After months of sluggish sales that didn’t “push the envelope,” online postage took its biggest dive last week when Net postage pioneer E-Stamp bailed out of the market, announcing plans to phase out its Internet postage business and cut its workforce by about 30 percent. Company officials said the action was designed to shift their business into what they consider a more lucrative market of supply-chain management software.
Analysts are calling E-Stamp’s move a sign of the market’s uncertain future. The PC based system was originally hailed as a great alternative to registered postage machines and a way for haggard customers to avoid long lines at the post office and buy their stamps 24 hours a day.
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But like a lot of Net concepts, online postage has not lived up to its promises – to consumers, who despite its much-touted convenience have shown little interest in printing electronic postage at home and investors increasingly disillusioned with any kind of idea that ends with dot.com.
Tim Burns, New Orleans-based lawyer and author who has been advising technology start-ups for the last 15 years, said last week that while electronic postage originally seemed like a great idea, it hasn’t proven to consumers, so far anyway, that it’s “worth it.”
Because postage is a commodity, there’s just “not enough unique value to justify” buying it online, Burns said. These days stamps are everywhere, from supermarket checkout lines to ATM machines. “The Post Office has made it more accessible,” he said, plus there’s also “all those little mail shops and copying places at every corner.”
The U.S. Postal Service itself also offers its own kind of electronic postage by letting consumers buy stamps online and have them mailed right to them.
Therefore, online postage is not able to solve enough problems for consumers to propel them online, the way say, Amazon.com has made it easier for them to buy their books, Burns said.
PC postage is commercially licensed by the U.S. Postal Service. With electronic stamp products a customer sets the amount of postage, class of service and other shipping details through a PC interface, which then prints postal indicia on either envelopes or labels. Like bar codes, indicia contain machine-readable information the postal service needs to process the mail.
One of the perks of electronic stamps is that customers can use built-in address books to simultaneously print address labels and postage to many recipients in a single operation, which can be efficient for small businesses needing to do bulk mailing
Although there’s “a measure of convenience” for consumers, Burns said, there’s also the matter of needing certain software and equipment to buy stamps online and the extra time it takes to having postage download. “Who’s going to take the time when the alternative is not that much different?” Burns said.
Adoption by consumers of online postage “has been a bit slower than we thought,” admitted Brandee Barker, director of corporate communications for the California-based Stamps-.com, which had been E-Stamp’s biggest rival.
Still, Barker called it the typical lag involved in starting any new industry. It’s hard to get people to “change their behaviors,” she said, but with ever more folks destined to go online in coming years, Barker predicted online postage would eventually sell.
She said Stamps.com currently has about 270,000 customers in the United States and primarily targets small businesses. “In building a software product there’s always an evolution,” Barker said. “As the product continues to evolve it continues to get better.”
E-Stamp was the first company to sell stamps over the Internet in August 1999 after receiving U.S. Postal Service approval, with Stamps.com following soon after.
Pitney Bowes entered the market this year with ClickStamp, although analysts have said that company’s profitable conventional business will allow it to withstand the hazards of a startup and more easily develop a customer base. There’s also a company called Neopost which offers Simply Postage, a service that E-Stamp has started suggesting as an alternative for its online stamp customers.
All these competitors coming online at about the same time was another problem for E-postage, Burns said, and E-Stamp’s failure was a case of not “being able to stick it out and build up the critical mass.”
Stamps.com laid off 240 employees in October and like E-Stamp has taken a beating on Wall Street. Also in October two top Stamps-.com executives resigned, and its stock, which earlier this year hit a high of $98.50, has been stalled these last weeks at below $3 a share.
Still, there was some good news this month for Internet postage providers, as the U.S. Postal Rate Commission recommended creating a new discounted rate for First Class mail sent using Internet postage. At the same time the commission declined a discount proposal by mail-metering giant Pitney Bowes for postage meters.
Christine Dugas, spokesperson for the U.S. Postal Service in Providence, said that despite consumers’ growing comfort with the Internet, most folks still aren’t familiar enough to want to print postage with their PCs. “At this point you probably have to be somewhat sophisticated” to use it, she said.
Jennifer Panaro, manager of public relations and communications at PitneyWorks, Pitney Bowes virtual stamp division, said that despite the aforementioned problems the company is enthusiastic about its prospects in online postage. “You’re always going to start with your early adapters,” just dying to tap into the latest new technology, she said.
And, since the target user group for Internet postage is “extremely low volume” businesses, for Pitney Bowes online postage “essentially touches a part of the market we’ve never had,” Panaro said.
