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The gig economy is doing more than just providing convenience for consumers. New data from on-demand delivery service Postmates underscores the opportunities presented by this growing sector of the workforce for businesses and workers alike.
Postmates teamed up with Edelman Intelligence to create an economic impact model to measure the effect it's had on cities, businesses and workforces in the 300 U.S. markets it operates in. The data show from 2017 to date, $1.2 billion has been generated through the Postmates platform, which connects 150,000 couriers to 25,000 merchant partners to deliver goods on demand. Couriers earned $216.8 million last year, averaging $18.32 an hour.
From 2015 through 2017, Postmates says, it generated $380 million in sales in Los Angeles and $127.7 million in New York.
The company also measured business growth both on and off its platform for partner merchants and finds businesses reported growing 3.7 times faster once they teamed up with Postmates, which prides itself on getting customers their orders in an hour or less.
"There is a fundamental shift happening in our cities right now — it's not just that customers and buyers can summon anything at the click of a button to their doorstep," says Vikrum Aiyer, head of strategic communications and policy at Postmates. "But there is also a difference in how businesses are competing as a result of a shift in commerce."
Postmates is different from some of its larger competitors, such as GrubHub, which is a public company focused on food delivery. Postmates fulfills orders beyond food to include goods, targeting local hardware or electronics stores in addition to food deliveries.
Analysts say seeing this kind of growth in markets such as Los Angeles and New York City isn't surprising, but expanding beyond the largest metros in the U.S. may prove more challenging as both consumers and companies have different preferences.
"The data we see in the top 30 MSAs in the U.S., and similarly in Canada, is where these services have grown the fastest," says Foster Finley, global co-head of transportation and infrastructure practice at consulting firm AlixPartners. (MSAs, or metropolitan statistical areas, are geographic regions with a high population density.)
"It's triggered a fascinating phenomenon, but when you go to tier-two cities, in many cases, the same growth isn't there. There's a bifurcation between big metropolitan areas, where there is a higher concentration of digitally minded industries, and the rest of the world," Finley added.
Delivery has become a major focus for not just small businesses, but also restaurant chains.
McDonald's and UberEats have a marquee partnership, and Yum Brands, the parent of Taco Bell, KFC and Pizza Hut, bought a 3 percent stake in GrubHub earlier this year.
"I think where delivery works is really a byproduct of the market itself, how densely populated it is and spending patterns of consumers," says R.J. Hottovy, senior restaurant and retail analyst at Morningstar. "There are pros and cons as a restaurant operator — you get greater incremental revenue from it, add new customers and get better access to consumer data. But it can be expensive — from 15 to 25 percent of a cut — to participate in these partnerships."
But to be clear, Hottovy and Finley agree, the "Amazon Effect " isn't a trend.
"It's a big play in urban markets, and I think we'll continue to see consolidation in the space over the years to come of delivery services. There's been a debate over whether this is a fad or not, but I don't think it's going away," Hottovy said.