6 ms·

What's Postmates moat? Having never used it, I don't necessarily see the 2.6b$ value in a smaller delivery app that is only really used in some areas of the US.

What's Postmates moat? Having never used it, I don't necessarily see the 2.6b$ value in a smaller delivery app that is only really used in some areas of the US. Though I'm sure there is something I'm missing and 2.6b$ is probably less expensive than the cost of pricing Postmates out of the market especially considering it's an all stocks deal. It's just that delivery seems to be easily scalable and easy to just dump money in to gain users (free delivery / delivery fees are much stronger factors than brand loyalty in my experience) so why acquire relatively minor players? What's also interesting is that Postmates seems to have raised around 700m$, so chances are it's investors are probably the first to make an actual realized profit from food delivery ;).

cheeze 6y ago
That I/random users use it. Why? I don't know. They were early to the game and I stuck with it I guess
- mardifoufs 6y ago
  But that's the thing though, that's a very small advantage when it comes to a cutthroat sector like food delivery imo. I know I just use whatever app has free delivery or 25% off at that particular moment since it's almost frictionless to switch between apps. Even using different messaging apps is much harder. That applies to all delivery apps and access to capital is really the only determining factor of success in that industry, but Postmates was also lacking in that regard.
cglong 6y ago
Of all the services I've tried in this space, only Postmates lets you request items from businesses they aren't partnered with. This was a huge win once when I needed groceries delivered quickly.
- mardifoufs 6y ago
  So they can go to the restaurant and order for you? That's interesting. I can't imagine it being very efficient or very fast though, how do they manage to not lose tens of minutes per order on non partnered restaurants/stores?
  - cglong 6y ago
    My guess would be that they make up for it in lots of fees :) Our $6 purchase ended up being ~$25 (following a $150 precharge haha).
  - giarc 6y ago
    I wonder if an overseas call centre employee is the one calling in the order, not the delivery driver?
- ybot 6y ago
  They all do this now, to one degree or another. [1] [2] The economics are even worse (because they don't get a cut from the restaurant), so these types of orders are either very high fee for the consumer, a loss leader, or both. [1] https://gizmodo.com/doordash-pizza-arbitrage-shows-the-fubar-economics-of-d-1843530770 https://gizmodo.com/doordash-pizza-arbitrage-shows-the-fubar... [2] https://www.eater.com/2019/10/30/20940107/grubhub-to-add-restaurants-without-permission-like-postmates https://www.eater.com/2019/10/30/20940107/grubhub-to-add-res...
  - bshanks 6y ago
    I've heard that on Postmates you can use the write-in functionality to order from a business that isn't on their platform at all (you order from a nearby business and in the write-in field tell the Postmate to go across the street, etc). I'm not sure if many of the other services provide a way to do that.
- bshanks 6y ago
  You can also order non-food items on Postmates (e.g. stuff from Home Depot). Also anecdotally, the probability of an order actually arriving and being correct seems to be higher on Postmates. Perhaps the drivers there are more motivated to do a good job.
acwan93 6y ago
I use Grubhub most of the time, and I’ve found the thing that keeps me on the platform is 1) The $10 monthly credit on American Express Gold cards and 2) The 2% cash back from the Rakuten portal, which stacks with the 4x points from the Amex card. Of course, a lot of restaurants end up increasing their prices on Grubhub to make up for their fees, and rightly so (I phone in using the number listed on Apple Maps). I still don’t understand how anyone expects these food delivery apps to be profitable. I’m also 95-99% certain once we feel safe dining at a restaurant again we wouldn’t be using these apps anymore.
- vecinu 6y ago
  > 1) The $10 monthly credit on American Express Gold cards But the annual fee is $250, how is it worth it? At best if you use the $100 airline credit, which is now hard to "hack", and max out $10/mo on Grubhub, you're still paying $30 for the privilege...
  - toomuchtodo 6y ago
    > Earn 4X Points at U.S. supermarkets on up to $25,000 per calendar year in purchases. > Earn 4X Points on restaurants including takeout and delivery > Book a room through American Express Travel that's part of the Hotel Collection, stay two consecutive nights and get a $100 hotel credit to spend on qualifying dining, spa, and resort activities.
    - vecinu 6y ago
