Why Postmates’ New Subscription Plan Compares Unfavorably To Amazon Prime

postmates

Postmates, an US only Uber-style delivery service, recently launched a new subscription plan, called Postmates Plus Unlimited. $9.99 per month gets customers free deliveries on all “Plus” orders over $30. TechCrunch:

Plus merchants include American Apparel and thousands of other partners in the Postmates preferred merchant program. By the end of the year, Postmates will have 10,000 Plus merchants across 40 U.S. markets.

Postmates Plus Unlimited kind of sounds like Amazon Prime, amirite? When asked about competing with Amazon, Postmates VP of Growth Kristin Schaefer told me that Postmates has been very anti-Amazon from the very beginning. At the same time, Postmates sees Amazon as its biggest competitor.

“The goal is to make local inventory that’s offline and even online really accessible in every city,” Schaefer said. “That’s very counter to Amazon’s mission with warehouses.”

“Plus merchants” are special partners paying Postmates between 15% to 30% of revenue for better placement and cheaper delivery fees for customers.

It is interesting that Postmates is comparing this directly to Amazon Prime. From the TechCrunch article:

“Over years, we’ve done a lot of time looking at Prime and trying to understand it and thinking about how the model can work for us,” Schaefer said. “It’s been in the works for a long time.”

Lets compare Postmates Plus Unlimited to Amazon Prime in the US. Postmates’ subscription plan amounts to $119.88 per year.

Amazon Prime costs $99 per year.

But that is not the most damning thing in this comparison. Amazon Prime brings much more than free (and fast) shipping to the table.

The attractiveness of Amazon Prime lies in its bundle. (And the scale Amazon can leverage nowadays.)

More than that, Amazon Prime has a clear value proposition for Amazon customers: “You will get all these items faster and cheaper and we have more, so much more, goodies here waiting for you.” Convincing customers that Postmates’ more expensive subscription has advantages seems like a big challenge to me, especially in a market with almost half of the market’s households already on Amazon Prime.

Postmates makes sense for merchants. But why does it make sense for end customers? It might make sense if one orders a lot from local restaurants as well as from merchants through Postmates. But is that enough? And what will Amazon do in the take-out space? Amazon is already slowly rolling out restaurant delivery. Maybe advances in groceries are enough. (Postmates had started to go after the grocery market way back in 2012.)

This is not meant to put Postmates or any other startup down. It just shows how much of an uphill battle this has become; at least in the US market.

Postmates is fulfilling 1 million deliveries a month now. The company has raised $138 million in funding so far.

More on “Postmates Plus”:

Last year we carefully began to transform our premium product. We were able to capitalize on huge efficiency gains, mostly through delivery volume density and as a result a much greater fleet utilization. It really does help that we have a fleet of 25,000 Postmates doing deliveries. We also started forging partnerships with small and large merchants. These partnerships allow us to integrate into a partner’s POS or inventory system and allow them to use our Postmates Order technology.

The result was Postmates Plus – a network of more than 3,000 local merchants that are now accessible at a heavily reduced delivery fee of $2.99/$3.99. Nine months after launch, Plus accounts for almost 40% of our delivery volume.

It is going to be interesting to see how Postmates will evolve. The business seems to evolve nicely. Bloomberg:

Postmates can do this because it is making more than it’s spending in 15 of its 40 markets, [Kristin Schaefer, the company’s vice president of growth and strategy] said. The business is “contribution margin positive” in those markets, she said. Costs in that calculation include courier pay, office rent, salaries for local operations teams, and the cost of courier and customer acquisition, as well as parts of marketing and customer service that serve that market. They don’t include most employees at headquarters, such as coders, executives, and designers.

More on this topic:

3 comments

  1. […] Why Postmates’ New Subscription Plan Compares Unfavorably To Amazon Prime […]

    Like

  2. […] of marking up the delivered items Postmates has partnering merchants paying commission fees. (and thus having a lot of the costs for Postmates deliveries being absorbed by the whole […]

    Like

  3. […] Why Postmates’ New Subscription Plan Compares Unfavorably To Amazon Prime […]

    Like

%d bloggers like this: