Delivery War Continues

Postmates is latest of the Big Four delivery companies to announce expansion.

Postmates recently announced that it has added 1,000 more cities to its service, bringing the total number of cities in its universe to 3,500 across 50 states. With the expansion, Postmates says it’s available to more than 70% of U.S. households up from 26% in mid 2018.

The news comes as Postmates prepares for an initial public offering. Postmates is one of the Big Four competitors in the on-demand food delivery space along with DoorDash, Uber Eats, and Grubhub.

The fourth-largest food delivery service by consumer spending, Postmates has kept a relatively low profile in recent years. But two big investments, totaling $400 million, in the last seven months has enabled Postmates to expand.

“We weren’t able to spend that much money in 2018 because we weren’t the most capitalized player,” said Postmates CEO Bastian Lehmann, referring to DoorDash and Uber Eats. “We are now putting the money we have raised to great use.”

After its most recent round of funding in December, Postmates reportedly had a private valuation of $1.85 billion. DoorDash, Grubhub and Uber Eats all have significantly higher valuations.

Although Postmates delivers everything from iPhones to groceries and alcohol, most of the company's growth comes from its food-delivery business.

In the past few years, Postmates has introduced new services to increase the number of orders, improve efficiency, and attract new customers. Postmates said its service is particularly popular among millennials, who represent about 75% of its customers.

The first new service was a membership program called Postmates Unlimited, which debuted in 2016. For $9.99 monthly, customers get free deliveries for orders that cost more than $15. Postmates says that the Unlimited program accounts for more than a third of all orders and triples the average frequency of orders per user.

Postmates also recently introduced Postmates Party, which now represents about 12% of orders. The new delivery option gives customers the chance to get free delivery from restaurants from which people around them are already ordering. The point is to give drivers a chance to make more money by giving them multiple stops on the same trip while providing customers free delivery and helping Postmates reach more people.

But Postmates faces a major challenge in overtaking its larger competitors, according to some of the latest data. Data research firm Second Measure says that Postmates accounted for just 10% of total consumer spending in the food delivery space in March. Meanwhile, Grubhub had 33%, DoorDash had 30%, and Uber Eats has 22%.

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