Since January, FedEx, UPS and others in the shipping world have broadened their use of dimensional (DIM) weight pricing, eliminating the exemption for packages measuring less than three cubic feet and making DIMs the standard pricing model for most shipments.
DIM pricing is determined by a formula that factors the size as well as the weight of a shipment, in most cases amounting to a price hike without any changes to the service being delivered. As calculated by The Savvy Shipper, a woman’s shoulder bag with the dimensions 19x15x5 which has an actual weight of two pounds would have a DIM weight of nine pounds, increasing the shipping price by 28.3%. A video game controller with the dimensions 12x8x8 with an actual weight of one pound would have a DIM weight of five pounds, increasing the shipping price by 29.7%.
According to a new report from Sealed Air, DIM pricing “could have major financial implications for unprepared manufacturers and retailers.” Companies that don’t optimize their packaging to account for DIM weight pricing could be paying up to $550 million more per year in shipping costs.
The good news is, there are ways to offset these costs. Here are some things to consider when reevaluating your operations to account for the changes brought on by DIM pricing:
As you take this new reality in stride and readjust to this new normal, considering strategies such as these will ensure you maintain the competitive edge.
With an innovative delivery solution from Newgistics, the e-tailer keeps its customers happy—and its shipping costs down.
Aleva Stores is a rapidly growing e-tailer of home health and wellness products ranging from nutritional supplements to running socks. Aleva Stores operates 10 niche sites that each focus on specific healthcare product lines and are fully supported by a team of knowledgeable customer service professionals. Aleva Stores is committed to delivering a great customer experience and providing a level of service that is unique in the segment, and this dedication is evident in the merchant’s informal motto: a “fresh idea on shopping.”
For Aleva, one fresh shopping priority is to ensure orders arrive within five business days after they’re shipped. “It’s about keeping the customer happy—getting them to come back,” explains Derek Gaskins, President of Aleva Stores. “If they order something and it takes 10 days, then that’s probably the first and last shipment you’re going to have with that customer.”
Aleva Stores says Newgistics Select offers the ideal combination of price and performance.
In the ultra-competitive online marketplace, e-tailers need delivery solutions that are both fast and affordable. Aleva simply could not strike the right balance between speed and cost until the company turned to Newgistics.
Now, Aleva Stores ships with Newgistics Select(TM), a postal-based uniquely designed to deliver within Aleva’s target delivery window—and does so affordably and competitively. Because Aleva Stores was finally able to find the right balance between its two competing priorities, its president Derek Gaskins says Newgistics Select is “obviously the way to go.”
The Pain Points
Aleva Stores values fast delivery times so much that its company vision promises its customers delivery within five business days of leaving the distribution center with standard shipping. However, a previous shipping provider’s poor performance made it difficult for the merchant to deliver on that promise. The carrier had approached Aleva Stores with rates that Gaskins called “incredibly aggressive,” but the delivery metrics did not meet expectations. Packages were often late or, even worse, lost, which in turn cost Aleva Stores in other areas.
To meet Aleva Stores’ delivery needs, Newgistics Select can be adjusted based on performance reports the merchant receives regularly.
“We were re-shipping daily, multiple orders,” recalls Gaskins. “And there’s a pretty steep price associated with that, not only in absorbing the cost of the product and shipping it again—you’re quite possibly losing that customer.”
Aleva Stores then switched to a shipping company that promised reasonable rates and delivery within five business days. However, the carrier shut down without warning in 2012. Aleva Stores was left scrambling.
Newgistics stepped in almost immediately, offering what Aleva Stores had a hard time achieving with other carriers: the ideal combination of price and performance. Aleva Stores selected Newgistics Select, a postal-based solution that provides estimated average transit times of 3-5 days at substantial savings over national parcel ground carriers.
What’s more, Newgistics Select offers merchants the flexibility to meet their individual needs for delivery speed. Based on frequent performance reports from Newgistics, Aleva Stores can request any adjustments that may be needed to continue achieving its delivery objectives.
“If you come to them and say ‘I want to hit a certain metric,’ they’ll build a Newgistics Select solution to accommodate that,” Gaskins explains. “And that’s pretty unique. I don’t think there are too many carriers—if any—out there that are going to build all these custom matrices to meet the customer’s goals.”
Now that Aleva Stores ships with Newgistics Select, orders reach customers within the merchant’s target timeframe of five business days. What’s more, the daily re-ships that ran up costs are no longer a significant problem and the volume of pricey calls and emails to Customer Service is down as well.
“With the other options that are out there, either somebody can deliver a quality product or somebody can have a price- competitive product,” observes Gaskins. “Truly, I feel Newgistics is the first time I’ve found a quality product that’s still hitting on a price point that makes sense.”
By VP Marketing and Field Sales, Newgistics
Trends in consumer behavior continue to indicate a changing attitude toward shipping options within the overall shopping experience. Market analysis shows that, despite relatively flat growth rates in the U.S. shipping market as a whole, the acceptance of value-based shipping is rapidly displacing premium time-definite services.
Why this transition? Aside from consumers watching their spending more closely, some carriers are facing continued pricing pressures (tied to core transportation services) and high fixed operating costs, leading them to modify their billing procedures and negotiate service agreements with shippers – and the higher rates get passed on to consumers. However, there are alternatives that can help shippers not only control costs, but also improve base service levels by leveraging untapped information and opportunities.
This is about more than just shipping: a company’s brand and reputation is on the line every time a customer places an order. While some merchants get consumed with evaluating each individual transaction, intelligent merchants look at the lifetime value of customer and implement services that meet the customers expectations in price, service, and performance – encouraging the customer to continually ‘invest’ in their brand.
Certainly, there are still customers who want the option to purchase time-definite, higher-cost shipping services – but considering the growing number of consumers demanding economical alternatives, prudent shippers must offer an variety of services in order to appeal to a the needs of the their most valued asset, the customer. Otherwise, they risk losing that customer to the big box retailer who may not offer the same level of convenience, but doesn’t tack on inflexible high-cost shipping, either. A comprehensive shipping offering can tackle these challenges and more – from increasing the lifetime value of a customer and reducing call center costs, to creating new marketing opportunities and streamlining IT processes.