The shipping industry is undergoing transformative changes, Stamps said, noting that rivals UPS and FedEx have introduced aggressively priced programs targeted at Stamps’ ecommerce customers.

This article was updated by Internet Retailer to include comments from Eric Nash, senior director, online marketing, Stamps.com.

(Bloomberg)—Stamps.com Inc. said it would end its exclusive partnership with the U.S. Postal Service, and highlighted increasing threats from Amazon.com Inc’s aggressive moves into shipping services.

What’s ending, says Eric Nash, senior director, online marketing, Stamps.com is the site only working with the USPS. “Stamps.com customers will continue to have access to buy and print USPS postage and shipping labels within the Stamps.com platform, Nash says.  “In the future, customers may see other carriers and services options. Right now, we only have USPS in the Stamps.com platform.”

 

Still, at least two analysts cut their ratings with the news, saying the strategy shift will be “painful” and will hurt growth over the near to medium term. While the practice of selling print-at-home USPS postage at a discounted rate had been called a “scheme” by critics, many on Wall Street didn’t expect to see the company sacrifice what B Riley FBR called “a lucrative revenue stream.”

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“The ‘eventual potential’ became an actual last night,” Craig-Hallum analyst George Sutton wrote in a note to clients. “Eventually, we all knew something would have to give. We did not expect it to be now.”

The shipping industry is undergoing transformative changes, Stamps said during a conference call with analysts Thursday, noting that rivals UPS and FedEx have introduced aggressively priced programs targeted at Stamps’ ecommerce customers. “And of course the most significant driver of the ecommerce package business is Amazon,” CEO Kenneth McBride said during the call. “Amazon’s track record of disrupting an industry is well-established. So their threat should be taken very seriously.”

Small retailers are among the biggest customers for Stamps and they need more options than just an exclusive agreement with USPS as the market evolves, McBride said. “When our customers are offered services such as shipping with Amazon, FedEx One Rate, UPS’s new products, regional carriers, Uber shipping, ship from store and everything else, we have to bring those solutions to our customers,” he explained.

“Nothing changes in the services and features that we offer, including USPS services,” Nash tells Internet Retailer. The announcements in the earnings call are unrelated to Stamps.com’s PC Postage license which continues without impact, he says. Customers will continue to be able to access all existing USPS rates (Commercial Base Pricing) for packages and the Metered Mail rate for First Class Mail letters

“Our service level commitments, customer care investment and technology support will all continue at the highest levels,” Nash says. “Going forward, we plan to add even more great carrier services and features with the goal of offering the best mailing and shipping platform for domestic and international shipping services.”

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Shares of Stamps dropped as much as 58% on Friday in New York, touching their lowest since August 2016 and wiping off $2 billion in market value. The company’s commentary about aggressive pricing tactics employed by bigger rivals—as well as new challenges from Amazon—also weighed on shares of United Parcel Service Inc. and FedEx Corp. UPS dropped as much as 3.5%, while FedEx fell 3.4%.

“While in the short-term Stamps has taken steps to reduce the lost revenue burden by charging its NSA clients a software surcharge, in our opinion it will take heavy investment in order to re-establish new deals with strategic carriers in order to restore growth over the long-term,” Roth Capital Partners analyst Darren Aftahi wrote in a research note.

He downgraded the stock to sell from buy and slashed his price target to $78 from $260, saying that Stamps “has shifted from a growth company and stock to one that is growth challenged.”

Stamps is No. 105 in the Internet Retailer 2018 Top 1000.

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