Stamps.com dumps Postal Service to pursue Trump nemesis Jeff Bezos

It’s one the money-losing Postal Service, hamstrung by congressional requirements to pre-fund worker pensions, can’t match, and it’s one of the key reasons Stamps.com decided this week to ditch a revenue-sharing agreement that made the Postal Service the exclusive shipper for customers using both its signature service and the Endecia brand that caters to businesses.

The announcement hammered the company’s stock on Friday, with shares tumbling 57 percent to $85.25 in New York trading, and it will cost customers significantly. Many who had service agreements that allowed it to use Stamps.com postage printing software for free, since the expense was picked up by the Postal Service under the agreement, will now have to pay a 3 percent surcharge based on package volume.

“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,” said CEO Ken McBride. “We’re setting our corporate strategy assuming Amazon will be a big corporate player in global shipping.”

Ending the Postal Service deal will free Stamps.com to connect its customers with not only Amazon, but shipping giants like Atlanta-based United Parcel Service and Memphis, Tenn.-based FedEx.

[Read more: Trump slams Amazon for using Postal Service as ‘Delivery Boy’]

It’s likely to hurt sales in the near future, however. Zach Cummins, an analyst with B. Riley FBR, slashed his 2019 revenue projection for the company 17 percent to $570 million.

“While it is surprising, to say the least, that Stamps.com would sacrifice such a lucrative revenue stream with the U.S. Postal Service,” company management believes more varied service options will be the key to long-term success over the next five years, he explained. The firm will eventually be able to strike revenue-sharing agreements with Amazon, UPS, and others, Cummins predicted.

“What is best for our customers today will not likely be what is best for them five years from now,” McBride said. “If they don’t succeed in shipping their products to their customers, then their businesses won’t succeed, and we won’t succeed, because we’ll lose the customer.”

The development isn’t without irony: Two decades ago, Stamps.com became the first vendor the Postal Service approved for a software-only mailing and shipping service. It reiterated as recently as November that losing payments from the mail carrier based on business-generation volume might hurt its financial performance.

Walking away from the deal to pursue Amazon, in particular, chafes an already sore point in relations between the Postal Service and the White House.

Trump has repeatedly claimed that some of the organization’s profitability woes are caused by undercharging Amazon, a company for which it routinely handles the last leg of delivery and one which has been a favorite target of the president.

The Postal Service disputed that claim, but the president was undeterred. His distaste for Amazon coincides with his irritation about unfavorable articles in the Washington Post, which Amazon’s founder separately owns, and Trump characterizes as fake news.

Bezos, the world’s richest man with a fortune of more than $130 billion, noted the Twitter barbs in a blog post this month describing what he said was an effort by the National Enquirer — a tabloid run by an ally of the president — to blackmail him over private photos exchanged with his mistress.

Just a few months earlier, in December, a report from a task force created by the president after his complaints about the postal service’s relationship with Amazon recommended that the organization pull out of mail and package markets where it competes with private industry.

McBride cited that point to justify Stamps.com’s decision, though he noted the impact of the report is unclear, given the service’s murky organizational structure.

Dating to the late 1700s, the mail carrier was once a government agency led by a member of the President’s Cabinet. It was restructured in 1970 as an independent division of the executive branch run by a board of governors but is still subject to Congressional control.

The Postal Service didn’t immediately respond to a message seeking comment on Friday.

“One of the critical aspects in today’s very dynamic e-commerce industry is how quickly new products can come to market and how quickly an organization can make adjustments,” the Stamps.com chief said. “As we look at how the U.S. Postal Service will fare as these rapid and dynamic changes happen in shipping, we have concerns that they may become less competitive over time, and it’s really through no fault of their own.”