Memphis-based FedEx has announced it will start calculating all shipping charges by package size, a move that will trigger price increases on roughly one-third of ground shipments.
The change will impact Internet retailers the most, according to analysts, although ad specialty suppliers and some Web-driven distributors appear likely to be affected, as well. Previously, FedEx charged for shipping by weight, with the size of the package only mattering after a certain threshold was reached.
As an example of the new pricing structure, a one-pound square package carrying several T-shirts would cost 41% more to ship. Research company ShipMatrix predicts 32% of all ground packages will now cost extra to ship, the majority of which will weigh less than five pounds. UPS has declined to reveal whether it is considering a similar move, but based on history, analysts expect the company will soon raise its prices, too.
FedEx’s policy change will greatly affect e-commerce giants like Amazon and Zappos, which have a habit of shipping lightweight items in large, oversized boxes. The hike could curb the purchase of items like paper towels and diapers that consumers have grown accustomed to buying online. The term for the pricing practice is dimensional weight, “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,” said FedEx, in a press release announcing the change. FedEx’s rationale is to get “an appropriate price for the value of service we’re providing,” said a company spokesperson.