The Delivery Conference and Other Takeaways
Metapack, a subsidiary of Stamps.com (STMP), hosted its annual ecommerce event, The Delivery Conference, last week. The two-day affair was held virtually for the first time, providing us with an opportunity to hear from a cadre of Metapack executives, retailers and carriers. The conference sessions largely focused on the extraordinary growth in e-commerce experienced in 2020 and what may be in store for 2021. Citing research from Accenture, Metapack indicated that as much as a decade of growth was pulled forward into 2020 as a result of the COVID-19 pandemic. Of the increase in demand last year, Accenture estimates 30%-50% will be sustained post-pandemic.
Regarding its own experience, Metapack effectively saw two peaks last year. Volumes in April matched those in November 2019 and after a brief respite during the summer, volumes surged a second time during peak season. Worth noting, Metapack’s volumes increased 60% Y/Y during the week of Black Friday and peaked on Cyber Monday as parcel volumes rose 23% above the highest volume day during Black Friday week. In a preview of its own commissioned research, Metapack found that 87% of consumers plan to shop more online after the pandemic. As for its platform, Metapack experienced no issues with downtime or performance during peak season and is now processing over 1 billion labels per year. The company has been investing in its post-purchase delivery products, unveiling its Delivery Tracker product at last year’s conference and announcing plans to launch a new returns solution and invoice reconciliation tool later this year.
Anecdotes shared by those participating in the event largely mirrored the ecommerce trends reported in the U.S., namely an initial lull as retailers grappled with store closures and other restrictions at the outset of the pandemic followed by extraordinary growth in online sales that culminated in a record peak season. For context, many of the speakers were based in the U.K., where Metapack is also domiciled. All told, online sales increased 30%-40% in the U.K. last year, reaching 28% of total retail sales. As far as the prospects for sustaining that growth in 2021, retailers were uncertain as to what the new year holds. With lockdowns in the U.K. likely to remain in place at least through Q1, internet sales are expected to continue at an elevated pace in the near-term. In this regard, one omni-channel retailer indicated that online volumes are still double year-ago levels although the pace of sales feels slower than what was seen during the initial months of the pandemic. Whether lockdowns remain in place through Q2 will dictate whether volumes can continue to grow through 1H ’21. All were in agreement that the combination of an increasingly vaccinated populace and better weather will likely precipitate a slowdown during the summer months followed by a rebound during peak. We surmise these dynamics will apply to the U.S. as well and note that our FY ’21 estimates for Stamps.com already exhibit this anticipated seasonality to a degree.
Interestingly, the carriers at the event sounded more confident in the prospects for growth this year. Royal Mail indicated that infrastructure put in place for the holiday season, which was the most challenging period of the year due to the combined impact of unprecedented parcel volumes and the need to collect and distribute COVID-19 test kits, remains in operation as volumes are still at elevated levels. In prior years, the capacity added for peak season would have been disbanded in January. Ireland’s An Post anticipates parcel volume growth of 15%-20% on top of the 40% increase realized in 2020.
Domestically, the United States Postal Service (USPS) is slated to report its fiscal Q1 ’21 results this morning, which means monthly data for December should be published by the end of the week. We plan to await the data before publishing a more formal earnings preview for Stamps.com. That said, UPS has already given us a glimpse as to how the holiday season unfolded in the U.S., reporting stronger than anticipated Q4 ’20 results highlighted by a 28.5% increase in small and medium-sized business (SMB) volume. Relevant to Stamps.com, UPS indicated that over 700,000 accounts are now part of its Digital Access Program with program revenue up over 360% Y/Y in 2020 and expected to reach $1 billion in 2021. While UPS refrained from providing specific guidance for 2021, management indicated the year was off to a positive start.
Other takeaways from those that have reported Q4 ’20 results come from Amazon, eBay and Pitney Bowes, all of whom outperformed expectations for the quarter. At Amazon, SMBs increased their worldwide sales over 50% Y/Y and comprised 55% of total paid units in the quarter. eBay’s marketplace GMV increased 18% Y/Y on a constant currency basis, comprised of U.S. GMV growth of 25% and international GMV growth of 15%. Management had anticipated GMV growth in the low double-digits for Q4 and is now guiding for Q1 ’21 GMV growth in the low-20% range. Finally, Pitney Bowes posted 60% Y/Y growth in its Global Ecommerce segment. Domestic parcel volumes increased 76% Y/Y, while digital volumes rose 50% Y/Y and cross-border volumes were up 76% Y/Y. With all this in mind, we continue to expect Stamps.com to deliver Q4 ’20 results well above expectations.
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).