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Comment by mardifoufs | Hacker News Reader

What's Postmates moat? Having never used it, I don't necessarily see the 2.6b$ value in a smaller delivery app that is only really used in some areas of the US. Though I'm sure there is something I'm missing and 2.6b$ is probably less expensive than the cost of pricing Postmates out of the market especially considering it's an all stocks deal. It's just that delivery seems to be easily scalable and easy to just dump money in to gain users (free delivery / delivery fees are much stronger factors than brand loyalty in my experience) so why acquire relatively minor players?

What's also interesting is that Postmates seems to have raised around 700m$, so chances are it's investors are probably the first to make an actual realized profit from food delivery ;).

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I use Grubhub most of the time, and I’ve found the thing that keeps me on the platform is 1) The $10 monthly credit on American Express Gold cards and 2) The 2% cash back from the Rakuten portal, which stacks with the 4x points from the Amex card.

Of course, a lot of restaurants end up increasing their prices on Grubhub to make up for their fees, and rightly so (I phone in using the number listed on Apple Maps). I still don’t understand how anyone expects these food delivery apps to be profitable. I’m also 95-99% certain once we feel safe dining at a restaurant again we wouldn’t be using these apps anymore.

Exactly,those are amazing perks but they make for very expensive moat. As long as they need to bribe their users to stay with different financial incentives they will keep being glorified VC money redistribution schemes. My guess is that we will see a shift towards profitability when either cash dries out (which would mean Uber wins, they have deeper pockets and cashflow from ride sharing) or restaurants start to shift towards delivery optimized structures that would bring down delivery times and increase margins. I wouldn't bet on market domination from any player yet considering Just Eat's recent moves and deep pockets.

A little off topic, but wow it always amazes me how good credit card rewards are in the US.

I agree that it makes for an expensive moat. It really doesn’t seem viable to sustain a business like this.

Unless, ghost/cloud kitchens become a thing and these app platforms start building or partnering with these kitchens. Then they have full vertical integration where they can set prices.

Just an FYI, Apple Maps uses Yelp for at least some of its data and they’ve been caught putting fake numbers on their site for Grubhub commission:

https://www.eater.com/2019/8/6/20756799/yelp-grubhub-phone-n...

Not sure if this applies to numbers in Apple Maps, but something to bear in mind.

Yeah, it’s tricky with how to find just a phone number for the business. Luckily a lot of businesses have a website (that looks like a simple Squarespace/Wix template) that list a phone number or direct you where to order online.

A lot of restaurants use Chownow, which seems great since there’s no commission paid, but you lose out on being discovered online on Grubhub/Postmates/etc.

> 1) The $10 monthly credit on American Express Gold cards

But the annual fee is $250, how is it worth it? At best if you use the $100 airline credit, which is now hard to "hack", and max out $10/mo on Grubhub, you're still paying $30 for the privilege...

Amex has customer service at least an order of magnitude better than any Visa/MC licensee I’ve dealt with; that’s really what you’re paying for. If something goes wrong with a purchase, they’ll tend to make it right without asking many questions/filling any forms. Lost cards can be next-day’s without charge. They have actual physical offices in non-US nations that can advance you local currency and provide you a new card (among other things) should your wallet be stolen while traveling.

Having utilized card services and customer support heavily for almost two decades with a number of card co’s made me very much an Amex partisan.

That's interesting, I have many credit cars from Visa/MC/Discover and never had an issue with fraud purchases or lost cards.

The only payment service I’ve had fraud trouble with is PayPal. Their customer service is the worst. I recently bought something through PayPal, and it was amazing to see how hard a fraudulent seller could take their system.

> Earn 4X Points at U.S. supermarkets on up to $25,000 per calendar year in purchases.

> Earn 4X Points on restaurants including takeout and delivery

> Book a room through American Express Travel that's part of the Hotel Collection, stay two consecutive nights and get a $100 hotel credit to spend on qualifying dining, spa, and resort activities.

I wasn't able to utilize these benefits efficiently since the The Blue Cash Everyday® Card has 3X points @ Supermarkets has no annual fee and I have another card for restaurants.

I suppose if you max out all the categories it's not a bad card if it's all you have.

I agree you have to be able to take full advantage of the benefits for you to recoup the annual fee.

Aside from what the peer comments say here, the point multipliers end up offsetting the costs of the annual fee. You’re right that the airline credit is harder to redeem now, but in my case I was luckily able to redeem it all by February.

Also, Chase Sapphire Reserve has the $60/year credit to DoorDash. Seems like we’re just redeeming a bunch of VC money.

Wow, I had no idea Chase added that perk, and I just started using DashPash this month! I switched from my Amex to the Chase card just now, you just saved me a bunch of money, thank you!

> I’m also 95-99% certain once we feel safe dining at a restaurant again we wouldn’t be using these apps anymore.

at least here in NYC, we've been using delivery apps for over a decade. I wouldn't expect usage to drop below pre-COVID numbers once (and really, we should be saying if) things go back to normal.

