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UPS, FedEx Dimensional Pricing Could Increase Shipping Costs for Online Retailers

In order to curb online retailers’ use of oversized boxes for goods that could be shipped much smaller, the United Parcel Service (UPS) and FedEx are switching to new shipping systems where package pricing is based on dimension.

Instead of pricing by weight, retailers will be required to multiply a box’s length by its height and width, and then divide that by 166 to arrive at its dimensional weight. UPS put the change in place Monday, and FedEx is scheduled to follow suit on Jan. 5.

According to Reuters, industry experts have warned that unprepared smaller firms could end up paying up to 50 percent more for shipping.

A spokesperson for FedEx said the company needs to charge a “fair value” for use of its asset: space. Some retailers have reduced package weights, but have not downsized the boxes accordingly.

Bill Smith, UPS vice president of marketing, told Reuters, “We believe this (dimensional weight pricing) will encourage customers to reduce their package sizes.”

Big box e-tailers like Amazon are expected to easily accommodate the change, but smaller companies that may lack the resources to alter their shipping, could turn to the United States Postal Service (USPS) as a result.

Amine Khechfe, general manager of Endicia, which offers shipping solutions for e-commerce vendors, told Reuters a women’s shoulder bag weighing 2 pounds, shipped in a box measuring 19 by 15 by 5 inches, will have a dimensional weight of 9 pounds and cost 45 percent more to ship.

The USPS, which could pick up more business as a result of these changes, still prices packages by weight, but in July announced some price cuts to accommodate e-commerce, a sector expected to grow by at least 10 percent annually over the next five years.