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FedEx Price Change Will Pose Challenge for Ecommerce Shippers

Shippers adjusting their pricing for services is nothing new, as companies like UPS and FedEx do so routinely in response to the market and the ongoing issue of high fuel costs. However, come January 2015, ecommerce pros who use FedEx will see a fundamental shift in that company’s pricing structure that could impact their businesses.

FedEx plans to implement dimensional weight pricing across all of the packages shipping via its FedEx Ground service. For customers using the company’s Express service, this is nothing new. However it represents a big change for the Ground shipment customer segment.

Currently, FedEx only puts a dimensional weight price tag on items three cubic feet or greater in size. Once the beginning of January rolls around, all packages shipping by FedEx Ground will use that pricing scheme to determine cost of shipment.

“This change will align the FedEx Ground dimensional weight pricing with FedEx Express by applying it to all packages. Dimensional weight pricing is a common industry practice that sets the transportation price based on package volume – the amount of space a package occupies in relation to its actual weight,” the company said in a statement.

The USPS moved to “dim weight” pricing in 2007 – it helps them recoup costs for big packages that don’t weigh much in relation to their size.

Online sellers who might believe they could seek relief by shifting business to rival UPS may need to think again. The Wall Street Journal, citing shipping industry analysts, predicted UPS would also shift to match this pricing.

FedEx recently launched a OneRate flat-rate option, but the service falls into its Express offering rather than the less expensive ground shipping.

As many in ecommerce have found, the perk of free shipping, especially when offered during the busy holiday shopping season, provides a strong consumer incentive to buy. With FedEx and possibly UPS making ground shipping more expensive, ecommerce pros will have tough choices regarding how they manage the higher cost versus the sales generated with their free or flat-rate shipping promotions.

FedEx Ground call itself a “leader in cost-effective, small-package ground shipping” in US and Canada. FedEx Ground includes more than 61,000 employees and a network of more than 525 distribution hubs and local pickup-and-delivery stations. There are more than 35,000 motorized vehicles that transport approximately 5.6 million packages daily, and the company reported annual revenue of $10.5 billion in fiscal year 2013. Its parent, FedEx Corp., earns annual revenues of $45 billion.

See the announcement about dim weight pricing on the FedEx website.

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David A Utter
David A Utter
David A. Utter is a freelance writer based in Lexington, KY. He has covered technology topics from search to security to online business and has been quoted in places like ZDNet and BusinessWeek. He considers his appearance on NPR's "All Things Considered" with long-time host Robert Siegel a delightful highlight. You can find him on Twitter @davidautter and on LinkedIn.