Postmates has been facing two big problems lately: raising money as the flow of venture capital funding to startups slows, and bringing down its prices to a point that appeals to the 99%.
On Monday, the on-demand delivery startup said it had solved the first problem with a $140 million round in new funding from investors.
As for the second problem, CEO Bastian Lehmann told Fast Company that the key to bringing down prices resides in a new unlimited subscription product. The product, which launched in March, charges customers $9.99 per month for unlimited deliveries from Postmates’ “partner” merchants, as long as each order totals at least $25.
“We have a dream that there is a world with zero delivery fees,” Lehmann said. “That’s where we want to move toward.”
Postmates says it completes more than 1.5 million deliveries per month and that more than 40,000 independent couriers have made deliveries to its users. The company’s 6,000 partner merchants—as opposed to merchants who do not have a relationship with Postmates—pay a 20% commission on orders made within the Postmates app. This allows Postmates to charge a relatively low $2.99 delivery fee on those orders. The more orders Postmates’ customers place with partner merchants, the more value the platform has to merchants as an advertising channel, and the more willing merchants will be to cover the cost of delivery. Subscriptions push more business to these partners because the program only includes orders from partner businesses.
The hope is that subscribers will also be more frequent and more loyal customers. So far, Lehmann says, subscribers have ordered on average 7.5 times per month. He did not comment on how many people have purchased a subscription. “It’s the company’s job to recruit more merchants to participate [as partners] so that delivery gets more and more attractive to customers,” he said.