advise your courier what should be done if they are unable to complete your order as requested.

The options on this screen include the following

Go with the store's recommendation

Leave out the selected item

Cancel the entire order

This is a crucial step as the available items are not updated in real time. This step helps your courier avoid having to call you unnecessarily.

Step 4. Order confirmation

The fourth step is to confirm your order. The screen will list all the items you have requested. This screen also includes an estimated subtotal and estimated delivery time. If you are in agreement, click on the "Get It Now" button located at the bottom of your screen.

If blitz pricing is applicable to your order it will be reflected on this screen so you can either continue or cancel the order.

Step 5 - Order Tracking

Once you pay for your order you will receive a call from the courier who the delivery has been assigned to. They will confirm your order once again. You may then proceed to track your order.

Tracking is available to show the couriers going to the store or restaurant, when they pick up the order and when they are driving to the delivery location.

As your courier gets near they will either call you or send you a text message to confirm the delivery location and gather any other pertinent details e.g gate code etc., needed to complete the delivery

Once your order has been flagged as delivered there is a feedback/rating system that allows you to comment on your experience from start to finish.

Postmates encourage the tipping of their couriers and have built the option into the app. If you prefer to tip the courier in person that is also an option. There is also an option to go back into the app and tip the courier after the order has been delivered.

Who Delivers for Postmates

Postmates deliveries are handled by independent contractors.The drivers/couriers are considered independent contractors as they decide when they wish to work as opposed to being told when to work. The drivers/couriers are referred to as Postmates and become part of Postmates fleet.

The convenience provided by Postmates comes at a premium. That being said, however, it appears that more and more people are willing to pay for the convenience as the company continues to post profits and expand its operations.

As the company grows though they will have to deal with issues that are coming up in the gig economy. Gig economy refers to a labor pool made up of freelancers and independent contractors.

Those issues include:

  • A push to change driver/courier classification from independent contractor to employee.
  • Staying competitive as more and more players join the marketplace.
  • Attentive customer service response to issues that arrive on all sides.
  • Maintaining the level of service that a premium convenience fee demands.