6 Tips for Shipping Carrier Rate Negotiations

As your ecommerce business starts to regroup after the holidays and ramp up for a successful 2018, it’s important to keep carrier rates in mind when developing your action plan for the new year. Why? For starters, shipping carriers start charging new rates soon:
• 2018 UPS rates start on Dec. 24, 2017
• 2018 FedEx rates start on Jan. 1, 2018
• 2018 USPS rates start on Jan. 21, 2018

You can re-negotiate your rates with UPS and FedEx at any time, and don’t need to wait for your agreement to end, so why not make it a new year’s resolution to get the best shipping rates for your business? Carriers do not use a “one size fits all approach” to determine the discounts and incentives offered to each shipper—pricing agreements are custom to the specific customer.

If you’re ready to re-negotiate your rates, keep in mind that you don’t want to negotiate EVERYTHING, as some shipping characteristics aren’t as attractive as other characteristics are to the carriers from a discounting perspective. Here are six tips to help you negotiate rates in a way that has the greatest impact on your bottom line:

1. Study your shipping stats
Think about the information that you provide FedEx and UPS—everything from customer names and addresses to the value of your products and other accounting information—and all the information they can gather about you because you’re a customer, such as how much you spend on certain services and the average weight of your packages. They know a whole lot about your business, which gives them an advantage when you negotiate with their pricing team. Make sure you know everything they’re going to be able to find out by scrutinizing your invoices. You don’t want to go into this process with just a rough idea of your shipping preferences and spending with a carrier.

2. Know your top surcharges
Get a good understanding of which surcharges have the biggest impact on your shipping operations so you can work to negotiate discounts on these charges. It’s important to realize that some surcharges (like the more common fuel and residential delivery surcharges) will be harder to get discounts on than others, but it doesn’t hurt to try.

3. Don’t be distracted by value-add services
Carriers typically use “value-add services” as one of their compelling arguments against further discounting your rates and will try to use these as a way to draw focus away from shipping fees, common surcharges and other key pricing factors. Be clear with your carriers that you appreciate these value-add services but that they’re not going to impress you as much as competitive discounts and incentives.

4. Keep your contracts to yourself
Keep your contracts to yourself! Providing one carrier a proposal from another carrier doesn’t help you—you’re basically giving them the tools they need to offer you just a slightly better deal. Keep this information to yourself to be used as leverage.

5. Stand your ground with refunds and penalties
Late deliveries result in unhappy customers and lost opportunities for repeat business, which is why you should never waive your right to file for a money-back service guarantee or guaranteed service refund. You’re paying for a specific service standard and will lose the ability to reclaim substantial money in the form of refunds if the carriers do not meet that standard.

You should also reject any contract language regarding early termination. Carriers raise your rates each year, and you shouldn’t have to pay them a fee if you want to move your business elsewhere for cheaper rates. The only time you might consider accepting early termination language is if the carrier promises to freeze your rates for the term of the contract.

6. Diversify your shipping mix
Don’t put all your eggs in one basket—always keep a small amount of business with the other carriers. Try to keep 30 percent of your deliveries with another carrier (such as USPS, consolidators and regional carriers), because you never know when a rate will change or a new surcharge will pop up that will make you want to move more shipping volume to a different carrier. Letting your carrier know you also ship through other providers can give you an advantage, as the carrier will want to do what’s possible to bring more of your business over.