Web stamp firms head to small businesses for holidays

As the holiday season quickly approaches, online stamp companies are hoping to piggyback on the expected Internet shopping fervor, signing promotional deals and boosting sales.

3 min read
As the holiday season quickly approaches, online stamp companies hope to piggyback on the expected Internet shopping fervor, signing promotional deals and boosting sales.

E-Stamp today announced that it has signed distribution deals with some of the Internet's biggest companies, including America Online, Buy.com and Office Depot. Last month, AOL took an equity stake in Stamps.com as the company launched its services nationwide.

Both companies stocks closed higher today.

But despite the high hopes of E-Stamp and Stamps.com executives, some industry analysts doubt that consumers or small-business owners will look to the Web to buy stamps during the holidays. The reasons: competition from other e-commerce companies, automated bank teller machines and grocery stores that sell stamps--and the post office itself.

"We don't think it's going to have a significant impact this holiday season," said Melissa Shore, a Jupiter Communications analyst.

E-Stamp and Stamps.com allow users to pay for postage online and print postage slips out on their home computers. Targeted primarily at the home office and small-businesses market, the companies' services compete against more traditional postage meters offered by offline giants such as Pitney Bowes and Neopost.

International Data Corporation estimates that small and home-based businesses currently spend about $12 billion on postage. IDC projects that in five years that amount will grow to $14 billion, with online postage sellers taking a 10 percent, or $1.4 billion stake of the market.

According to a recent government report, the Internet could erase $17 billion dollars in revenues from the U.S. Postal Service.

Ellen Perelman, E-Stamp's senior director of marketing, said that her company should benefit from the online holiday shopping season and from the growth of e-commerce in general. Although consumers will flock to Amazon.com and other large e-tailers this holiday season, they also will turn to smaller businesses, Perelman said.

In addition to sending out holiday packages to consumers, those companies are also likely to send out greeting cards and end-of-the-year mailings to clients and employees, she said.

"One of the side outcomes of the trend toward e-commerce is that businesses are creating a lot more items to be sent in the postal system," Perelman said.

Through today's deal, companies aligned with E-Stamp--which also include Egghead.com, Fry's Electronics and Beyond.com--will begin immediately distributing E-Stamp's postage services in their retail stores, catalogs and e-commerce sites.

Stamps.com's Green said he expects consumers to buy stamps online because of its convenience and low cost. Instead of going to the post office or signing a long-term contract for a postal meter, Stamps.com customers can sign up for a service that will allow them to print stamps on their computer for about $1.99 per month, plus postage costs.see related story: Will Net stamps, email hurt postal monopoly?

Such a system is better than the alternatives, especially during the holidays, Green said.

"One of the biggest difficulties of getting out your holiday cards and presents is going to the post office and having to wait in line," Green said. "We've all been through that process, and it's not pretty."

But Jupiter's Shore said that consumers can already avoid lines at the post office. The U.S. Postal Service sells traditional stamps through its Web site, and many local supermarkets and ATMs sell stamps.

In addition, consumers and others increasingly rely on email and electronic cards in place of traditional letters and greeting cards, Shore said.

"We don't really believe that online postage is a good category for consumers," Shore said.

Gomez Advisors analyst Alan Alper compared postage with paper usage. With the rise of the Internet and computers, paper was expected to become obsolete; instead, the paperless office seems more like wishful thinking, Alper said. Likewise, it may be too soon to predict the demise of postage.

"Is this a solution for yesterday's problem? Only time will tell," Alper said.