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Retailers Reviewing Carrier Decisions Due to Costs

June 10, 2015
One of the contributors to increased costs is the expanded use of dimensional rating.

More than three quarters of the respondents to the “Internet Retailer Survey 2015”  said they were “satisfied” with their carriers’ services, however 20.4% were considering changing their carrier, citing cost as the reason.

Analyzing the survey,  ASDI, a developer of multi-carrier shipping software and provider of barcode scanners, noted that one large e-retailer which ships up to 50,000 packages a day with UPS said that it was “not looking to change our primary retailer, but diversify among carriers.”

One of the contributors to increased costs is the expanded use of dimensional rating, which is also known as cubic weight or volumetric weight. It is a freight billing technique that is calculated by multiplying the (Length x Width x  Height) applied to a dimensional factor. This rating, which varies by carrier and other factors, has  caused significant price increases for shippers of lightweight small parcels.

As an example, Internet Retailer reported, “Web-only retailer Inc. found that dimensional pricing resulted in one of its hottest products—the Today’s Mom pregnancy pillow—shipping as an 18-pound package, nearly double its actual 10-pound weight, founder and CEO Jack Kiefer says. Even smaller packages were getting hit hard, he adds. “If you take the DIM weight factor and other standard rate increases and residential surcharges, it got to the point where we were looking at it costing $9 to ship a 1-pound package across the street.”²

In the face of rising shipping costs, a growing number of shippers are now looking to diversify their carrier portfolio rather than relying so heavily on a primary carrier. Regional carriers are getting their attention. As a result of lower operating costs, regionals can often pass along to customers savings of 10% to 40% over UPS and FedEx pricing. Most regional carriers transport packages via truck hubs instead of airlines, and trucking can be as little as 10% of airline costs.

The survey also sheds light on shippers’ use of free shipping programs as a customer incentive.

More on the survey. 

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