Dimensional Weight Pricing: How a “17 pound” feather can affect your ecommerce profit margins
Ecommerce has long been considered to have a cost advantage over brick-and-mortar retailers. After all, real estate, inventory and human resource costs are all lower.
However, these reduced costs come at an expense — Internet retailers rely on a third-party for fulfillment. Which means their margins and perhaps overall business model is at the mercy of other companies.
This dependency became all the more clear recently when UPS and FedEx announced a significant change to shipping policies by applying dimensional weight pricing (also known as DIM) to all ground shipments. This means that the size (length, weight and height) of even lightweight objects could cause increases in shipping costs for ecommerce vendors.
A concrete example of this is The Wall Street Journal estimating a 37% increase in price for a 32-pack of toilet paper and a 35% increase for a two-slice toaster.
At the MarketingSherpa Media Center at IRCE 2015, I spoke with Abe Garver, a contributor to Yahoo! Finance and an M&A (mergers and acquisitions) banker, to discuss how these shipping changes are affecting ecommerce companies. Abe used the example of a peacock feather — which may really only weight six ounces, but due to its large size is considered weighing 17 pounds when calculating the cost of shipping.
