How to Negotiate Shipping Rates: Tips for Better Price and Service

13 min read

One big factor that can really eat into your budget and product profits is shipping rates, which can vary greatly from one provider to another. Sometimes, these unexpected costs can cancel out any savings you made earlier in the manufacturing process. So, it’s worth knowing how to negotiate shipping rates to protect your profit margins.

From dealing with UPS, FedEx, and USPS to freight lines, getting the best deals will require a thoughtful strategy — especially since you don’t want to skimp on key aspects like service and speed.

Good news — this article has all the info you need. Keep reading to learn how to get better shipping rates.

How to Negotiate Rates with Shipping Lines

The first step in negotiating rates with shipping lines is understanding the market landscape. For example, UPS and FedEx hold a significant portion of the market share, creating a duopoly that sets the standard for pricing.

Since this duopoly accommodates around 70 to 80% of the market share, they set the rates for the entire industry compared to each other, not compared to what it actually costs to ship a parcel.

However, this does not necessarily mean that you have no room to negotiate. It’s important to research and compare prices from various carriers to have a better understanding of what is considered reasonable.

The great news is that most shipping carriers follow a similar process for negotiating rates. This means the information below can help you with any carrier you choose to work with.

Creating an Account

The easiest way to save on shipping is to create a free account with a provider of your choice. In addition to enjoying shipping discounts, having an account opens up other cool perks like free shipping supplies, scheduling recurring collections, different tracking options, and more.

If you run a small business, creating an account is a great way to start saving on shipping costs. For example, if you want to know how to negotiate shipping rates with UPS, their website claims you can save up to 11% on every shipment with a free UPS account.

USP provides more benefits for customers who have an account

Explore multiple carriers and compare their perks before signing up. Some provide free package pickup and flat-rate shipping, while others offer discounts for small businesses or loyalty rewards for frequent shippers. Deciding which perks are more valuable depends on your shipping needs and budget.

Integrations with Ecommerce Platforms

The ecommerce platform you use for your online store can also help save on shipping fees. Certain shipping providers, like USPS, integrate with ecommerce platforms to offer discounted rates to their customers. Consider it as if shipping rates have already been negotiated on your behalf.

Take Ecwid by Lightspeed, for example. When using Ecwid for your online store, you not only benefit from discounted shipping rates but also have the convenience of printing shipping labels directly from your Ecwid admin.

If you’re wondering how to negotiate shipping rates with USPS, this option might be just what you need. Ecwid sellers in the US can buy and print discounted shipping rates through USPS, while those in Belgium, the Netherlands, and Germany can utilize Bpost, PostNL, and DHL, respectively.

If you are from another country or want to use a different shipping provider, you can buy discounted shipping labels using apps from the Ecwid App Market.

Accessing discounted rates through an ecommerce platform is a convenient way to manage all aspects of your online store in one place rather than juggling multiple accounts and services.

With Ecwid, you can buy shipping labels right where you manage your orders

Shipping Contracts

While the first two options work great for small businesses, larger sellers may consider signing a shipping contract with a carrier. This allows you to negotiate custom rates based on your specific shipping volume and needs.

Once you have chosen a carrier, it’s crucial to understand how the negotiation process works. Typically, carriers will review your shipping history and volume to determine your rates. The more you ship, the better rates you can negotiate.

It also helps to clearly understand your average shipment size and destination zones, as this information can affect your negotiated rates.

A shipping contract is a legal agreement between you (the company or manufacturer) and the carrier (UPS, FedEx, etc.). Depending on your manufacturing and shipping model, such a contract will hammer out the details of what is being shipped and in what volume.

For example, a contract can contain:

Agreements on how much is being shipped in a given period
Where to – individual customers (called “parcel shipping”) or bulk shipping to other companies (called “freight”)
Packaging dimensions
Mode of shipment (ground, air)
And other important factors.

A contract normally covers several items, such as payment terms, insurance, and liability. Signing a shipping contract can also provide additional benefits, such as dedicated account managers, specialized customer service, and other perks.

However, it’s essential to carefully consider the contract’s terms and conditions before signing. Thoroughly review the pricing structure, service level agreements, and hidden fees or surcharges.

It’s also recommended that you compare multiple contracts from different carriers to get the best deal for your business. Don’t be afraid to negotiate and ask for better rates or added services that fit your needs.

More Things to Note When Negotiating Shipping Rates

Now that you know how to negotiate shipping rates with FedEx or any other carrier, here are a few more things to keep in mind when securing shipping contracts.

Consider Your Business Needs

Carriers have different pricing structures and may offer discounts based on the volume or frequency of shipments. Consider your business’s shipping needs and negotiate accordingly.

