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Can Postmates pull off universal one-hour delivery?

The largest on-demand delivery company promises it will arrive in one hour or less: anything, anywhere

Over the last five years, a booming new industry has developed: on-demand delivery services that let you order over the web, or with a mobile app, from merchants that up until now were only accessible if you went to the store. Postmates describes itself as the largest of these companies, the software service at the heart of a fast-growing business.

Its fleet of couriers deliver everything from sneakers to sandwiches to cellphones. The company doesn't sell any of these items itself. Rather it acts like an API, enabling any vendor to add delivery as an option to its website or app. Its clients include 7-11 and Apple and the company recently raised an $80 million round of funding that reportedly values it at $400 million.

Ride-sharing, but for your burrito

The startup actually began as a ride-sharing service similar to Uber and Lyft. Instead of hitching a ride, users would request an item and place for it to be dropped off, then their package would hitch a ride. But because there was no commerce, there was also no activity. Eventually, in desperation, the company declared that for one weekend, users could ask for items to be purchased and Postmates would go out to both buy and deliver them. All of a sudden over $8,000 was moving through the platform. It's now estimated to pull in around $10 million in annual revenue.

But as quickly as its opportunities are expanding, so are the challenges facing Postmates. Like other startups in the so called "gig economy," the human laborers who power its service are classified as contractors, and thus don't receive benefits like health insurance or overtime. This notion is being challenged in court, most recently in a class action lawsuit in Postmates' home state of California. A recent ruling stated that Uber, and by extension companies like Postmates, would have to begin treating many of their workers like full time employees.

Postmates CEO Bastian Lehmann would argue that the company's impact, of course, is actually very beneficial for workers and local communities. Rather than purchasing from a big, out-of-state chain or an online giant, Postmates ensures that the money flows to local merchants, local workers, and local tax coffers. Everything but its cut of the delivery fee, that is.

Of couse, Postmates isn't alone in hoping that software can "hack the city" and build out a new, more efficient logistics chain powered by software and algorithms. Instacart is a rival delivery startup that has raised a whopping $275 million. Companies like Uber are also emerging as competitors for Postmates, hoping to tap their fleet of drivers to double as deliverymen. And Amazon, with its enormous logistical infrastructure and budding fleet of drones, is moving into the meal delivery business. It's hard to see how the advantages of Postmates' extensive inventory knowledge will last once its cyclists are matched against autonomous vehicles.