For nearly 20 years, the U.S. Postal Service and Stamps.com (NASDAQ:STMP) have had a marriage of complacents. As a USPS certified reseller, Stamps.com promoted the value of the USPS service to prevent transactions from converting to rivals FedEx Corp. (NYSE:FDX) and UPS Inc. (NYSE:UPS). One of the Stamps.com units, Endicia, provided USPS with the code name “Dazzle” which allowed users to print Porto on their computers without supporting the traditional and tedious USPS event authorization process. In return, Stamps.com received commissions ranging from 0.5 to 1.5% for label processing services. The marriage ended on February 2, after the Stamps.com, based in El Segundo, California, said it had terminated its “exclusive agreement” with USPS, which covered two of its units, the Stamps.com company and Endicia, a labelling company. In an analyst interview that day, Stamps.com CEO Kenneth T. McBride said the decision was made after USPS refused to give up the exclusive nature of the relationship and allow Stamps.com to include other parcel delivery drivers. Stamps.com said his claims were non-negotiable, so he terminated the agreement as soon as the USPS did not give in.
USPS declined to comment on this article. A spokesman for the Stamps.com did not respond to a request for advice. The first class Mail and USPS Marketing Mail NSA is based on the total revenue of First-Class Mail Automation Letters, USPS Marketing Mail Automation Letters and USPS Marketing Mail Carrier Route Automation Letters and provides an incentive to promote the growth of first class mail. A baseline is determined from recipes from first-class automation letters, USPS marketing mail automation letters and the USPS Marketing-Line-Line-Code-Automation Carrier Letters Nek compatible with full service (705.23.0) over a previously indicated 12-month period. It includes a postage threshold that will be adjusted from the basic plan in order to qualify for a discount. When the adjusted revenue threshold is reached, a discount on a percentage of the port increase difference resulting from a subsequent cumulative price increase by First Class Mail and USPS Marketing Mail is generated in relation to existing prices at the time of the agreement. If the adjusted revenue threshold is not reached, the NSA holder pays a fine. The stakes are high as postal services grow. Stamps.com processes 5.5 billion packages a year for USPS. Based on Stamps.com data, it processes 35 percent of U.S. Priority Mail packages, half of all packages that are moved into first-class service and about 30 percent of all international USPS packages. Maritime activity has grown from about 300 million packages 10 years ago to the current level, a rate of growth that no other USPS partner has been able to achieve, Stamps.com said.
Much of the growth is related to the explosion in demand in e-commerce, which began about seven years ago and shows no signs of weakening. One of the changes affects the cost of Endicia`s software, which was paid for by USPS. McBride said on the call that it began informing customers of a 3 percent premium on their shipping volumes to support the costs of the technology. In a comment that, given the steady double-digit growth in parcel traffic, is expected to remain in USPS executives, McBride said that “we don`t know if the future direction of the USPS will imply a strong strategic focus on growing packages.” (According to the transcript of the Seeking Alpha analyst call, McBride said, after having cited a recommendation in the White House Postal Reform Report last December, that usPS should focus on essential services that are not provided by the business community.