FedEx’s projected rate changes (i.e. Moving to a weight + dimension model) are creating some serious issues for both small and big e-commerce companies. Their changes are leaving many e-commerce retailers scratching their heads in confusion. To provide you with more information on the topic we’ve outlined some key points about the changing shipping rates, what kind of impact they will have on e-commerce, and what steps businesses should take to prepare for the holiday season of 2015.
New FedEx Rate Changes
FedEx has chosen to move to a weight and dimension model beginning in 2015. The change is expected to be similar to the change USPS made in 2007 that takes into account both dimension and weight for shipped items. FedEx expects the adjustment to cover costs associated with moving larger packages that do not weigh as much in relation to their size, items like toilet paper or diapers. This is becoming an issue for FedEx as more and more consumers are buying their daily products via websites like Amazon.
The Impact on E-commerce
Naturally, the biggest concern to vendors is the adjusted price difference in the rate changes FedEx is making, however that may not be the biggest issue. In fact, not being able to provide accurate shipping cost quotes may be a bigger issue, and could prove disastrous for websites that fail to account for the change. If sales sites do not, or cannot, provide accurate shipping costs during the checkout process, customers may end-up abandoning their carts due to uncertainty – nobody wants to buy a product that they don’t know the total cost of. Over hundreds of enterprise B2B e-commerce and B2C e-commerce implementations, we have found that not all businesses have accurate dimension information for their products. Whether a site uses Magento, DemandWare, Hybris, Shopify, Volusion, or any other e-commerce platform – if the product information does not include dimension plus weight values, it will be difficult to accurately calculate the new FedEx shipping costs.
The big e-commerce players, like Amazon, already have the proper calculations (see in their Pantry Offering), and may not need to worry about these changes, but smaller vendors often don’t have the information they need or this level of sophistication. If an e-commerce retailer fails to have the details they need (like dimension data) in their ERP systems, then a change will be necessary.
All is Not Lost
There are ways to overcome product data limitations. Some of our clients include dimension data on products that they know are bulky, and then calculate the appropriate shipping costs for these products. Others include a surcharge premium automatically to their shipping costs for bulky items. There are pros and cons to both methods.
As we continue to work with our multi-channel commerce clients on their Strategy, Marketing and Merchandising programs, we will certainly be focusing on how the perk of free shipping will need to evolve come this busy holiday season, to start setting the stage for 2015.
The Bottom Line
E-commerce is complex and requires adaptation to the constant changes. This is just one more thing to adapt to and hopefully your e-commerce platform is capable of handling the adjustment.