It’s surprising how many online retailers are still unaware that come January 5th both UPS and FedEx will be calculating shipping rates based on dimensional weight. This is going to come as a big shocker to these unsuspecting storeowners, raising shipping costs up to 50%.
The majority of online retailers who don’t offer free or flat rate shipping calculate shipping prices based on weight for optimal pricing. Now retailers will have to multiply length by width by height and then divide that number by 166 for the dimensional weight.
Why are FedEx and UPS Forcing this Change?
From the Carriers Point of view this move makes total sense. Bill Smith, UPS vice president of marketing made a statement to Reuters that;
“We believe this (dimensional weight pricing) will encourage customers to reduce their package sizes.”
Reducing package size is a big deal to shippers who need to maximize their commodity; which is ‘space’. Both UPS and FedEx stand to save a bundle by forcing retailers to consolidate space.
What Does This Change Mean to The Business Owner?
It means that retailers shipping items like bikes, bike frames, manure forks and even toilet paper are going to take it in the shorts. Here’s a helpful stat pulled from The Wall Street Journal,
“Under the new rate system the price of shipping an eight-pound, 32-pack of toilet paper between 601 and 1,000 miles would increase 37% to $13.81.”
To cut-to-the-chase, online retailers who have been shipping by weight alone are going to notice a dramatic loss in profit. For the majority of online retailers, who don’t have the negotiating power of Wal-Mart, will most likely need to find a way to pass along the price increase to the customer.
For many small business owners like Joseph Berto this will be very difficult. Joseph owns and operates Equi-TeeMFG.com, for which one of the most popular items is his patented horse manure fork the Shake’n Fork. Joseph is very concerned about what is going to happen to his business as the dimensional shipping will more than double his existing shipping costs.
There will be many others like Joseph who will be unable to pass the increase along to the customer simply because it would push the total cost above what is acceptable in the market place.
Is Dimensional Weight Going To Impact Your Business?
If you’re an online retailer it probably will. Check out the Savvy Shipper to see how dimensional rates could impact your store.
The best course of action is to understand how dimensional shipping is going to impact your products. Charles Moore, VP of Parcel Logistics, has some great tips on Dimensional Weight Best Practices for businesses.
There are going to be plenty of online retailers looking for your suggestions on how to save on shipping when these new changes roll into place.