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Stamps.com Under Fire over Reseller Discounts

Who doesn’t want to get discounted postage rates, but the issue of USPS reseller discounts is getting some attention from Wall Street in recent weeks.

Accusations are flying that Stamps.com is abusing reseller discounts, but those allegations are coming from parties that appear to be attempting to lower the stock price of the publicly traded company in order to short the stock. The reports are attempting to sow fear into investors that the USPS could take away advantageous discounts from Stamps at a moment’s notice.

The reseller program was designed to attract businesses who might have been using rival shipping carriers. But when the USPS broadened its reseller program in 2009, the agency wrote, “While the Resellers Program gives USPS inroads into many new markets, it also offers a benefit for Postmasters. Because resellers will use PC Postage vendors for postage payment, the revenue generated will be credited to the five-digit ZIP codes where the packages enter the mailstream.”

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While we’re disdainful of the motivation behind the recent Wall Street reports, scrutiny of the USPS reseller program doesn’t sound like a bad idea. For that matter, we’d love to see the books opened on some of the Negotiated Service Agreements that the USPS has entered into with private companies like eBay and Amazon, though there’s no reason to think that will happen.

So what’s the recent kerfuffle about? Prescience Point Research Group published an inflammatory report on SeekingAlpha – here’s an excerpt:

“Our research indicates that Stamps.com has partnered with certain undisclosed Utah-based postage resellers in order to recharacterize low-volume shipping customers that would not qualify for USPS discounts as high-volume shipping customers that would. In doing so, we believe that Stamps.com has found a way to skim undeserved revenues off the USPS.”

But be sure to also take a look at this report we found from SL Advisors to understand Prescience Point’s possible agenda:

“Prescience Point is a hitherto unheard of research firm with no known location (so presumably outside the U.S. since they’re not registered) and no publicly disclosed employees. They focus on research uncovering companies’ fraudulent activities. Although they write about what they find, so as to (presumably) sell their research to subscribers, they also short the stocks they cover.”

Regardless of the Wall Street angle, the reports about Stamps.com could have an impact on merchants. Shipping consultant Gordon Glazer of Shipware describes the issues in a post called, “Stamps.com under scrutiny – will this be the end of Postage Discounting for lower volume shippers?” available on LinkedIn.

Glazer believes the USPS Office of Inspector General (OIG) is likely to conduct an investigation, and he writes “one might conclude that the result of this could be the elimination of Reseller Postage discounts for the smaller shipper.”

But he does not advocate panic, saying there are lots of “ifs” and unknowns.

Update 7/22/16: This article initially stated that Endicia was a client of Shipware; that’s not the case. Shipware’s report includes the following disclosures at the bottom of the post: “In the interest of full disclosure, Gordon recently took a small short position on Stamps.com after the two reports mentioned were published. Also, Shipware provides access to discounted postage pricing through one of the Reseller agreements mentioned in the reports.”

Update 8/1/16: See the story from the August 1st issue of Newsflash.

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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