FedEx to switch to charge by size rather than weight

As Ecommerce and online shopping is continuously growing, shipping of items has become high priority for shoppers, merchants, and delivery

As Ecommerce and online shopping is continuously growing, shipping of items has become high priority for shoppers, merchants, and delivery firms. In an effort to reduce complications and contribute to a fairer playing field for serial shoppers, shipping firm FedEx is reconfiguring its shipping costs.

Until now, the majority if not all shipping companies, including local postal services around the globe have calculated shipping costs primarily by weight. FedEx’s new calculations will focus on package dimensions, meaning physically larger packages will cost more to ship than those with smaller displacements.

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This new form of “dimension-based pricing” has spawned from the growing “buy everything online” craze that has hit recently, with Ecommerce platforms offering grocery and perishable item shopping, much like Amazon’s Pantry and Fresh services.

The pay-per-weight model has also spawned the online “dressing rooms”, with users ordering multiple light weight item such as shoes, trying them on and picking the one more suited for them to result in the remaining items to be shipped back to the Etailer.

Light weight items such as toilet paper and basic clothing also create an issue with space. As large light weight items fill up more storage in the back of shipping trucks and fulfillment centers, dispersing all-sized packages have become non-cost efficient, creating logistical issues.

“People are being spoiled with the notion that having delivery to the home doesn’t cost any more than the store. You drive a truck down the road and you fill it up with pingpong balls, you will lose money,” said Satish Jindel, president of ShipMatrix Inc., a developer of shipment-tracking and analysis software.

Given the overly sized light packages, FedEx failed to meet its quarterly profits and was forced to cut its forecast due to the rising gasoline prices.

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“FedEx needs to make sure it’s getting paid the right amount for the space it’s taking up,” said David Vernon, an analyst at Sanford Bernstein.

This shift will affect both merchants and consumers. Amazon for example offers flat shipping to its Prime users, given that FedEx will calculate the shipment by displacement could result in items no longer being made available to Prime customers, possibly resulting in less shoppers opting for the premium service.

Customer will be forced to think twice before ordering once “cheap” shipping items as it may result in overly priced shipping per compared to the price of the item.

As if it sensed the new reform coming, Amazon has begun testing its own shipping service. However given what was found by FedEx, ShipMatrix, and Sanford Bernstein it may have to recalculate its shipping procedure as well.



Image courtesy of Wikipedia

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