Postmates latest Pay Model Update


(Harry) #1

It's been a while since Postmates made any serious changes to their business model, although when they finally did, it was for the benefit of their customers and not their drivers/couriers.

Postmates works with two kinds of restaurant's, these are:

Partners

These are restaurants that enter into a partnership contract with Postmates and pays Postmates a fee for every order that arrives via Postmates app. This fee is a referral fee or buys to pay kind of online advertising conversion rate. The partner fee is $3.99 per order.

Non-Partners

These restaurants pay a larger fee for deliveries performed by Postmates drivers, the orders are made via the app, but the restaurants are not in the app list of partnered merchants, so the customer reaches them on their own and places the delivery via Postmates. These restaurants pay Postmates a $5.99 fee for the service.

This was the deal before the update, now Postmates made a new deal if restaurant partners with Postmates they don't pay a delivery fee at all, just pay a $10 per month to subscribe. The ones losing out are the drivers since Postmates is not a profitable operation and the drivers do not earn much. In fact, Postmates is known for small deliveries and bad to no tipping, so drivers will always lose out when working for Postmates.

If you want to make money delivering food, then you better look at GrubHub, UberEats, DoorDash, Caviar and Saucy, which means go to anyone else.

The Postmates Trap

Let's start out with a declaration, Postmates is not Uber, it is like Uber in that it loses money, but unlike Uber, it doesn't have even 1% of what Uber has regarding turnover. So the new change is a honey trap, but for Postmates itself, it is conning itself that it can survive making losses and build up a large client base let's take a closer look at what is happening.

The End of Blitz Pricing

This old feature meant that a driver would be paid for the distance traveled, which is relevant for long distance deliveries. So, if delivery were for an 18-mile stretch, the driver would get around $25. Now, with the new change, this is out the window, and a driver will only earn the same distance around $5. Sure, the customer is happy, but what about the driver?

The DoorDash Model Failure

This was a flat fee pricing system, but the driver could see the delivery locations and decide to take or not. Many long-distance deliveries were refused due to the distance, and that is why many customers tried to take advantage of DoorDash since they would order from restaurants far off which they would never usually reach unless they had a delivery service. In theory, Postmates could have defeated DoorDash just on this issue alone, but Postmates decided to fight back and did something similar, only with one difference, they hid the destination. By hiding the destination, they made drivers realize that they would be charging a long drive for a $4 order; not a good thing at all. For short deliveries the order will pay the driver around $1.00, well I don't need to tell you what a driver will think of that. This might be good for a 16-year-old kid on a bike, but for someone with a family to support, education to pay for or with a car doing a sideline job, this just doesn't cut the muster. The new model is only good for short distance orders, and we reckon this new model will kill the long distance orders completely.

Postmates had a great payment scheme in place, and now they changed it to try and attract a load of new customers with their cheap pricing but at the cost of the drivers. Their big mistake was not learning from Uber or Lyft. The company is not a head office; it's not the app. The company is its drivers, the delivery people are Postmates, without them, you have nothing, just a bit of software and software doesn't deliver anything.

The Bottom Line

We reckon it's only a matter of time till Postmates goes the way of Sidecar and disappears from the scene. $10 per month might be enough for a flat subscription fee, but without a proper delivery payment model in place, and without drivers to deliver, Postmates will lose long distance orders, and since customers tend to be lazy and prefer a one-stop shop where they can order their deliveries from one place, long distance and short we reckon its only a matter of time till we only remember Postmates.