Get Cheaper Rates From FedEx & UPS for your E-Commerce Stores

Last updated: November 5th, 2018.

Intro

FedEx ships more than 14 million packages each business day, and rival carrier UPS ships 20 million packages and documents daily.

Chances are, a large percentage of these packages contain products from e-commerce store owners like you.

Small businesses rely on UPS and FedEx because they have wide-ranging domestic and international reach and they dominate the market.

But as a business owner, how can you rest assured that you’re getting the best shipping rates?

You may be enticed by introductory discounts which only last for a limited time (i.e. FedEx’s Advantage Program discounts on select Ground, Office, and Express services), or you might simply accept the rates you’re given without protest.

However, for a business that ships constantly and whose needs are ever-evolving, you don’t have to settle for the first offer. You can negotiate.

Let’s talk about how!

About This Guide

The Order Metrics profit & growth guide is designed to get you to unlock the most profit for your e-commerce business.

These are real tested techniques could help you grow your business and unlock the extra capital you need to invest in the areas that really matter to you.

We've seen first hand the power of negotiating with FedEx & APC. Assuming you are shipping a decent volume of goods - there might be value to unlock in your business.

Why Should You Trust Us?

This was written by George Sylvain, co-founder of Social Print Studio, a successful e-commerce store that has been selling prints and profitable for 8 years.

Additional help was provided by Hank Kronick,founder of Order Metrics and data analysis specialist. We've got a combined 16 years of e-commerce experience and have personally used every technique described in this guide and seen the results in practice.

The Logistics Of Negotiation

You’re probably accustomed to the logistics of your warehouse or inventory space, but getting the best shipping rates requires knowledge of a different set of logistics. Successful negotiation can put a significant amount of money back in your pocket, but only if you come prepared.

Know What's Available

There are a few types of discounts you can receive:

  • Volume-based: These discounts are tied to the amount of packages you ship. The more you ship, the more you save. This is beneficial when business is thriving, but when shipments fluctuate, your savings follow suit.
  • Guaranteed: These rates stay the same. Regardless of how your volume fluctuates, you get the same rate. But in order to negotiate a guaranteed rate, you need a consistently high shipment volume prior to initiating talks.
  • FedEx Advantage Program - These rates stay the same. Regardless of how your volume fluctuates, you get the same rate. But in order to negotiate a guaranteed rate, you need a consistently high shipment volume prior to initiating talks.
  • Reduced Surcharges: FedEx & UPS charge things like "large item surcharges" or "home delivery surcharges". If your business only sells large items, or only delivers to homes, there could be opportunity to discuss lowering these.

In some cases, if you're not yet a full-fledged high-volume company, you can get a three month grace period to build sales and strengthen your data. But afterwards, you have to show and prove.

Also, Know Your Numbers

Also, Know Your Numbers

UPS and FedEx only want to offer discounts if those savings encourage more business. Thus, the stronger your data is, the more negotiating power you have. Come prepared to talk about the following:

  • The average weight per package shipped
  • The average delivery zone
  • The average number of inbound and outbound shipments per day
  • The percentage of minimum charge shipments
  • Your most common surcharges

And feel free to pull together any other information that you think is helpful. Ultimately, the carrier you’re negotiating with wants to make sure they’re getting something out of the deal. This negotiation is your chance to prove your worth, consider if you might have some x-factors such as brand partnerships that sweeten the deal for them.

The importance of data underscores the fact that you should use independent shipping software like Shippo or Shipstation. In addition to easily amassing and accessing data, you can use timesaving and revenue-building tools that make your shipping process more efficient (i.e. fulfillment management, inventory tracking, packing slip printing, etc.).

If you’re looking for precedent, that information is harder to find. Unlike USPS, neither UPS nor FedEx publishes its volume threshold rates. So, shipping rates are determined on a case-by-case basis. However, to give an idea of the volume numbers that entice major carriers, look to USPS’ listed rates.

For domestic Priority Mail Express shipments, the qualification threshold is 5,000 pieces per calendar year. The threshold bumps up to 50,000 per year for general Priority Mail.