      I wasn't able to utilize these benefits efficiently since the The Blue Cash Everyday® Card has 3X points @ Supermarkets has no annual fee and I have another card for restaurants. I suppose if you max out all the categories it's not a bad card if it's all you have.
      - toomuchtodo 6y ago
        I agree you have to be able to take full advantage of the benefits for you to recoup the annual fee.
bhahn 6y ago
To clarify, the total funding amount is a bit more than $700m. $903m according to Crunchbase. https://www.crunchbase.com/organization/postmates https://www.crunchbase.com/organization/postmates
ThrustVectoring 6y ago
Network effects are the moat here, much like for ride hailing apps. More drivers signed up on the app means that the service times for customers are improved, and more customers using the app means less waiting time and dead mileage for drivers.
- Barrin92 6y ago
  There isn't much of a network effect at all once you hit a certain, relatively small, size which is why national ride-hailing businesses keep pushing the big ones out of their respective markets, and why there already are quite a lot of them competing profits away. There's an illusion of network effects due to the investors willingness to burn their own money. Otherwise, like the actual transportation industry it's just a low margin business with tons of competition. Meaningful network effects don't just make your company marginally better as you get bigger, that's true for virtually any business. It has to be shown that the size actually makes you run away with it instead of just leveling off. The same is true in the fintech industry with all these much hyped neo-banks running on debt. Internationally they all tend to lose to local competitors because knowing your market and getting the details right is more important than scale.
- twblalock 6y ago
  A few things undermine the networking effect: drivers working for multiple delivery/ridesharing companies, and customers using multiple delivery companies. If Postmates went of out business tomorrow the drivers would just shift to Doordash and Grubhub and Instacart and the others. There is zero moat.
- zippy5 6y ago
  I wouldn't call it network effects. All competitors are predominantly sharing the same network of customers and drivers. Sure, some are loyal to one service but I'm guessing a majority of people will try to get the best deal. If the network participants essentially select for lowest margin service with low switching costs, there is no moat. All services, in theory, should gain efficiency from network scale at same rate.
twblalock 6y ago
They don't have a moat. They are one of many similar players in the same space, which are interchangeable both to their workers and their customers, and they can only compete on price. Drivers often work for several of these companies at the same time, and customers will use whichever one is cheapest at the time they feel like placing an order. At the moment, with so many similar companies in the space, I don't see how any of them could become profitable, especially while being engaged in a race to the bottom on prices (because price is all that customers actually care about; the experience of a guy in a car bringing stuff to your door is pretty much the same with all of these companies).
- dragonwriter 6y ago
  > because price is all that customers actually care about Customers actually care about service, too, but the two-sided-market-drivers-aa-contractors models doesn’t really leave the parts of service that would matter in the hands of the delivery matchmaker, so it's true that all they have is price, not because it's all customers care about but because it's all the firm has any kind of control over, by design.
  - JMTQp8lwXL 6y ago
    They could let customers pay a N% (say 10%) premium for a ...better-rated delivery courier? I'd be curious to see how that'd A/B test. Probably would fail, but nonetheless prove a point if there's any 'service' component that is possible to compete on.
    - maxyme 6y ago
      I believe Uber eats is currently doing that. Recently I noticed an option to pay $1.50 extra for "Priority delivery" which may be a combination of what you mention as well as modifying the delivery algorithm in your favor.
    - twblalock 6y ago
      If one company succeeded at doing that, all of the others would copy it by the end of the month. Again, no moat.
habosa 6y ago
Back when I was on the platform Postmates was the only one that would deliver anything from anywhere. Like you could order a MacBook or a burrito.
deminature 6y ago
>so chances are it's investors are probably the first to make an actual realized profit from food delivery ;) Grubhub has been profitable for years now, pulling in $23m in income in 2018, see: https://www.cnbc.com/2019/12/13/grubhub-uber-eats-and-doordash-drove-an-online-food-delivery-boom.html https://www.cnbc.com/2019/12/13/grubhub-uber-eats-and-doorda...

