Guide to Negotiating Shipping Rates With Your Carrier
by Jillian Voege
This article was updated 8/5/2024.
Sometimes, it might seem like the cost of shipping can be inelastic; there’s a little bit of wiggle room when you negotiate rates with your carrier, but the rates and fees are what they are.
Many small businesses don’t feel like they have enough clout to get advantageous rates, while businesses of all sizes have to deal with the increasing amount of surcharges and fees that carriers tack on with each passing year.
The trick isn’t to go into your contract negotiations trying to steal concessions. Ultimately, it’s about demonstrating value and justifying why carriers should give you better rates. If you look at your shipping contract in those terms, then it shouldn’t matter how big or small you are. You can get a better contract by increasing your value or leverage to the carrier in any way you can.
Keeping that in mind, we have created a simple, step-by-step guide that will walk you through how to negotiate shipping rates with carriers.
1. Be informed—and bring your data to the meeting
In order to demonstrate value, you have to be able to answer any and all questions the carrier might ask about your business and its future. You should know your operations inside and out, from the total packages shipped last year to the forecast of packages that will be shipped next year.
Relying solely on the carrier's information gives them the upper hand, but having your own data provides leverage.
Prepare for negotiations by gathering comprehensive shipping data, including package volume, size, and weight, broken down by carrier and service level. Additionally, be sure to understand the costs associated with overnight delivery, peak season surcharges, fuel surcharges, and address corrections.
Additionally, bring information on the carrier's performance, such as any delays or missing packages. This preparation will help you negotiate more favorable terms and ensure you have the insights needed to make informed decisions.
“When you're going in, review the data. What are your on-time delivery rates? What are your damage rates? Were there service failures? What complaints do you have? And then look for opportunities where [service] can be improved. You know, maybe you're having new service offerings or shipping volumes. You've got an upcoming promotional period or seasonal spikes that you're wanting to discuss. Just make sure that you have all the information ready to go beforehand.” — Lori Boyer, “Mastering the Shipping Rates Battle”
2. Decide what to negotiate about
When negotiating shipping rates, it’s important to have a plan. Start by researching a carrier’s pricing, including additional fees and surcharges. Then decide which you want to lower or waive. Keep in mind the following potential charges:
- Dimensional weight pricing. When calculating shipping costs, carriers often use dimensional (DIM) weight pricing. If you frequently ship large, lightweight packages, negotiating a better DIM factor will be in your best interest.
- Insurance. Using a third-party insurance company for your shipments can significantly reduce shipping costs, particularly for high-value items. But if you prefer to use carrier insurance, you might want to see if they’ll lower premiums for your packages.
- Residential delivery surcharge. Residential deliveries typically cost more than commercial deliveries due to additional logistical challenges, and major carriers usually impose surcharges to cover these costs. By discussing these surcharges with your carrier, you may be able to negotiate lower fees or even have them waived, reducing your overall shipping expense
- Large package surcharge. The large package surcharge applies to shipments exceeding specific dimensions or weight, typically those over 130 combined inches or 90 pounds. If your business frequently ships large packages, negotiating a reduction in this surcharge can significantly lower your shipping costs.
Surcharges are especially important to negotiate because they increase quickly (sometimes faster than base shipping rates). Consider the characteristics of your average shipment—size, weight, destination, and shipping distance—and try to bring down the associated surcharges.
3. Compare carrier rates
We recommend getting a good lay of the land of shipping rates from all carriers—not just the major ones, but regional ones too—to use as leverage when you’re negotiating lower rates or surcharges from your main carrier.
Comparing shipping options doesn’t just help with negotiations. It also gives you insights into the pricing that other carriers are offering so you can find the best rates and services. Each carrier offers different pricing structures, delivery times, and service levels. By evaluating and comparing these factors, you can choose the most cost-effective and reliable shipping partners for your business needs.
4. Stay up-to-date with industry trends
Staying informed about current trends and costs in the shipping industry is crucial when negotiating shipping rates.
By keeping track of your carrier and other carriers’ pricing strategies, service changes, and market fluctuations, you can identify the best times to negotiate for lower rates or improved terms. Understanding the broader industry landscape allows you to benchmark your rates against competitors and leverage this information to secure better deals.
What are competitors (or people in similar industries) paying for shipping? What discounts do they get? Try doing some research online or talk to people at industry events to find this information.
5. Read the fine print
Hidden fees can significantly inflate your shipping costs if overlooked. Carefully review contracts and service agreements to identify and understand these fees. By reading the fine print and asking detailed questions, you can avoid unexpected charges and better manage your shipping budget.
6. Have a backup plan
Being prepared to walk away from a negotiation is a powerful strategy that ensures you do not settle for unfavorable terms. Recognize that your current carrier may not always offer the best deal, and exploring alternative carriers can reveal better opportunities. Having a backup plan and being willing to switch carriers demonstrates to your current provider that you are serious about obtaining competitive rates
“Be very open, and know what your goal price is. … Be like, hey, this is my goal. If you can meet this goal, great. But if you can't, let's both move on. Being very clear about what your goals and needs are is going to make your negotiation a very smooth and easy process. You want to make sure [the agreement] works for both businesses.” — Ryan Leahy, “Mastering the Shipping Rates Battle”
7. Prioritize relationships
The deeper the relationship with your carrier is, the more likely they’ll give you more concessions or perks when your contract is up for renewal.
Frequent communication matters more than you might think! Don’t just talk to your account manager every year or two—check up on them every quarter to catch up. Not only will you make the relationship more valuable and future negotiations more fruitful, but you’ll also stay up-to-date on any moves your carrier might make.
It’s also important to understand the way your carrier operates. Learning their operations and terminology will help you speak their lingo and negotiate a better deal.
8. Remember, it never hurts to ask
As you go into the details, it doesn’t hurt to ask about any relief from extra surcharges or fees that are tacked onto your packages. It may also help to run some projections to see if you can save money by eliminating surcharges and fees instead of lowering rates. This way, you’ll be aware of every angle you can push to lower your overall shipping bill.
As long as companies rely on carriers to move products, shipping will always be a major part of your operations budget. It’ll be a constant push-and-pull between you and your carrier, but if you approach your negotiations as a partner and emphasize the symbiotic nature of your relationship, you’ll come away with a much better contract that gives you more room to grow.
9. Get lower shipping rates the easy way
Negotiating with carriers can be immensely satisfying and productive. Lots of businesses are able to get lower rates and surcharges through the negotiation process. But what if you want to ship with a diverse carrier mix? Building a relationship with more than one carrier—and integrating with their technology to print labels—quickly becomes cost-prohibitive.
Multi-carrier shipping software provides the perfect solution. With a shipping API like EasyPost, you can easily connect with over 100 national, international, and regional carriers. EasyPost has done the hard work of negotiating volume discounts, and we pass the savings down to businesses like yours.
EasyPost also comes with label generation, address verification, insurance, and other time-saving automation features.
Try for free and instantly access rate discounts of up to 83%.