Delivery startups like DoorDash and Postmates struggle with driver churn, high operating costs in quest to capture untapped market
Mike Isaac / New York Times : Tweets: @shiraovide , @mikeisaac , @mikeisaac and @mikeisaac Tweets: Shira Ovide / @shiraovide : Good @MikeIsaac piece that makes me wonder if delivery startups are just driver arbitrage. http://www.nytimes.com/... @mikeisaac : postmates rolls out Postmates plus, $3.99 delivery. guess: from shops they've partnered with http://www.nytimes.com/... http://twitter.com/... @mikeisaac : huge issue for on-demand companies with high burn rates looking for scale: driver churn. Giant problem for them all http://www.nytimes.com/... @mikeisaac : nominating “unit economics” for a crunchie: “most discussed term while reporting this story” http://www.nytimes.com/...
Context & Ripple Effects
This February 2016 piece lands mid-arc for the Uber-for-everything cohort: two months earlier, leaked Postmates financials showed gross margins above 20% and revenues doubling, yet Mike Isaac's reporting exposes the cost side those numbers hid — driver churn and burn rates that make every delivered order expensive to produce. Shira Ovide's framing of the business as 'driver arbitrage' captures the core question: whether these startups own any advantage beyond subsidized labor.
The years of related coverage since confirm the piece identified a durable structural problem rather than a passing growing pain. Postmates kept searching for fixes — a $3.99 Postmates Plus tier, then fee structures customers disputed — while rivals scaled on growth-over-profits logic, and by 2022 a new generation of NYC grocery delivery startups was still averaging double-digit-dollar losses per order.
First-order effects
- Postmates' rollout of the $3.99 Postmates Plus subscription is an immediate attempt to convert unpredictable per-order delivery costs into flat, predictable revenue from its most frequent customers.
- DoorDash and Postmates must keep raising driver pay or incentives to counter churn, directly inflating the operating costs the article identifies as their biggest drag.
Second-order effects
- Costs migrate to customers: within months, Postmates passes expenses through in fees that often exceed the quoted estimate, testing how much price friction its demand base will absorb before ordering less.
- Churn-plus-burn economics push weaker players toward exits — by 2019 Postmates fields acquisition interest from DoorDash, Walmart, and Uber rather than pursuing its long-delayed IPO, turning standalone viability into a consolidation question.
Third-order effects
- If the pattern holds, on-demand delivery consolidates around a few scale players who treat losses as market-share spend — the dynamic visible when GrubHub, DoorDash, Postmates, and UberEats compete on supply expansion over profits, and again when six NYC rapid-grocery startups raised billions only to lose $20+ per order.
- The repeated failure of thin-margin courier models pushes the industry toward owned-inventory alternatives like Gopuff's warehouse network — which itself faltered once pandemic demand faded — suggesting no delivery structure has yet solved the unit-economics problem this article first flagged.
The trend: On-demand delivery keeps colliding with the same wall — per-order labor costs and driver churn — forcing each generation of startups toward subscriptions, fee pass-throughs, and eventual consolidation.