As a retail business, chances are a big chunk of your cash flows right back to moving your goods in and out. If you are regularly shipping a high volume of products to customers and wholesale clients without taking advantage of carrier discounts, you could be spending up to 40% more than you need to. This savings could mean turning a larger profit or could free up the funds you need to offer customers a shipping discount for large orders, which is a powerful tactic to increase sales and revenue. A September 2013 Canadian survey by UPS and comScore conducted found that 3 out of 4 shoppers added items to an eCommerce cart in order to reach a free shipping threshold.
It only takes is a little bit of elbow grease and homework to negotiate shipping discounts and finagle lower freight rates.
1. Create accounts with all of the major carriers. If you haven't done this already, get to it! UPS, FedEx and USPS (through Stamps.com) are the obvious starting points and accounts are easy to set up online. With your own dedicated account, you can arrange for carriers to pick up and drop off directly from you (no more frantic trips to the post office at 4:59 p.m.!).
2. Compare and contrast. When looking at the different options, make sure you answer all the questions that relate to your business specifically. Do they provide postage labels and rent printers? Will you have enough volume to qualify for their discounts? What is each carrier's rate on your most-shipped package sizes? For example, for heavy but small items, USPS can be significantly cheaper than UPS or FedEx. For medium-sized or large packages, though, UPS or FedEx can typically offer better rates. Researching these quirks and understanding your inventory's needs can also help you improve your shipping cost widget so that you don't lose money by accidentally undercharging customers for postage.
3. Make the ask. Once you have established a relationship with the account manager at the carrier(s) you like best, negotiating a lower rate is as simple as asking—even if you aren't quite a high-volume company yet. UPS and FedEx even give a three-month grace period if you're projecting a larger volume of sales as your business grows. You can take advantage of that more affordable shipping now, but be as accurate as you can with your predictions or you will lose your low rate if your goals aren't met. If you need to boost your volume, you may also use your own account to manage inbound shipping costs (rather than reimbursing the manufacturer or wholesaler). Even if you don't walk away with a deep discount right away, you'll know what thresholds you will have to reach to qualify for more significant savings.
Bonus tip: If you aren't able to negotiate a rate yet due to a low volume, check to see if your business credit card has a partnership with any mail carriers in the meantime. You might discover a hidden 5%+ savings there!
Have you had success negotiating discounted shipping? Let us know in the comments!