Of all the services I've tried in this space, only Postmates lets you request items from businesses they aren't partnered with. This was a huge win once when I needed groceries delivered quickly.

They all do this now, to one degree or another. [1] [2]

The economics are even worse (because they don't get a cut from the restaurant), so these types of orders are either very high fee for the consumer, a loss leader, or both.

[1] https://gizmodo.com/doordash-pizza-arbitrage-shows-the-fubar...

[2] https://www.eater.com/2019/10/30/20940107/grubhub-to-add-res...

I've heard that on Postmates you can use the write-in functionality to order from a business that isn't on their platform at all (you order from a nearby business and in the write-in field tell the Postmate to go across the street, etc). I'm not sure if many of the other services provide a way to do that.

So they can go to the restaurant and order for you? That's interesting. I can't imagine it being very efficient or very fast though, how do they manage to not lose tens of minutes per order on non partnered restaurants/stores?

I wonder if an overseas call centre employee is the one calling in the order, not the delivery driver?

My guess would be that they make up for it in lots of fees :) Our $6 purchase ended up being ~$25 (following a $150 precharge haha).

You can also order non-food items on Postmates (e.g. stuff from Home Depot).

Also anecdotally, the probability of an order actually arriving and being correct seems to be higher on Postmates. Perhaps the drivers there are more motivated to do a good job.

To clarify, the total funding amount is a bit more than $700m. $903m according to Crunchbase.

https://www.crunchbase.com/organization/postmates

They don't have a moat. They are one of many similar players in the same space, which are interchangeable both to their workers and their customers, and they can only compete on price.

Drivers often work for several of these companies at the same time, and customers will use whichever one is cheapest at the time they feel like placing an order.

At the moment, with so many similar companies in the space, I don't see how any of them could become profitable, especially while being engaged in a race to the bottom on prices (because price is all that customers actually care about; the experience of a guy in a car bringing stuff to your door is pretty much the same with all of these companies).

> because price is all that customers actually care about

Customers actually care about service, too, but the two-sided-market-drivers-aa-contractors models doesn’t really leave the parts of service that would matter in the hands of the delivery matchmaker, so it's true that all they have is price, not because it's all customers care about but because it's all the firm has any kind of control over, by design.

The service is the same with all of these companies. Someone brings a bag of stuff to your door. In my experience they are all about as fast each other.

They could let customers pay a N% (say 10%) premium for a ...better-rated delivery courier? I'd be curious to see how that'd A/B test. Probably would fail, but nonetheless prove a point if there's any 'service' component that is possible to compete on.

I believe Uber eats is currently doing that. Recently I noticed an option to pay $1.50 extra for "Priority delivery" which may be a combination of what you mention as well as modifying the delivery algorithm in your favor.

If one company succeeded at doing that, all of the others would copy it by the end of the month. Again, no moat.

Network effects are the moat here, much like for ride hailing apps. More drivers signed up on the app means that the service times for customers are improved, and more customers using the app means less waiting time and dead mileage for drivers.

There isn't much of a network effect at all once you hit a certain, relatively small, size which is why national ride-hailing businesses keep pushing the big ones out of their respective markets, and why there already are quite a lot of them competing profits away.

There's an illusion of network effects due to the investors willingness to burn their own money. Otherwise, like the actual transportation industry it's just a low margin business with tons of competition.

Meaningful network effects don't just make your company marginally better as you get bigger, that's true for virtually any business. It has to be shown that the size actually makes you run away with it instead of just leveling off.

The same is true in the fintech industry with all these much hyped neo-banks running on debt. Internationally they all tend to lose to local competitors because knowing your market and getting the details right is more important than scale.

A few things undermine the networking effect: drivers working for multiple delivery/ridesharing companies, and customers using multiple delivery companies.

If Postmates went of out business tomorrow the drivers would just shift to Doordash and Grubhub and Instacart and the others. There is zero moat.

I wouldn't call it network effects. All competitors are predominantly sharing the same network of customers and drivers. Sure, some are loyal to one service but I'm guessing a majority of people will try to get the best deal. If the network participants essentially select for lowest margin service with low switching costs, there is no moat. All services, in theory, should gain efficiency from network scale at same rate.

>so chances are it's investors are probably the first to make an actual realized profit from food delivery ;)

Grubhub has been profitable for years now, pulling in $23m in income in 2018, see: https://www.cnbc.com/2019/12/13/grubhub-uber-eats-and-doorda...

Back when I was on the platform Postmates was the only one that would deliver anything from anywhere. Like you could order a MacBook or a burrito.

That I/random users use it.

Why? I don't know. They were early to the game and I stuck with it I guess

But that's the thing though, that's a very small advantage when it comes to a cutthroat sector like food delivery imo. I know I just use whatever app has free delivery or 25% off at that particular moment since it's almost frictionless to switch between apps. Even using different messaging apps is much harder.

That applies to all delivery apps and access to capital is really the only determining factor of success in that industry, but Postmates was also lacking in that regard.

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