Commentary: Business has yet to give its stamp to Net postage

Barely a year after its launch, E-Stamp has become a classic dot-com failure--a case of a start-up that simply could not present a compelling value proposition to consumers.

2 min read
By Peter J. Grant, Gartner Analyst

When E-Stamp launched its online postage service last year, it seemed to be a classic dot-com success story, complete with hype and a high-flying stock price.

Barely a year later, it has become a classic dot-com failure--a case of a start-up that simply could not present a compelling value proposition to consumers.

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E-Stamp leaves the Net postage business

One of E-Stamp's most serious problems was that it was the first out of the starting gate in the business of online postage. As the first online postage provider to receive United States Postal Service approval, E-Stamp came up against the inevitable resistance to adoption that any new industry faces. In the end, the company was not able to overcome those challenges.

>From the beginning, Gartner research showed that online postage would be a tough sell. The consumers in the small office and home office markets saw no special reason to give up the convenience and service they have come to expect from the local post office--especially once consumers realized how difficult and time-consuming downloading postage could be.

Large companies, with dedicated mailrooms and advanced mail processing equipment, had no reason to switch to a PC-based program. That left only midsize businesses--a market that E-Stamp has actually done quite well with. In the end, however, midsize businesses did not generate enough revenue for E-Stamp to survive as a provider of online postage.

In abandoning online postage to focus on delivering Web-based logistics to business customers, E-Stamp is acknowledging that there was simply not enough potential in what had emerged as its market niche.

Given the failure of a company as well-funded as E-Stamp, it is an open question whether any company can expect to make a profit in the online postage market. The company's primary competitor in this space, Stamps.com, recently slashed its workforce in an attempt to cut costs. Other services, such as ClickStamp from mail processing giant Pitney Bowes, have been slow to gain acceptance.

It is possible that, as a new generation of computer-literate consumers comes of age, online postage may become an attractive alternative to the long lines at the post office. For now, however, it seems likely to continue to meet serious consumer resistance.

(For related commentary on business mailing process improvements, see TechRepublic.com--free registration required.)

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