Postmates is at war against Uber and Amazon to deliver everything on-demand, and this woman is its secret weapon
Postmates launched in 2011 to bring its users whatever they want, whenever they want it, courtesy of local couriers.
But since its launch, some massive companies including Amazon and Uber have also decided to tackle the same on-demand delivery space. And they each make the $130 million Postmates has raised from Silicon Valley investors look like pocket change.
Postmates, which is rumored to be seeking a new round of financing, thinks it can take the heat, in part because of a woman named Kristin Schaefer.
And as Schaefer points out, this delivery "sh--" isn't easy.
"On-demand delivery is really f---ing hard," Schaefer told Tech Insider when asked how Postmates plans to defeat Uber. "So much shit goes wrong all the time. It's magnitudes different than ride sharing. There's just a whole other host of things you have to deal with."
Schaefer, who formerly worked alongside billionaire investor Peter Thiel at Clarion Capital, is the company's fifteenth employee. She's been tasked with helping the startup expand to 40 cities throughout the U.S without burning piles of cash. Los Angeles, the third market Postmates launched in, is the company's largest from a revenue perspective, followed by New York.
Schaefer explained how she's been growing Postmates, and why she thinks the startup can win the delivery wars.
Expanding beyond the 1%
To use Postmates, you place an order from a nearby restaurant or store through its app or website. A Postmates courier then accepts your order and brings it to your address.
"We often describe Postmates as a remote control for your city," Schaefer said. "It gives you powers."
When Schaefer joined the startup three and a half years ago, it was making 4,000 deliveries per month. Now it's doing just over 1 million.
Schaefer says the company went through a few distinct growth phases. The first year was spent figuring out Postmates' expansion playbook. The second was spent creating partnerships with larger brands, like Starbucks and Apple, to broaden the types of deliveries Postmates couriers could make.
Currently, Postmates - which has traditionally been priced like a luxury product (it can cost nearly $10 to get a bagel delivered) - is focused on bringing new, cheaper delivery options to the masses.
The Postmates Plus program, which launched in 2015, allows users to get same-day deliveries for a flat $3.99 plus a 9% service fee from about 4,000 partnering stores. Big names that have signed on to Plus in the last year include Chipotle, 7-Eleven, McDonalds, Walgreens, American Apparel, and Apple. A newer subscription plan called Postmates Plus Unlimited unlocks free deliveries with no service fee on orders over $30 for $9.99 per month.
The cheaper prices seem like a no-brainer for consumers, but the rates sound unsustainable for a yet-to-be-profitable startup.
Schaefer assured Tech Insider that the pricing structures for Unlimited and Plus work, in large part because the more expensive Postmates offerings offset the cheaper ones. The blended gross margin across all Postmates deliveries is about 20%, the company says.
"When we launch a product, we never launch an economic structure that will be unprofitable," says Schaefer. Her team of 15 spends a lot of time crunching numbers and playing with levers, like minimum basket sizes and delivery distance radiuses, to make sure of that.
"We were never spending recklessly, and we are always trying to figure out how to get the most out of each dollar," she adds.
In a market where food delivery apps are struggling to raise money, cutting staff, and even shutting down, Postmates CEO Bastian Lehmann said in February that the company plans to be profitable next year. Postmates declined to discuss any of its financial projections with Tech Insider or confirm Lehmann's statement from February on future profitability.
Tough competition from Amazon, Uber, and others
There's an obvious comparison to be made between Postmates and Uber, which has recently been expanding its UberRush delivery service and food delivery with UberEats. Amazon has also been aggressively going after services like Postmates with its same-day (and sometimes one-hour) delivery for Prime subscribers.
Then there are the countless startups competing for the core Postmates business of food delivery, like Caviar, DoorDash, and Maple.
In terms of Uber's delivery products, UberRush and UberEats, Schaefer said Postmates has seen "absolutely no impact to any of our metrics in markets that they've launched."
She pointed out that many of the restaurants available through UberEats are already Postmates Plus members. And once people order through a Plus merchant, their order frequency nearly doubles on average.
Postmates sees Amazon as a closer competitor than Uber, she said, although the two companies have different approaches. Amazon sets up warehouses in cities where it offers same-day deliveries and sells items that are mostly from huge, national brands. It's also starting to sell its own clothing label.
Close to 80% of Postmates orders are still food, but orders from convenience stores like Walgreens are growing along with health and beauty products from the likes of Sephora. Schaefer sees Plus Unlimited subscriptions (with their lack of delivery fees and service fees) as key to making Postmates a financially viable way of delivering anything and everything - like Prime was for Amazon when it was just a book retailer.
"That is a major step for us in the direction of starting to open up commerce and to shift away from being a food delivery company," she said.
"We never set out to be a food delivery company. The focus has always been much more around commerce and making your entire city available to you."