RWRetailWire
Back to Discussions
DISCUSSION

Do subscription services make sense for one hour delivery?

Written by Tom Ryan
Mimicking Amazon Prime, Postmates has launched a subscription service for free delivery. For a monthly fee of $9.99, Postmates Plus Unlimited offers customers free delivery in less than an hour on orders exceeding $30 from its over 3,000 Postmates Plus merchant partners. Postmates Plus partners include many restaurants, but also retailers such as Starbucks, American Apparel, Walgreens and Trader Joe's. Last year, Postmates launched a preferred merchant program, and last month its Plus service, which capped delivery fees to $3.99 with merchant partners, down from $5 to $20. Restaurants and retailers pay from 15 percent to 30 percent of the transaction price to help cover the reduced delivery fees while receiving more prominent placement within the Postmates app. Like Amazon Prime, the new subscription service is designed to entice consumers to use the service by default to avoid paying the delivery fees charged by others. "We're a delivery company, but we want to become a utility for local commerce," Bastian Lehmann, CEO, told The Wall Street Journal. "Anything that people want to order locally, we want to be able to bring to them." Instacart, Google Express and smaller startups, like Munchery and Sprig, also offer paid memberships to consumers in exchange for faster and cheaper delivery. Amazon, which charges $99 annually for Prime, has also been ramping up same-day and one-hour delivery services. In over 20 U.S. cities, Prime Now offers Prime members free two-hour delivery and $7.99 one-hour delivery for certain items. For Postmates, the subscription service is expected to initially lower margins but help recruit new merchant partners and add leverage to negotiate higher commission rates down the road. "We're willing to sacrifice a bit on our margins to give our customer a much better experience," Sean Plaice, co-founder and chief technical officer at Postmates, told Bloomberg. "We know that — ultimately, strategically — this is the business we want to build, something that's affordable to everyone."

Discussion Thread0