cheeze 6y ago

That I/random users use it. Why? I don't know. They were early to the game and I stuck with it I guess

mardifoufs 6y ago
But that's the thing though, that's a very small advantage when it comes to a cutthroat sector like food delivery imo. I know I just use whatever app has free delivery or 25% off at that particular moment since it's almost frictionless to switch between apps. Even using different messaging apps is much harder. That applies to all delivery apps and access to capital is really the only determining factor of success in that industry, but Postmates was also lacking in that regard.

cglong 6y ago

Of all the services I've tried in this space, only Postmates lets you request items from businesses they aren't partnered with. This was a huge win once when I needed groceries delivered quickly.

mardifoufs 6y ago
So they can go to the restaurant and order for you? That's interesting. I can't imagine it being very efficient or very fast though, how do they manage to not lose tens of minutes per order on non partnered restaurants/stores?
- cglong 6y ago
  My guess would be that they make up for it in lots of fees :) Our $6 purchase ended up being ~$25 (following a $150 precharge haha).
- giarc 6y ago
  I wonder if an overseas call centre employee is the one calling in the order, not the delivery driver?
ybot 6y ago
They all do this now, to one degree or another. [1] [2] The economics are even worse (because they don't get a cut from the restaurant), so these types of orders are either very high fee for the consumer, a loss leader, or both. [1] https://gizmodo.com/doordash-pizza-arbitrage-shows-the-fubar-economics-of-d-1843530770 https://gizmodo.com/doordash-pizza-arbitrage-shows-the-fubar... [2] https://www.eater.com/2019/10/30/20940107/grubhub-to-add-restaurants-without-permission-like-postmates https://www.eater.com/2019/10/30/20940107/grubhub-to-add-res...
- bshanks 6y ago
  I've heard that on Postmates you can use the write-in functionality to order from a business that isn't on their platform at all (you order from a nearby business and in the write-in field tell the Postmate to go across the street, etc). I'm not sure if many of the other services provide a way to do that.
bshanks 6y ago
You can also order non-food items on Postmates (e.g. stuff from Home Depot). Also anecdotally, the probability of an order actually arriving and being correct seems to be higher on Postmates. Perhaps the drivers there are more motivated to do a good job.

acwan93 6y ago

I use Grubhub most of the time, and I’ve found the thing that keeps me on the platform is 1) The $10 monthly credit on American Express Gold cards and 2) The 2% cash back from the Rakuten portal, which stacks with the 4x points from the Amex card. Of course, a lot of restaurants end up increasing their prices on Grubhub to make up for their fees, and rightly so (I phone in using the number listed on Apple Maps). I still don’t understand how anyone expects these food delivery apps to be profitable. I’m also 95-99% certain once we feel safe dining at a restaurant again we wouldn’t be using these apps anymore.

vecinu 6y ago
> 1) The $10 monthly credit on American Express Gold cards But the annual fee is $250, how is it worth it? At best if you use the $100 airline credit, which is now hard to "hack", and max out $10/mo on Grubhub, you're still paying $30 for the privilege...
- toomuchtodo 6y ago
  > Earn 4X Points at U.S. supermarkets on up to $25,000 per calendar year in purchases. > Earn 4X Points on restaurants including takeout and delivery > Book a room through American Express Travel that's part of the Hotel Collection, stay two consecutive nights and get a $100 hotel credit to spend on qualifying dining, spa, and resort activities.
  - vecinu 6y ago
    I wasn't able to utilize these benefits efficiently since the The Blue Cash Everyday® Card has 3X points @ Supermarkets has no annual fee and I have another card for restaurants. I suppose if you max out all the categories it's not a bad card if it's all you have.
    - toomuchtodo 6y ago
      I agree you have to be able to take full advantage of the benefits for you to recoup the annual fee.

