Earlier this year, both FedEx and UPS announced that they will apply dimensional weight pricing to all domestic ground shipments. The change — slated to take effect on December 29, 2014 for UPS and January 1, 2015 for FedEx — will impact shippers in a big way.
Having a clear understanding of the new pricing model will help you prepare for the changes.
Here’s a quick primer on dimensional weight pricing, how to calculate it, and what you can do if your business is affected.
Defining dimensional weight pricing
In a nutshell, dimensional weight pricing is a method of calculating the shipping cost for packages based on volume — or the amount of space the package occupies — in relation to its weight.
To find the dimensional weight of a package, you must:
- Multiply the length, width and height of your package and divide it by 166 (166 is the standard dimensional factor used by FedEx and UPS for domestic Ground shipments).
- Round this number up — that gives you the dimensional weight of the package.
- Compare the dimensional weight to the actual weight of the package.
- The higher of the two “weights” is used to determine the shipping cost for the package.
So what does dimensional weight pricing actually look like?
Take, for example, a medium-size pet bed measuring 23x18x3 inches with an actual weight of 1 pound. After calculating the volume of the package and dividing by 166, the dimensional weight, rounded up, is 8 pounds.
Now let’s say you’re shipping this package to Zone 4. Based on the current actual weight, shipping this package would cost $7.35. But with the new dimensional weight rating in effect, shipping would cost $10.10, an increase of $2.75 (or 37.4%).
While a couple of extra dollars may not seem like a lot, the true cost builds up over time. If you shipped 50 of these packages a day to Zone 4, the average monthly impact would be an additional $4,125.1
It’s clear that ecommerce businesses could see a substantial hike in shipping costs for larger, lightweight products, as FedEx and UPS are looking to gain back some of the costs associated with shipping these space-hogging packages.
Weighing your options
If your business will be impacted by this pricing change, there are a few things you can do to help mitigate the extra costs.
Start by reviewing your current packaging to see if you can reduce the sizes so they take up less space in delivery vehicles. Keep in mind that there’s a fine line between making a package as small as possible and risking damage to its contents as well as diminishing the overall quality and experience for your customers.
If reducing package size isn’t an option for you, it’s good to remember that UPS and FedEx aren’t the only game in town. Now is a great time to explore alternative carriers.
Using a regional carrier is one option for local deliveries. While some of these carriers charge extra fees for services such as residential delivery or address correction, these fees are often lower than FedEx and UPS. Either way, it’s important to do your research and factor surcharges into your calculations.
Another option is the U.S. Postal Service. Although the USPS also has dimensional weight pricing, it only applies to packages larger than a cubic foot, and only if the package is going to zone 5 or beyond. Check out the USPS’ new, lower rates for Priority Mail – they may provide another economical option for your business, especially if your packages tend to weigh between 1 and 40 pounds.
Additionally, since the USPS is not planning a price increase in January, you can enjoy these new Priority Mail rates well into the New Year.
Chances are 2015 will ring in more changes to shipping, as carriers continue balancing operational costs and profits. But, staying up on the latest pricing changes and adjusting your shipping strategy along the way will certainly make for a smoother delivery.
Amine Khechfé is co-founder and general manager of Endicia
 Calculations based on 2015 Standard List Rates for FedEx and UPS Ground service to Zone 4 (301-600 miles). Surcharges not included.