How to negotiate good shipping rates: A guide for small business owners

Are pricey shipping rates preventing you from launching or expanding your small business? You’re not alone: 41% of retailers said shipping costs were their biggest challenge in 2022.¹

Here’s the good news: Negotiating better prices can unlock significant savings. Try these top strategies and tips to help secure more favorable shipping rates.

Understanding the importance of shipping rates

Lower shipping rates not only boost profitability but also directly increase customer satisfaction and loyalty – 38% of shoppers say that reasonable shipping fees are one of the most important factors when choosing between retailers who don’t offer free shipping.²

Before you can unlock better rates, it’s helpful to understand all the various cost components. This can include:

• Distance. The further the package travels, the higher the cost may be.
• Weight and size. Heavier and larger packages can cost more to ship.
• Speed of delivery. Expedited shipping typically increases overall costs.
• Fuel surcharges. Fluctuations in fuel prices may affect shipping rates.
• Volume. Shipping in bulk often reduces the per-unit cost.

Preparing for negotiation

Before contacting your carrier and negotiating shipping rates, arm yourself with knowledge and a clear strategy. You can prepare by:

• Conducting research and analysis. Understand your shipping volume and frequency. Compare current rates with market standards to identify potential savings.
• Setting your goals. Determine what you want to achieve, whether that’s lower rates, better service terms, or added-value services.
• Identifying alternatives. Look into other carriers and shipping methods. This not only gives you more options, but can serve as benchmarks in negotiations.

Negotiation strategies

Like with any business deal, effective negotiation is an art that combines preparation with strategic communication.

Use these negotiating strategies for shipping rates:

• Build a strong negotiation position. Highlight your business's consistent shipping volume and reliability as a client to appeal to carriers.
• Be persuasive. Use clear, concise arguments to articulate your needs. Be ready to listen and respond to the carrier's counterpoints.
• Leverage your shipping volume. Emphasizing your shipping quantity or frequency may unlock bulk or loyalty discounts.

Negotiation tips and techniques

Negotiating better shipping rates requires not only a grasp of shipping best practices but also tact and timing.

Strengthen your case with these negotiating tips:

• Timing is key. Initiate discussions when you're not pressed for immediate shipping solutions, such as the holidays.
• Ask for discounts and incentives. Ask about available cost-saving opportunities, like volume discounts or seasonal promotions.
• Consider your options. If your shipping carrier isn’t budging, don’t be afraid to explore alternatives.

Reviewing and finalizing agreements

Secured a tentative deal with your shipping carrier? Great! As you approach the finish line of finalizing your shipping rate agreement, make sure to:

• Review contracts carefully. Examine all terms and conditions diligently to ensure they align with your negotiation outcomes.
• Secure written agreements. Always obtain written confirmation of the rates and terms to avoid future discrepancies.
• Monitor your shipping needs. Regularly evaluate the effectiveness of your current agreement, adjusting as necessary to maintain optimal terms.

Keep in mind that even with favorable shipping agreements, “item not received” situations are inevitable. For an extra layer of protection, consider PayPal Seller Protection for Merchants,³ which can provide protection for the eligible goods you ship out.

Bottom line of how to negotiate good shipping rates

By mastering these negotiation tactics, from preparation to finalizing terms, small business owners may enhance profitability and boost customer satisfaction by passing along any savings.

Want a better way to manage your shipping? Check out PayPal Shipping to unlock shipping rates, automate tracking, and keep info in sync.