USPS Offers "Positioning Discounts" in Recent Negotiated Service Agreement Filing
In a recent request by the United States Postal Service (USPS) to add Priority Mail Express, Priority Mail & First Class Package Service Contract 67 to the competitive product list, we came across a provision within the negotiated service agreement (NSA) that we have not seen in any contracts previously reviewed. We presume the NSA is with either Etsy or its recent acquisition, Reverb Holdings, as the agreement references Reverb.com LLC as a wholly-owned subsidiary of the customer and covers packages shipped by merchants utilizing the company’s platform. Under Section J of the NSA, entitled Positioning and Support Tables, if the USPS determines that it has been positioned as the “Preferred Shipping Provider” by the customer, then the customer is entitled to additional “Positioning Discounts” beyond other discounts and growth incentives included in the agreement. To qualify for these discounts, the customer must display the USPS as the default and only shipping carrier and force sellers to navigate to a different page in order to view other carrier options.
Between UPS’ unveiling of its Digital Access Program last week and the USPS’ provision to lock in default shipper status on a marketplace platform, it is clear to us that the major domestic carriers see value in capturing the volumes associated with small and medium-sized businesses and are willing to extend incentives to technology providers able to assist in this endeavor. As it relates to Stamps.com (STMP), we believe the company’s large customer base leaves the company well positioned to benefit from the increasingly competitive dynamics within the shipping and logistics space. If this latest USPS NSA is any indication, the willingness of carriers to negotiate for preferred shipper status and other growth incentives bodes well for the company’s long-term opportunity to monetize the shipping volumes across its various platforms. We continue to evaluate the implications of Stamps.com’s partnership with UPS on our model and price target, but wanted to bring this latest development to everyone’s attention.
Our report with model and disclosures is available here.
Disclosure(s):
The analyst, a member of the analyst’s household, and/or an account in which the analyst exercises discretion hold(s) a long position in the common stock of Stamps.com (STMP).