Betting On Amazon, Stamps.com Ends USPS Partnership, Shares Plunge

Stamps.com announced that it was ending an exclusive partnership with the United States Postal Service, according to reports. The company’s shares fell 56 percent — more than $110 to about $87 — on the news.

CEO Ken McBride said that Amazon’s entry into the shipping sphere was a key motivator in the decision.

“Amazon’s track record of disrupting an industry is well-established. So their threat should be taken very seriously by every player in the shipping industry,” McBride said. “We are setting our corporate strategy assuming Amazon will be a big global player in shipping.”

The move bodes well for Amazon, as it shows the company can make inroads into an entrenched industry with high barriers to entry. The fact that Stamps.com left its partnership with a government agency (albeit an independent one) shows that Amazon has a chance to penetrate the market.

“Amazon is the powerhouse, the gorilla in e-commerce. And so we need to work with Amazon and really everybody needs to work with Amazon,” McBride said. “What they’ve done is they’ve built their network from scratch, and they’ve built it in the last few years, and they’ve built it with e-commerce in mind. And a lot of the other carriers have networks that are much older.”

McBride said Amazon set a standard that the USPS simply can’t live up to. He added that the company wants more options for its customers.

“When our customers are offered services such as shipping with Amazon, FedEx One Rate, UPS’s new products, regional carriers, Uber shipping, ship from store and everything else, we have to bring those solutions to our customers,” he said.

Darren Aftahi, a Roth Capital Partners analyst, told Bloomberg that it’s going to take serious investment from Stamps.com to increase growth.

“While in the short-term Stamps has taken steps to reduce the lost revenue burden by charging its NSA clients a software surcharge, in our opinion it will take heavy investment in order to re-establish new deals with strategic carriers in order to restore growth over the long-term,” he said.