If you typically ship large volumes, you can leverage this as a bargaining chip for better rates. On the other hand, if your shipping needs are more sporadic, focusing on negotiating better service levels rather than lower rates may be more beneficial.

Negotiate the Contract Duration

Another vital aspect to consider is the duration of the contract. Most contracts have a set term, usually ranging from one to three years. Carefully review this and negotiate for a longer term, as this can often result in better rates and more stable shipping costs.

Learn About Extra Fees

Another critical factor is to find out about any extra fees carriers may charge for overnight and peak delivery, fuel surcharges, address correction, and even residential delivery. These assessorial charges can run up significantly if not considered.

Keep in Mind Grace Periods

Some shipping carriers may extend a grace period if your shipping volume is not yet high enough to procure attractive discounts and you expect your volume to increase rapidly. This grace period will allow you to take advantage of those lower prices now, but you will lose your discounted rate if the sales goals aren’t met.

Connect with Your Account Manager

Typically, after you sign a contract with a carrier, you will be assigned an account manager or representative. It is important to establish a good relationship with this person as they can often provide valuable insights and help resolve any issues that may arise during the shipping process.

Review Your Contract Regularly

Finally, it’s important to regularly review your shipping contract and renegotiate when necessary. Shipping rates are constantly changing, so feel free to reach out to your carrier and negotiate for better terms if you notice a significant cost increase. It’s also beneficial to compare rates from different carriers periodically in order to ensure you are getting the best deal for your business.

How to Negotiate Freight Rates

Curious about the difference between freight and shipping? Let’s delve into the details.

The Difference Between Freight and Shipping

When it comes to freight, we typically think of moving large shipments, often in bulk. Think of it as the heavy lifting in logistics. Shipping is a broader concept, encompassing anything from tiny packages to entire shiploads. It isn’t constrained by size or quantity.

Freight and shipping costs can differ significantly. When it comes to freight, weight, volume, and distance play a big role. It’s all about loading smart and planning routes well to save money.

Like many other carriers, FedEx uses distinct terms for freight and package shipments

Shipping rates are influenced by even more factors like how it’s transported, how quickly it’s delivered, and what is being shipped.

Choosing between freight and shipping depends on cargo type, delivery speed, budget, destination accessibility, and service specifics. Freight suits large, heavy items, while general shipping works for smaller loads.

Negotiating Freight Rates

Handling freight comes with different factors compared to shipping parcels. For example, freight is typically calculated in bulk.

Similar to shipping carriers, freight shippers work with contracts that outline the terms and conditions under which goods will be transported.

This type of contract covers the transportation of goods from one place to another, detailing the price, payment terms, delivery dates, and responsibility for loss, damage, or delays during transit.

When negotiating freight rates, it’s essential to understand the factors that impact pricing and how you can leverage them to get a better deal.

Consider the following:

Volume. Shipping more allows for better rate negotiation with carriers, who benefit from transporting larger quantities efficiently. Consolidated freight shipping costs are also typically lower than shipping individual packages.
The type of goods being shipped. Hazardous materials or oversized items may require special handling or have specific regulations and restrictions, which can increase the cost of shipping.
Operating costs. Demurrage fees, free time, detention fees, and container pick-up/return locations can add up, potentially surpassing savings from lower freight rates.
The mode of transportation. Air freight is usually pricier than sea or ground transport but offers a faster alternative for urgent shipments.

Wrap Up

Contract negotiation can make a big difference to your bottom line, for better or for worse. So, do your homework, stay informed, and understand your own bottom line and budget. Then, suggest and negotiate until you find the perfect shipping deal that suits your requirements.

Choosing an ecommerce platform is just as important as selecting a shipping provider — both play key roles in your business success. For a robust online store with the added benefits of hassle-free shipping, consider Ecwid by Lightspeed.

Ecwid provides you with various shipping tools so that you can offer your customers a smooth and transparent shipping experience:

Display real-time, accurate shopping rates at checkout from trusted carriers like UPS, USPS, FedEx, etc.
Buy and print discounted shipping labels from the Ecwid admin
Offer real-time order tracking and more.

Learn more about shipping tools you can use and set up an online store with Ecwid to start delivering a top-notch shopping experience to your customers.

Sell online

With Ecwid Ecommerce, you can easily sell anywhere, to anyone — across the internet and around the world.

Get started

Business Finance

Aug 22, 2024

About the author

Anastasia Prokofieva is a content writer at Ecwid. She writes about online marketing and promotion to make entrepreneurs’ daily routine easier and more rewarding. She also has a soft spot for cats, chocolate, and making kombucha at home.