EcommerceBytes-Update, Number 382 - September 13, 2015 - ISSN 1528-6703     4 of 6

New Shipping Rules a Heavy Lift for Merchants

By Greg Holden

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The plus-sized Butterfly bra sitting in a cardboard box depicted in the accompanying graphic weighs 7 lbs. even though the scale it is sitting on says the entire package weighs only 1 lb. 14 oz. How is that possible, you ask?

If you're at all familiar with the practice of dimensional weight pricing, you know the answer. DIM weight pricing, which is now used by all of the "Big Three" shippers for some services, takes the length, width, and height of a package into account as well as the weight of the object inside. That means large but lightweight items cost more to ship.

According to FedEx's online rate calculator, the cost to ship this box in this bra using FedEx Ground jumps from $10.73 to $13.88 when DIM weight pricing is taken into account. That's a 29 percent increase. How can sellers cope with the kinds of rate hikes they're confronted with under the new pricing structure?

The issue was the subject of a workshop I attended at the IRCE conference in Chicago last June called "Weighty Matters: Saving on Shipping Now." The presenters were James Rhee, Executive Chairman and Chief Executive Officer of Ashley Stewart, and Maria Haggerty, Chief Executive Officer and founder of Dotcom Distribution, and they shared some tips based on their experiences.

Last October, I wrote about how using smaller boxes can help you save dramatically on shipping. In their workshop, Rhee and Haggerty provided additional tips on reducing costs: using polybags, negotiating better rates with shippers, and adjusting shipping logistics.

Rhee said that Ashley Stewart has pulled off a "mini-miracle" in the last two years. In the company's first 24 years selling clothing for full-figured women, it had never turned a profit. When he came aboard, said Rhee, "There was no ecommerce effort to speak of. By end of year, close to 40 percent of all sales will be on ecommerce."

"In early January we were hit with a 13 percent rise in shipping costs," said Rhee. "An $8.95 flat rate is an expected feature of our online business."

Thanks to the DIM weight pricing that UPS and FedEx instituted, "On January, 1 lb. was no longer 1 lb.," said Dotcom Distribution's Haggerty. Ashley Stewart outsourced their distribution to her company. "We could not increase prices for this customer."

Tip One: The Polybag Alternative
First, Ashley Stewart talked to customers about how they would like to receive their products. They didn't want to offend customers by discontinuing the use of boxes and wanted to get some feedback beforehand. That's the first lesson: get your customers' opinions before making any changes.

"Clearly, retailers can't afford the negative impact poor packaging can have on their brand and customer experience," said Haggerty. "If you're unsure about how your customers will feel about the change, ask them! One of our clients with an active, engaged social following posed the question about switching from boxes. It turns out that flat rate shipping mattered more to customers than a box vs. a bag, so the consumer impact of the switch was minimal."

By switching to a bag for their bra shipments, costs dropped substantially for Ashley Stewart:

  • Cost per box: $5.31
  • Cost per bag: $1.75

The weight was reduced from 1.74 lbs. to 0.6 lbs., which made the company eligible for UPS Mail Innovations and other discounts for packages of less than 1 lb. UPS Mail Innovations, a service of UPS, provides automation and other high-volume services for customers.

Not every package is suitable for polybags, Haggerty cautions. "Items with sharp corners or made of fragile material should still be packed safely and efficiently in a box. However, softer or oddly-shaped items are well-suited for poly bags. When using poly bags, retailers should still consider the same steps as when packing a cardboard box. Dunnage should be used strategically to wrap fragile pieces and protect the product from scratches. The packaging should be easy and attractive to open while using the least amount of materials possible."

Tip Two: Adjusting Logistics
The switch to DIM weight pricing forced Ashley Stewart to change its shipping procedures. For one thing, because DIM weight impacts shipments to stores, the company drastically reduced the number of brick-and-mortar stores to 89.

All goods are shipped to stores on Monday. This gives the company a hundredweight price reduction, equivalent to a 20 percent reduction. "We tell staff they are going to receive heavy inventory on Tuesday and Wednesday, so they should focus on selling Thursday and Friday," said Rhee.

The important step for merchants, he said, is to take stock of your packaging inventory and physical inventory, and see if you can arrange schedules and shipments for better efficiency.

Tip Three: The Volume Discount
Another important step, he said, is to leverage your relationships with carriers and negotiate your rates in order to get volume discounts. And don't ship by air: it's too expensive.

In order to get such discounts, it's important to ship in volume, but that's not the only consideration, according to Haggerty.

"Specific quantities for discounts can vary by carrier, but what's consistent is how the strength of the relationship between the retailer and their carrier can impact the negotiations of their divisors."

A divisor is a set number established by each carrier in order to determine DIM weight pricing. You multiply length x width x depth to get the total number of cubic inches, and then divide the result by the divisor. Dimensional weight pricing is triggered when certain criteria are met:

  • USPS only charges DIM rates when a package is larger than a cubic foot (12" x 12" x 12"), and the package is going to zones 5-8. But for those zones, the divisor is 194, which results in lower costs, according to Stamps.com's document on DIM weight pricing (available on the Stamps.com website).

  • For UPS, dimensional weight pricing applies to all UPS Ground services and UPS Standard to Canada packages. The divisor is 166.

  • For FedEx, dimensional weight pricing is applied to all FedEx Ground packages. The divisor is 166.

"When determining dimensional pricing divisors, the carrier can use the industry standard of 166 for domestic journeys. But, that divisor isn't set in stone. If you are a reliable client that can commit to a carrier a certain amount you will ship on a regular basis, the carrier might grant you a higher divisor. Smaller ecommerce retailers need to find the right logistics partner to ensure that they have the best opportunities possible for shipping under dimensional pricing."

Such discounts can help in instances where boxes are needed and polybags won't work. "Boxes aren't inherently evil," she adds. "There's usually simply room for improvement for how efficiently they are packed and shaped in order to avoid triggering dimensional weight pricing."


About the author:

Greg Holden is EcommerceBytes Contributing Editor. He is a journalist and the author of many books, including "Starting an Online Business For Dummies," "Go Google: 20 Ways to Reach More Customers and Build Revenue with Google Business Tools," and several books about eBay, including "How to Do Everything with Your eBay Business," second edition, and "Secrets of the eBay Millionaires," both published by Osborne-McGraw Hill. Find out more on Greg's website, which includes his blog, a list of his books, and his fiction and biographical writing.


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