Market update: Mail superiority

Office World News, Oct 1999 by Cullen, Scott

Software is emerging as a whole new product category, but hardware still rules in the mailing equipment industry.

When it comes to mailing and shipping equipment, the topic generating the most buzz in the industry is PC postage. This development, which enables mailers to download postage from the Internet through their PCs and print it directly onto envelopes, is being touted by companies like Stamps.com, E-Stamp, Neopost, and a variety of others, as the next wave in mailing. All of these firms see gold in applying postage electronically. And, although office equipment dealers will no doubt hear a lot about this technology in the coming months, especially as the USPS gets closer to providing final approval to these products, the opportunities for dealers within this emerging product category are modest at best.

That's not to say that office equipment dealers should ignore the first wave of PC postage products, particularly if they have a strong SOHO clientele. However, dealers need to understand from the outset that these products with price tags in the $100 range come not only with low margins but will be marketed through every Tom, Dick, and Harry retail channel as manufacturers look to blanket the SOHO segment with what they think is the biggest thing to happen in the history of mail delivery since the postage stamp.

Steve Pietz, marketing manager for Neopost, the only postage meter vendor actively touting a PC postage product, conceded that with rare exceptions, dealers are not the distribution channel for PC postage. The strongest candidates, said Pietz, are those dealers with large multiple national accounts who need a number of units. He stated that even though dealers won't be the primary distribution channel for these products, there will be branding in the PC postage arena, and with Neopost as a player, this could have a pull-through effect as customers upgrade to larger systems to accommodate growing businesses. Pietz said that Neopost is looking to have a suite of PC postage products.

The PC postage products destined to hit the market come in a range of configurations, from purely software-based programs to products that use both hardware and software, as well as Internet downloads.

The makers of software and hardware combos are extremely optimistic about their products as they look to attract customers. Those manufacturers may be right in their enthusiasm. International Data Corporation (IDC), a Framingham, MA market research firm, has found that a hardware/software solution is preferred by most small businesses with a PC or Internet access over other postage services, such as software-only products and low-end meters.

"Providing a solution that meets small-sized business needs will be key in winning online postage market share," noted Ray Boggs, senior analyst at IDC.

"These products will have a direct impact on anyone who has any interest whatsoever in the small and medium size mailing market," added Richard Pavely, a mailing consultant and close observer of the mailing equipment industry.

Most recently, E-stamp, the company that claims to have pioneered the PC postage category, albeit with lofty protests from the likes of Pitney Bowes, received USPS approval for final beta tests of its PC postage product, fittingly called E-Stamp. Another competitor, Stamps.com is also entering the final stages. As with any product that imprints postage, the USPS has a vested interest and is not about to grant final approval until it is absolutely certain that the proper controls and security measures are in place. The companies with PC postage products have taken a long, circuitous route to final launch, having to deal with the USPS's stringent approval process as well as challenges from Pitney Bowes, who claims to have patents filed away deep in their vaults on virtually any technology related to mailing. About the only mailing-related products Pitney hasn't laid claim to are envelopes and the stamps themselves. However, even with the roadblocks put up by Pitney, the PC postage juggernaut isn't likely to be halted anytime soon.

Some industry observers maintain that PC postage technology may someday be incorporated in printing devices used by mid-size and large production mailers. Pavely doesn't expect this to happen anytime soon. "The big guys won't be involved in PC postage," he commented. "The high-speed inserters they're using have a difficult time keeping up with what they're metering now."

Yet some say that the technology to do this at the middle and upper middle portions of the postage meter market is available now. Even if that is true, virtually all companies involved in PC postage are focused on the low-end of the market where the first-time buyers reside rather than at the mid and upper ends where the serious mailers have already invested heavily in mailing and shipping equipment and aren't likely to leap at the opportunity to invest more dollars in technology. When this technology does go beyond the SOHO target market, dealers will reap the financial rewards of PC postage.