Will Postmates’ on-demand delivery work better as a subscription model?
Hoping greater volume makes up for any lost margin, Postmates, the on-demand delivery app, last week made it much easier for members of its $9.99-a-month subscription model to gain free delivery.
Under its Unlimited subscription service, $9.99-a-month now earns free delivery from “any restaurant or merchant” on the Postmates platform with a minimum basket size of $20 or more.
The change covers free deliveries from the app’s full list of over 250,000 merchants with the minimal basket size. Previously, free delivery covered only the 12,000 Postmates Plus merchants that pay a commission to partner with Postmates.
The $20 minimum fee was also reduced from $25. When the subscription service launched in March 2016, the minimum was $30.
“With the largest network of merchants of any on-demand delivery platform and with an average delivery time of 35 minutes or less, Postmates Unlimited customers have a one-stop shop for all their on-demand needs — from beers for game day, to sushi from Sugarfish for date night, to cold medicine at 1am,” said Kristin Schaefer, SVP of strategy & finance, in a statement. “We’ve already seen tremendous growth in our subscriber program over the past year, adding about 50,000 subscribers per month organically.”
The arrival of larger competitors motivated the change. The $20 minimum fee matches Amazon.com’s restaurant delivery service for Prime subscribers.
With friendlier pricing, Postmates hopes the number of subscribers expands from 10 percent of its customer base currently to 25 percent by the end of the year, according to Business Insider. Margins for Unlimited customers are currently at 40 percent and they purchase 50 percent more per month than non-subscribers.
For non-subscribers, Postmates introduced new flat, nationwide pricing of $3.99 for delivery from any of its Postmates Plus partners. The cost rises from $2.99, but service fees are eliminated. For out-of-network partners, the cost is $5.99, but variable service fees are capped at $20. Previously, Postmates received complaints for “surge pricing” tied to the distance and peak times.
UberEATS, another large player, charges a flat fee of $4.99 in major cities.
- Postmates Unveils New, Lower National Pricing & Up Levels Subscription Service – Postmates
- Postmates Unlimited — Let’s make this a regular thing – Postmates
- Postmates axes delivery fees for subscribers as it battles Amazon and Uber in the on-demand delivery war – Business Insider
- Postmates expands Unlimited, a Prime-style subscription service, to 250k merchants – TechCrunch
- Postmates finally ditches those insane delivery fees — but it might be too little, too late – Mashable
DISCUSSION QUESTIONS: Will a subscription service work better for Postmates versus the standard fee-per-order model? How should Postmates best position itself to differentiate from larger rivals including Amazon and Uber?