Don’t Overspend on Shipping! Here’s How to Negotiate Your Shipping Contracts
Has this ever happened to you?
It’s time to renew a shipping contract. You’ve been buried under a mountain of mission-critical tasks — everything from juggling inventory to handling returns — which means your time is limited. So rather than reading and reviewing the fine print, you simply ask where to sign. It’s worked in the past, so there’s really no need to revisit what’s in there. Right?
Fact is, too many e-commerce companies are resigning themselves to subpar shipping contracts without asking questions or looking for the best agreement possible. Which is a shame, since careful review could be the very thing the company needs to increase profitability.
With shipping carriers increasing their rates between 4.9% and 6.9% each year, what you don’t know can hurt you.
In fact, shipping costs often swallow up as much as 10% of online sellers’ revenue. Without the proper vetting process in place, your company could be hemorrhaging money without anyone’s knowledge.
If you want to keep your fulfillment costs in check, it’s imperative to gain greater control of your parcel expenditures.
Best way to do that? Regularly revisit your current carrier selection and negotiate your contracts accordingly. To help you get into this important habit, here are the key steps our shipping and logistics experts recommend:
1. Conduct a full review
You may not understand all of the terminology within each contract, and that’s ok. Your carrier doesn’t expect you to decipher the fine print, and may even be using it to quietly overcharge you. Just make notes on anything that isn’t clear. Then take those notes to your carrier’s representative or freight consultant and ask for guidance in decoding the language.
2. Look for extra fees
Once you start digging, you may be surprised at just how many extra surcharges the typical contract includes. Large package surcharges, address corrections, residential surcharges and additional handling charges all fall within the realm of “accessorial charges.” These extra fees are often used to cover additional “services” provided by carriers — ones that typically fall beyond the confines of standard shipping and receiving. Once you have a strong sense of the extra charges your carrier covers, you can target the appropriate discounts when negotiating your shipping contract.
3. Reevaluate your needs
Before entering into negotiations, it’s important to have a strong understanding of your overall shipping volumes and needs. Arming yourself with these basic details will allow you to research standard market prices and see how they compare to your current rates.
In addition, try to remember why you chose your current carrier to begin with. Was it based on the level of service, cost or timely performance? Once you’ve nailed down the factors that led you to particular carriers in the first place, you can reevaluate performance and decide if they still align with your current needs.
4. Ask about discounts
Do you know if your carrier offers quantity- or volume-based discounts? Most do, but they don’t always include them in contracts. Do a little research — a quick look at the carrier’s website or short email to your representative may be all you need — to educate yourself on the various types of discounts available. Then ask your carrier to include them in your contract.
5. Compare the competition
When evaluating your contract, it pays to remember that many of the biggest players in the industry are in competition with each other. Comparing the unique benefits of UPS versus FedEx, for example, can give you some leverage and strengthen negotiations. Do your research, and don’t be afraid to ask what one carrier can do to match the perks of another.
6. Claim your right to refunds
Here’s a little secret: At some stage, most brands and retailers are owed refunds from carriers for late, lost or damaged shipments. But many fail to claim these reimbursements, often because they simply don’t know they have a right to them. Carriers are legally required to compensate customers for any missteps. So if you’ve experienced issues without the proper corresponding refunds, you may want to consider factoring them in during shipping contract negotiations.
7. Ask an expert
When in doubt, seek the advice of an expert. Connecting with a firm that specializes in shipping invoices and audits can shed light on overpayments and other issues that might otherwise go undetected. Look for someone who can help you understand the fine print in contracts, analyze shipping data and decide how to handle the negotiations process. There’s no one-size-fits-all strategy when it comes to navigating agreements with carriers, and enlisting a partner to advocate on your behalf can go a long way when it comes to long-term carrier costs.
Looking for more insights you can use to guide your carrier strategy? Watch the on-demand webinar: Optimizing the Post-Purchase Experience With Better Shipping and Tracking. You’ll get additional tips you can use to improve shipment tracking and enhance the customer experience.