The most common types of discount that we hear about are related to cutting surcharges. FedEx has a monstrous list of surcharges all with fairly absurd high starting points. We recommend you identify all the different surcharges in your contract agreement or the ones that most commonly occur on your invoice. Take that list to your account manager and pick one to focus on. If you are only selling "Dangerous Goods" then a reduction in the FedEx Dangerous Good surcharge will make a big difference!

Befriend Your Account Manager

Great businesses are built on a foundation of great relationships, and negotiating your shipping rates is no different. Your account manager is your strategic partner, helping with everything from package tracking to bill reconciliation to tech support to identifying the best solutions for your business’s needs.

Communicate with them pro-actively – if you’re expecting a Q4 spike or a Q1 dip, give them a heads up so they can adjust your rates. And get to know them. The stronger the relationship, the better the rates.

Side note - you might find some other hidden benefits as well, we built a good relationship with our FedEx account manager and got tickets to big sports games and special events. Of course they are hoping you'll reward them with loyalty so don't get to hooked on this sort of thing!

Quick Tip

Big businesses like FedEx have old-school account managers who can reward you as you build strong individual relationships. Get to know your shipping account managers!

Negotiate Like A Pro

Aside from prepping your data and cozying up to your account manager, it’s important to utilize proven negotiation tactics:

  • Read the fine print: Look for spending minimums that could potentially negate the savings you’ve negotiated. Also look for surcharges that cut into your savings.
  • Look out for guaranteed volume penalty clauses, which could hurt you if you fall below a certain threshold.
  • Make the carrier show their hand first. Don’t put all your cards on the table right away; see what they can do for you.
  • You want to be crystal clear about the negotiation’s timeframe so things don’t linger on.

Depending on what scale business you are, there could be significant value to unlock by going deeper into the specifics of contract negotiation with FedEx and UPS.

One good resource for this is Parcel Magazine. They cover in-depth details about pricing and contract negotiation that goes far beyond what the average small shipper needs to know about.

Parcel MagazineMore FedEx info than you ever imagined

After The Negotiation

Once you’ve secured the best rates possible, don’t assume the work is done. Both FedEx and UPS utilize an automated billing system. It’s possible that your bill could include overcharges. Or worse, it may not reflect your negotiated rates.

It’s critical that you double-check your statements each month to ensure you’re paying for what you’ve agreed to.

Refund Retriever

We love a little tool called Refund Retriever. If any of your FedEx or UPS shipments are delivered late, or if they bill you twice, Refund Retriever will go out and get your money back. They only take a cut of what they save you, which can be a huge time saver and a no-brainer to set up. Their service can also help you identify negotiation opportunities.

One good way to do this well is to benchmark each month's bills against each other, and look for discrepancies.

If international shipping costs are usually 25% of your bill, but one month they jump to 35% - you might have discovered a billing error! This has happened to us, our international billing discounts were removed accidentally.

Our total bill was still within plausible totals for a month, so it might have escaped if we didn't pay careful attention to the details. We clawed ~$6,000 back from FedEx we would have never known about without careful monitoring.

In general, don’t begin negotiations with one carrier until you’ve used both. Ship packages with both FedEx and UPS and assess the experience. Who delivered packages the fastest, at the best rates, and to the areas that you serve most often? You wouldn’t want to lock in rates with UPS if FedEx could offer you a more compelling deal. Whatever you decide, conduct your due diligence to protect your bottom line and save money.

Watch Out

FedEx & UPS are notoriously bad at billing. Discounts you agreed to sometimes don't show up on your bill. Surcharges can come out of nowhere. We recommend running analysis tools on your billing every month. Some things to look out for are duplicate bills, new surcharges, 3rd party people using your account, and mis-typed dimensions.

Summary

FexEx & UPS are a little like black boxes when it comes to pricing. However you can unlock levels of savings as you grow by agreeing benchmarks with your account manager, or presenting your case to try to get exceptions to quantity rules. Often loyalty can be rewarded, so don't be afraid to play that card if it makes sense for your customers and product.

And never forget to check your bill.

Want to find even more ways to improve your bottom line?

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