Delivery Wars: Postmates To Deliver Under An Hour For $1

Postmates, a San Francisco-based startup, just closed an $80 million Series D round led by Tiger Global Management, wrote Co-Founder and CEO Bastian Lehmann on his company’s blog yesterday.

The investment values the four-year-old company at more than $400 million, according to The Wall Street Journal. Almost three years ago, Postmates started with the idea of offering deliveries from restaurants that didn’t deliver themselves – and in less than an hour. Now, 2.5 million deliveries and 28 markets later, the startup says it is currently operating the largest on-demand delivery fleet in the U.S. with 13,000 Postmates couriers. Now its gross profit is on track to grow by more than 10 times in 2015, compared to 2014.

To reduce the costs of deliveries, Postmates recently developed its Preferred Merchant Program, which includes more than 1,000 merchant partners who pay a 15 percent commission on an order in exchange for being prominently featured on the Postmates app. Lehmann told TechCrunch that 20 percent of all Postmates orders are now from a preferred merchant. Lehmann told WSJ that Postmates is now planning a new service to be rolled out in August that will charge customers around $1 a piece for deliveries of food and other goods to high-density zip codes at peak times.

The new funding will help the company expand to new locations as well as grow its key teams and explore new categories beyond food. On the company’s blog, Lehmann explains that food is what books were to Amazon when it started. This year, for instance, WSJ explains that the startup won out a partnership with Apple (against none other than Uber) to deliver MacBooks and other products the same day customers buy them online. The idea behind the same-day delivery system is that it creates an incentive for the buyer to order an Apple product if he or she knows that they will get it the same day. Other partnerships include Starbucks, McDonald’s and Chipotle.

According to Lehmann, Postmates could start to turn a profit next year — but that doesn’t necessarily mean the people running it will try to make that happen. He made it clear during a TechCrunch event in May that becoming profitable in 2016 remains strictly optional, stating plainly that it will happen only “if we decide to do that.”

Same-day delivery startups are on the rise, with the dry cleaning industry being one segment that is grabbing recent headlines. But the one-hour-delivery model is going a step beyond with lots of big name players — such as Amazon, Instacart, and Whole Foods — testing the waters.

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