How Retailers Can Adapt to Dimensional Weight Pricing Changes

dimensional weight pricing, 2015 holiday shopping, packaging, retailers, retail, online retail, ecommerceThis summer UPS announced plans to join FedEx in expanding dimensional weight pricing for all ground shipments in the U.S. Industry estimates predict that roughly one-third of shipments will be impacted by this change. .

Historically, shipment prices for ground packages have been based on weight. However, with the new pricing model, prices will be based on package size. The new model favors small, dense packages over the larger, light packages that have become the norm for shipping online orders.

For many ecommerce retailers, the switch to dimensional weight pricing will dramatically increase delivery costs across product categories, especially in apparel, consumer packaged goods and other categories with lightweight products. The Wall Street Journal estimates that under the new pricing model, shipping an eight-pound, 32-pack of toilet paper between 601 and 1,000 miles will increase by 37%. However, it isn’t ideal for the majority of retailers to pass these costs directly onto consumers since many of them will abandon their online carts if shipping prices are too high or transit times too long.

Although the new prices won’t go into effect until after the holidays on Dec. 29, retailers must start modifying their packing strategies now to ensure they do not overspend on shipping in 2015. To adapt to this new pricing model, retailers must ship smarter—and fast. Over the next four months, retailers will need to establish new packaging strategies and uncover new operational efficiencies to address this change. Here are several steps retailers should take to prepare for dimensional weight pricing:

  • Talk to Your 3PL Partner: For retailers who leverage third-party logistics partners for delivery and fulfillment, it’s important to consult with them to understand how these pricing changes affect their services and costs. Some industry analysts believe that smaller, regional logistics providers and freight carriers will not follow suit and move to dimensional weight pricing to stay more competitive. Regardless, retailers should meet with their logistics partners to see if and how the switch to dimensional weight pricing will impact them.
  • Design New Packaging: Retailers need to be clever about designing new packaging to accommodate dimensional weight pricing models. The key is uncovering new packing efficiencies. Retailers need to focus on keeping the package size as small as possible without damaging the quality or customer experience. We conducted a study recently at Dotcom Distribution that found that 52% of consumers are more likely to make repeat purchases from an e-retailer that delivers orders in premium packaging. Since packaging and delivery represents a fundamental component of the overall customer experience, retailers will need to continue to delight customers with high-quality packaging while reducing the size of the package to lower shipping costs.
  • Train Employees and Prepare Pick-and-Pack Lines: If you are implementing your new packaging designs ahead of this year’s holiday shopping season, it’s critical to provide training to your permanent and seasonal staff before November. Additionally, retailers should ensure their warehouses and pick and pack lines are stocked with enough supplies and packing materials to meet holiday demand.
  • Consider Other Cost-Savings Initiatives: Retailers can offset the costs of dimensional weight pricing by creating efficiencies in other areas of their logistics and supply chain operations. This includes increasing automation and forecasting capabilities. A strong logistics and fulfillment provider should offer guidance on cost-savings opportunities or technology for your organization.

By acting quickly and creating a strategy to address the new dimensional weight pricing model, big-box and e-commerce retailers can ensure they are not scrambling come December in the midst of the holiday rush. Proactive retailers can avoid taking huge revenue and profitability hits from increased shipping costs while still delivering an exceptional customer experience.

Maria Haggerty is the founder and CEO of Dotcom Distribution

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