UPS to Factor Box Size Into Pricing -- Update

By Michael Calia 

United Parcel Service Inc. on Tuesday said it would start factoring box sizes into the price of ground shipments in the U.S. and standard delivery to Canada.

The move follows rival FedEx Corp.'s decision in May to start pricing packages according to their sizes instead of by weight alone.

The pricing changes come as consumers increasingly rely on e-commerce and delivery with free-shipping options for lightweight goods in large packaging--such as paper towels and shoes--that had traditionally been bought at brick-and-mortar stores.

UPS on Tuesday said it thinks the new pricing--which will use so-called dimensional weight--will encourage shippers to pack lighter items in smaller boxes. Packages have become less dense in recent years, with the ratio of weight to external packaging declining, the company said.

UPS said it believes its new pricing structure will translate into lower vehicle and fuel costs as the smaller package sizes will mean more efficient use of space on delivery vehicles.

"UPS has been researching the potential expansion of dimensional-weight pricing for a number of years because it enables us to more appropriately align rates with costs, which are influenced by both the size and weight of packages," UPS Commercial Chief Alan Gershenhorn said in a news release.

UPS will start the new pricing Dec. 29, following the crucial holiday-shopping and shipping season. FedEx said it plans to apply its new pricing model to all ground shipments starting in January.

Several e-commerce leaders such as Amazon.com Inc., meanwhile, are looking to combat rising shipping costs by testing in-house delivery networks in a bid to gain more control over how quickly and efficiently customers get their orders. Observers have warned that a fully operational delivery and logistics system from Amazon is likely years off.

Write to Michael Calia at [e-mail]

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