If your business has been utilizing shipping services for years, you’ll know it’s been the industry norm to experience static periodic rate adjustments. These rate adjustments could make it difficult to keep on top of your expenses, as what you were paying at the beginning of the year could completely change by the end. 

A new challenge business owners might face lies in how shipping providers could be changing their pricing strategies to include dynamic pricing. Major carriers across North America are gravitating towards this model, which could have a lasting impact on their clients. In this article, we take a look at what that means and what you might be able to expect. 

What is dynamic pricing? 

Dynamic pricing is a structure by which rates continuously change based on variables such as demand, capacity, and more. You might be familiar with this structure if you’ve ever shopped for flights, hotel rooms, taken an Uber, or even ordered something on Amazon.  

What impacts dynamic pricing for small package and parcel shipping? 

There are a lot of variables that can change shipping rates under a dynamic pricing model. Some of the most important factors include: 

• Real-time data on variables like: 
  • Available truck capacity 
  • Lane demand 
  • Distance 
  • Fuel costs 
  • Seasonal factors 
• AI-suggested rates based on detected market patterns 

What does this mean for your business shipping services? 

No matter the size of your operation, dynamic pricing could potentially impact your prices significantly. At a minimum, it can make it harder to plan and budget for shipping as tightly as you might want. For businesses already struggling to meet consumer demands for fast, free shipping, this could become increasingly complicated.  

Experts at Harvard Business Review warn dynamic pricing for parcel shipping “could pose serious margin risks” to some businesses.  

“These evolutions will impact everyone in the supply chain, including consumers who will feel the shift through reduced free shipping, larger order minimums, slower deliveries, and higher prices. And this isn’t just an e-commerce issue. Pharma, telecom, auto parts, industrials: anyone who moves high volumes of parcels is exposed.” 

With dynamic pricing potentially resulting in pricing changes as often as several times a day, it’s more imperative than ever that businesses stay on top of their shipping expenses and contracts.