September 9, 2011 / 9:56 PM / 8 years ago

EBay shares slip on concern over U.S. Postal Service closures

SAN FRANCISCO (Reuters) - EBay Inc (EBAY.O) shares dropped more than six percent on Friday on concern the company may be among the most exposed e-commerce players affected by the massive post office closures at the U.S. Postal Service.

A general view of eBay headquarters in San Jose, California February 25, 2010. REUTERS/Robert Galbraith

The move by the USPS will impact e-commerce because when consumers buy a physical product online it has to be shipped, and often in the U.S. that’s carried out by the USPS.

The USPS is losing billions of dollars a year and Postmaster General Patrick Donahoe told Congress this week that it may default on a $5.5 billion payment due to a retiree health program at the end of September.

Donahoe wants to cut more than 100,000 workers, close thousands of post offices and end Saturday mail delivery.

“Any changes with any of the carriers that impact service are a big deal for e-commerce,” said Dan Weiss, vice president of operations at Shipwire, which stores and ships products for online merchants.

E-commerce has exploded and has taken market share from brick and mortar retailers. Part of that success has been fueled by efforts to make online shopping much like an in-store experience, while offering very cheap and fast delivery.

“Turmoil at the U.S. Postal Service will make it harder to do that,” Weiss told Reuters.

Big Internet retailers, like Inc (AMZN.O), tend to use FedEx Corp (FDX.N) and United Parcel Service (UPS.N) rather than the U.S. Postal Service, according to Scot Wingo, chief executive of ChannelAdvisor, a software provider that helps merchants sell more online.

However, if thousands of post offices close, that will make it harder and more expensive for small and medium-sized online sellers, known as SMB sellers, to ship products, Wingo explained.

“That means eBay has the most exposure,” Wingo added. “That’s where those SMBs live and thrive mostly.”

About 30 percent of eBay sales come from SMB sellers, Wingo estimated.

All the smaller online sellers on eBay’s main marketplace will find it tougher to ship items. They will have to travel further to post offices, or pay more to ship using FedEx or UPS.

EBay shares closed down 6.7 percent at $28.46 on Friday, while declined 2.7 percent to $211.39. The Nasdaq Composite index shed 2.4 percent.

“EBay has historically relied more on small and medium sized businesses, as well as individual proprietors, as a source of activity, listings and transaction revenue,” said Scott Kessler, an Internet analyst Standard & Poor’s Equity Research. “It would definitely be one of the companies adversely affected by some type of restructuring involving the U.S. Postal Service.”

Spokeswomen at eBay and Amazon didn’t immediately respond to requests for comment about the impact of U.S. Postal Service changes.

Reporting by Alistair Barr, editing by Bernard Orr

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