United Parcel Service Inc. (NYSE:UPS) said Tuesday it will begin pricing ground shipments in the U.S. and standard delivery to Canada based on box sizes in addition to weight beginning after Christmas.
UPS competitor FedEx Corp. (NYSE:FDX) said in May it would begin factoring package size into shipping prices instead of pricing by weight alone, beginning Jan. 1, 2015.
The pricing change, called “dimensional-weight pricing” by the industry, comes as shoppers increasingly buy items online, often with free-delivery options, even for large lightweight goods like paper towels in bulk. The company said in April its delivery volume in the U.S. increased by more than 4 percent in the first quarter of this year.
UPS hopes the change will encourage customers to ship lighter items in smaller boxes, as packages have become less dense in recent years, essentially wasting space. The new pricing structure is designed to decrease fuel costs as delivery trucks will be able to stow packages with a more efficient use of space.
The company already uses dimensional-weight pricing for packages shipped by its air service and by ground to Mexico, as well as for large packages shipped to Canada.
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"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 Chief Commercial Officer Alan Gershenhorn said in a statement.
The new pricing takes effect Dec. 29, 2014 after the busy holiday shopping and shipping season.