Understanding Carrier Shipping Rates & Negotiating Rate Discounts

Understanding Carrier Shipping Rates & Negotiating Rate Discounts

By Chris Crutchley on April 2, 2024
Carrier rate prices seeming mysterious to you? We'll explain how they work and how you can negotiate a discount on your rates this year.

US national carriers FedEx and UPS introduced a 5.9% rate increase in 2022. 

Who actually paid just 5.9% more? Only about 3% of companies. The majority of companies paid approximately double that 5.9%. 

Why? Because that 5.9% didn’t include several new surcharges and fees. 

When it comes to carrier shipping rates, complicated pricing structures and a total lack of transparency make it tough to understand why you pay the rates you pay, and even more difficult to negotiate for better rates.

In the past few years, fulfillment costs have shot up, and e-commerce is struggling to keep up and make its margin. Research shows that e-commerce retailers are often paying as much as 10 to 15 percent of an order’s total value in shipping costs. 

As an e-commerce company, it’s possible to negotiate with carriers for discounts. The carriers give you a shipping rate card with your contracted shipping prices listed, typically for the calendar year, which can be renegotiated each year.

However, they don’t make it easy. Parcel shipping costs vary widely, seemingly for no reason, among similar companies shipping similar numbers and weights of items. Looking at the rates and fees outlined in a shipping rate card, the numbers may seem random and arbitrary.

They are designed like this partly on purpose so that carriers can make more money. However, there are still a few key steps to follow to better understand the pricing on your carrier shipping rate card — and perhaps even negotiate a discount.

E-commerce retailers, here’s what you need to know about carrier shipping rates. Plus, steps to find out if you are eligible for any discounts.

Read About CBIP’s Global 4PL Logistics Services

Why are they so complex?

There are three components to the rate card: the rate card, rate set, and rate table. 

The rate table has the discounts and rates all listed together in a logical organization, while the rate set is a group of rate tables. Typically, a set will consist of the rate tables for one year.

The rate card is the highest-level data structure and is composed of one or more rate tables. Each customer is assigned a rate card unique to that customer.

Along with that rate card, you also receive a contract with lots of fine print that outlines the rules and rates, how fees are charged, what surcharges you may have, and what zones will have special pricing. 

The contract can be just as opaque as the rate card, and it can be difficult to understand what all the data means. 

What is really determining price? 

Volumes determine your shipping price. Carriers typically use tiered pricing to determine your rates, ie the more volume you are shipping, the less you will pay in per-unit shipping costs.

Hence, to negotiate effectively with carriers, you absolutely must know what your shipping volumes are.

If you shipped higher volumes than you did during the preceding year, you can negotiate better rates. However, you need to have all your shipping data on hand to send to the carriers. That’s how they determine whether or not you will receive a discount on shipping in your new contract. 

RELATED: 5 Easy Ways For E-Commerce Retailers to Save On Shipping

Collecting your shipping data

Not negotiating rates could mean losing a significant portion of your margin. Shipping costs are high, so you need all the discounts available to you.

To do that, you need to collect a lot of data, and you need the right tools to get the data and analyze it. That way, you can figure out where you are paying the most, and where you should be aiming for a discount.

You should be using shipping software able to track your shipments and record that data. This shipping data is your bargaining chip with the carriers: Collecting this data is paramount to your chances of getting a discount.

Your software will be able to collect vast amounts of data on an ongoing basis. In particular, there are a few key metrics that you will want to filter for which will come in handy when negotiating carrier rates.

  • Service spend — ie the total amount you spend on shipping
  • Surcharge spend
  • Avg cost per shipment( including surcharge and fees)
  • Weight — broken down into average weight and dimensional weight
  • % of parcels that meet carriers' minimum threshold
  • Which zones do you ship to the most

Negotiating parcel carrier rates

Once you have all your shipping data collected and organized, you can send that data to your carrier to try and get some discounts. 

Typically, this is done yearly, and a new carrier rate card will be drawn up with your shipping rates, fees, and surcharge specifications for the year. 

Negotiating for discounts is particularly important if carriers announce rate hikes, which happens sometime around September. This is the right time to do your annual review, when you check the most important shipping data that you’ve been collecting throughout the year.

A partner is crucial for handling the details — that’s why you work with CBIP

As an e-commerce business owner, we know you have specific dreams of what you want your brand to be, and how you’d like to grow your customer base and improve your product. 

Unfortunately, running a business also means you have to spend your precious time handling mundane details like logistics, when you’d rather focus on big-picture growth strategy. To avoid that, you can always hire an outside party to handle those details. But how do you find someone you trust to lead your e-commerce logistics on the right path?

Like with any relationship, communication is key when it comes to logistics partnerships. At CBIP Logistics, we excel at communicating with all our partners — and we treat them as exactly that: partners. 

Why is CBIP the best option for e-commerce retailers looking for better customer service and scalability? Well, CBIP is a 4PL. That means we don’t own the fulfillment centers, trucks, or warehouses we work with. Instead, we work with an extensive, worldwide network of those providers.

They are our partners, and we connect them all to you, our client, through our in-house tech platform. That way, when you need data on your shipments, we have it all compiled and organized for you, right on one, centralized client platform.

Dealing with the nitty-gritty details of logistics is what we do best, from getting your goods through customs to reading the fine print in a carrier rate contract. It’s time to get back to building your brand — let us deal with the logistics details.

Get in contact with us today for a complimentary logistics assessment. 

About Author

Chris Crutchley

Chris Crutchley is CBIP’s director of operations and finance. He has over a decade of corporate finance and operational expertise throughout the Asia Pacific.

In logistics, Chris strives to continuously innovate and challenge the industry’s norms in order to offer clients world-class service that emphasizes clear communication.


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