In case you haven’t heard about the hottest news in shipping – Amazon and Google are neck-and-neck in their attempts to compete for a bigger slice of the same-day/local delivery pie in major metro markets. And now, FedEx (and possibly UPS) is adopting “dimensional pricing.”
In a move expected to shake up the world of e-commerce, FedEx will now be pricing all packages according to size, not just weight. In other words, a box of 30 rolls of toilet paper weighing 5lbs will be billed as if it weighed 21lbs. While UPS is still quiet on the subject, the two companies have historically matched price increases.
According to Ben Popken’s recent story, titled “FedEx Plans To Charge By Size Could Shake Up E-Commerce” in NBC News, “The new scope of the ‘dimensional pricing’ is directly targeted at bulky but light packages containing things like toilet paper, sweaters and shoes.”
So what does this mean for the U.S. Postal Service®? If UPS does indeed follow suit, could USPS® shipping services become the more viable option? How will this affect tech giants’ push for a shrinking (and affordable!) delivery cycle?
Let’s see what Harry Whitehouse, co-founder and CTO of Endicia, has to say about how he sees the USPS angle of the story:
Q: How do Amazon’s recent announcements about same-day delivery and increased Sunday delivery with the USPS play into all this?
Whitehouse: This is just a different pricing model driving Amazon and other retailers to take another look at their shipping portfolio and rely more on the USPS.
Amazon just announced that it is testing its own delivery network called “last mile” in San Francisco. Additionally, it is expanding its Sunday delivery service with the USPS to 15 more cities across the U.S.
Taking advantage of the Postal Service’s existing logistics network is one of the ways Amazon can effectively compete with FedEx and UPS. And let’s not forget that for the under 5-pound market, the USPS typically offers the most affordable rates.
Q: Do you think it’s a given that UPS will do dimensional pricing too?
Whitehouse: History shows that these two carriers typically offer parallel pricing and services, with adjustments within months, if not rolled out at the same time. And let’s not forget that UPS is hurting too – their last quarterly earnings saw a 12 percent drop.
Dimensional pricing is seeking to gain back some of the cost incurred to ship an item. People will pay more for the things that can’t fit – sustainably – into a truck. FedEx is looking to increase the amount of product that they can deliver in one trip.
So what is your take on this breaking news? Feel free to sound off in the comments below. And if you’re curious to hear more about this topic, stay tuned for our follow-up blog post – coming soon!
For more news and tips, check out our FedEx vs. UPS vs. USPS shipping rates comparison page.