Article Contributed by Kristen Elansky
By now, you are probably aware of the dimensional weight charges implemented by big shipping carriers UPS and FedEx back in January. Under these changes, packages less than 3 cubic feet are subjected to dimensional weight pricing, also referred to as DIM pricing and DIM charges. DIM pricing calculates shipping costs based on a package’s volume— or how much space it occupies— in relation to its weight.
DIM charges, which have been applied to air shipments and larger ground parcels for a while, are now being applied to smaller ground parcels due to the increase in e-commerce sales. The continued popularity of online shopping has led to a steady increase in the volume of packages handled by carriers like UPS and FedEx, resulting in higher operating costs for these carriers. According to Alan Gershenhorn, UPS executive vice president and chief commercial officer, dimensional weight pricing “enables us [UPS] to more appropriately align rates with costs which are influenced by both the size and weight of packages. 1”
The Impact of DIM Pricing
Now that DIM pricing is being applied to ground parcels under 3 cubic feet, retailers are experiencing an average increase of 17% to their ground shipping costs, with some seeing 30% increases.2 A recent survey, which polled retailers to determine the impact of DIM pricing, found that shipping prices have greatly increased as a result of DIM charges. According to the report, the cost to ship men’s sneakers increased 13%, while the cost for a kid’s backpack went up 27%, a toy truck increased 32% and a toaster rose 35%.3
Holiday Shipping Predictions
The holiday shopping season is the busiest time of the year for retailers and shipping companies. For e-tailers, the National Retail Federation predicts online sales will increase between 6-8% to as much as $105 billion during the holiday shopping season. From Thanksgiving through December, USP is expected to ship over 630 million packages. December 22 is expected to be the busiest day, which is set for 36 million packages, doubling its average daily deliveries.4
Due to the substantial increase in sales and shipments over the holiday season, it’s important that e-tailers take the necessary steps to minimize the impact of DIM charges. According to the survey that analyzed the impact of DIM pricing, over 70% of respondents said they have not made changes to their shipping operations as a result of dimensional weight pricing.5 E-tailers that have been significantly impacted by DIM pricing thus far can expect to be hit even harder from now through December.
What Can You Do?
One of the best ways to reduce your DIM charges is minimizing the size of your parcels. According to Packsize research, the average package has 40% wasted space, which leads to expensive dimensional weight prices. Remember when I said DIM charges are based on how much space a parcel occupies and its weight? Well, by using the smallest possible box size, you are reducing the amount of space it occupies, thus limiting the DIM price.
To reduce the size of your packages, you can use a custom packaging solution, which allows you to make custom-sized boxes for the items you intend to ship. With custom packaging, you can create the smallest box possible and reduce the amount of corrugated and void material used.
In Conclusion
Dimensional weight pricing has had a huge impact on e-tailers that have not updated their shipping strategies. With the holiday season in full swing, your business should be utilizing every available means to reduce your DIM charges, or else your company will face the consequences.
Resources:
- The Newspaper of Trucking and Freight Transportation: UPS to Use Dimensional Pricing for All Packages http://www.ttnews.com/articles/basetemplate.aspx?storyid=35267
- How Is Dimensional Weight Pricing Being Addressed 9 Months Later? http://multichannelmerchant.com/opsandfulfillment/warehouse/dimensional-weight-pricing-addressed-9-months-later-27102015/
- DIM Weight: One Year Later
https://proshipblog.files.wordpress.com/2015/07/june-webinar-dim-weight-one-year-later1.pdf
- Online Shopping to Drive Record Holiday Shipments for UPS http://www.gosanangelo.com/business/bizearnsups_02512146
- Dimensional Weight (DIM) Impact: One Year Later
http://proshipnews.com/2015/07/20/dimensional-weight-dim-impact-one-year-later/