bhahn 6y ago

To clarify, the total funding amount is a bit more than $700m. $903m according to Crunchbase. https://www.crunchbase.com/organization/postmates https://www.crunchbase.com/organization/postmates

ThrustVectoring 6y ago

Network effects are the moat here, much like for ride hailing apps. More drivers signed up on the app means that the service times for customers are improved, and more customers using the app means less waiting time and dead mileage for drivers.

Barrin92 6y ago
There isn't much of a network effect at all once you hit a certain, relatively small, size which is why national ride-hailing businesses keep pushing the big ones out of their respective markets, and why there already are quite a lot of them competing profits away. There's an illusion of network effects due to the investors willingness to burn their own money. Otherwise, like the actual transportation industry it's just a low margin business with tons of competition. Meaningful network effects don't just make your company marginally better as you get bigger, that's true for virtually any business. It has to be shown that the size actually makes you run away with it instead of just leveling off. The same is true in the fintech industry with all these much hyped neo-banks running on debt. Internationally they all tend to lose to local competitors because knowing your market and getting the details right is more important than scale.
twblalock 6y ago
A few things undermine the networking effect: drivers working for multiple delivery/ridesharing companies, and customers using multiple delivery companies. If Postmates went of out business tomorrow the drivers would just shift to Doordash and Grubhub and Instacart and the others. There is zero moat.
zippy5 6y ago
I wouldn't call it network effects. All competitors are predominantly sharing the same network of customers and drivers. Sure, some are loyal to one service but I'm guessing a majority of people will try to get the best deal. If the network participants essentially select for lowest margin service with low switching costs, there is no moat. All services, in theory, should gain efficiency from network scale at same rate.

twblalock 6y ago

They don't have a moat. They are one of many similar players in the same space, which are interchangeable both to their workers and their customers, and they can only compete on price. Drivers often work for several of these companies at the same time, and customers will use whichever one is cheapest at the time they feel like placing an order. At the moment, with so many similar companies in the space, I don't see how any of them could become profitable, especially while being engaged in a race to the bottom on prices (because price is all that customers actually care about; the experience of a guy in a car bringing stuff to your door is pretty much the same with all of these companies).

dragonwriter 6y ago
> because price is all that customers actually care about Customers actually care about service, too, but the two-sided-market-drivers-aa-contractors models doesn’t really leave the parts of service that would matter in the hands of the delivery matchmaker, so it's true that all they have is price, not because it's all customers care about but because it's all the firm has any kind of control over, by design.
- JMTQp8lwXL 6y ago
  They could let customers pay a N% (say 10%) premium for a ...better-rated delivery courier? I'd be curious to see how that'd A/B test. Probably would fail, but nonetheless prove a point if there's any 'service' component that is possible to compete on.
  - maxyme 6y ago
    I believe Uber eats is currently doing that. Recently I noticed an option to pay $1.50 extra for "Priority delivery" which may be a combination of what you mention as well as modifying the delivery algorithm in your favor.
  - twblalock 6y ago
    If one company succeeded at doing that, all of the others would copy it by the end of the month. Again, no moat.

habosa 6y ago

Back when I was on the platform Postmates was the only one that would deliver anything from anywhere. Like you could order a MacBook or a burrito.

deminature 6y ago

>so chances are it's investors are probably the first to make an actual realized profit from food delivery ;) Grubhub has been profitable for years now, pulling in $23m in income in 2018, see: https://www.cnbc.com/2019/12/13/grubhub-uber-eats-and-doordash-drove-an-online-food-delivery-boom.html https://www.cnbc.com/2019/12/13/grubhub-uber-eats-and-doorda...