As customer expectations continue to rise, businesses need to balance the speed and efficiency of their e-commerce offerings with the impact of rising freight costs. By doing so, they can identify what we call “the perfect package,” which means having the least amount of packaging material needed to optimize product protection.
DIM Weight and Rising Freight Costs
Recently, major carriers have implemented higher pricing schemes tied to box size. The announcements follow the dimensional weight (DIM) price hike that went into effect earlier in 2015 for all ground packages.
DIM weight pricing calculates shipping costs based on the volume of a package. According to some estimates, it may increase overall shipping charges by $550 million annually.
In fact, Sealed Air recently surveyed more than 150 companies of varying sizes and industry focus to determine how they were impacted by these changes. We found that 89% are already seeing an increase in shipping costs from DIM. Of these, nearly half (41%) are facing cost increases of 10% or more.
For major shipping carriers, pricing increases are directly driven by skyrocketing consumer demand.
Today, packages need to be delivered faster and cheaper than ever, and the holiday peak season brings even greater expectations. In addition, consumers are shipping bigger packages to more residential addresses, taking up valuable space in major carriers’ trucks and aircraft containers.
Consider this: eMarketer forecasts that ecommerce will grow 25% globally in 2015. It’s likely that consumer expectations will grow correspondingly. The amount of space available in delivery trucks or in the belly of an aircraft is finite, so clearly something has to give – and that something is box size. By implementing higher prices across freight and ground shipments, and for packages that exceed set dimensions, carriers are saying their capacity isn’t expanding.
The question of how to keep shipping costs down and deliver on consumer expectations looms large, but the answer lies in thinking small.
The changes in shipping prices convey an important message to e-retailers: The dimensions of a package are now just as important as its weight. In the ecommerce era, there’s no longer room for oversized boxes containing small items buried under a heap of unnecessary air pillows.
Dropping a Few Inches
Now, more than ever, ecommerce shippers are taking another look at their packaging processes in order to adhere to new pricing schemes.
Navigating these changing dynamics means identifying ways to right-size your boxes, while ensuring that packages arrive damage-free. This change represents a great opportunity to improve the sustainability of shipping practices. The opportunity involves the amount and type of materials used; the efficiency and ease of the returns process; and optimizing the box size.
Here are some things to consider:
- Size matters – Chose a box that matches the size of its contents. It can be more cost-efficient to invest in a large inventory of various box sizes, rather than paying higher shipping costs for the wrong-size box.
- Minimize materials – Always use high-quality protective material, considering cushioning, durability and especially important in consideration of price schemes, space consumption.
- Carrier labels – Keep in mind that “fragile” and “handle with care” labels cannot replace protective packaging materials.
- Think outside the box – For smaller items, don’t forget that mailers are a great alternative to boxes, especially for companies shipping light-weight, hard-to-break items.
- Consider your customer – What are end users looking for from their retail experience? For example, customers who purchase luxury cosmetics online may care most about receiving a box that reflects the value of the shipment and extends the brick-and-mortar shopping experience to their doorstep. Others may see higher value in maximizing the speed and minimizing the cost of delivery.
- Keep track of costs – By recording total shipping charges on a monthly basis, you can make sure you’re never being charged incorrectly.
- Pick a partner – Choosing the right packaging partner is an essential step in approaching these price hikes correctly over the long term. The costs of getting it wrong can be significant.
Remember, these changes in shipping prices don’t have to hurt your business’ bottom line. Your packaging partner can help you quickly determine and invest in the right solutions for your shipping needs, ultimately proving that the economic returns gained from sustainable shipping can be significant.
Ken Chrisman is President of Sealed Air Product Care