Chicken or Egg Problem: Low rates for volume but can't get volume without low rates.

Discussion in 'UPS Discussions' started by UPSforMe, May 30, 2013.

  1. UPSforMe

    UPSforMe New Member

    Hi guys.

    I am a lifelong UPS customer and always use UPS whether shipping or buying online.

    I am set to launch a new ecommerce startup and would like your advice.

    Simply put, the price and quality of service you provide is the most important issue to the success of my business that is outside of my control. If I can't offer a competitive delivery rate for my customers, we won't be successful.

    As a startup, we obviously have no volume, so we don't have a volume rate. Without a volume rate, we can't compete with existing businesses who can offer low shipping rates.

    We are going to be using a fulfillment warehouse that allows the use of our own account number. We have been offered low rates using USPS, FedEx Ground, SmartPost, etc. but I really want UPS to be our exclusive delivery provider from warehouse to door. I consider our driver's to be a part of our company since you are the one's who are actually coming face to face with our customers. Delivery reliability and professionalism matter to me.

    I understand that quality has it's costs and I don't expect something for nothing however as an ecommerce merchant, we are all competing with Amazon on some level. We absolutely must be able to get a discount rate if we're ever going to have a chance to get off the ground. (yes, I know we won't get Amazon's rate ;)

    What is my best course of action? Are there volume buying organizations that I can join to get a rate where I can be competitive?

    What do I need to do to get a competitive shipping rates from UPS to be able to grow into the successful ecommerce business I know we can be?

    Thanks for your time.
     
  2. CaliforniaPaul

    CaliforniaPaul Active Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    You'll need some Amazon type volume.
     
  3. Jackburton

    Jackburton Gone Fish'n

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Shipping in today's competitive market is deffinately a get what you pay for. As much as people on here dog UPS, even on its worst day we still blow our competition out of the water with package visibility, commitment times, pickup hours, technology innovations, and overall service. We aren't the cheapest, but as you said yourself, you're looking for a balance and I think we achive that better than anyone in the market.
     
  4. AMTK54

    AMTK54 New Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    This will give you a bit of a discount to get started:

    https://www.ups.com/mrd/promodiscount?loc=en_US&promoCd=BCDRRLF11

    You can also try dealing with sales and seeing if you can negotiate rates down. I don't know much about what would be involved in that. In this area, like many areas, there are consultants who can help you get more favorable rates, but you may have to shell out cash up front. I'd try dealing with sales and seeing what they will offer you. If you are seeing more competitive rates on the USPS side, feel free to use that to your advantage in securing a contract with UPS.

    Don't be prepared for huge discounts on ground, as there's less profit margin in it than other areas. But you will be able to get a discount.

    If you are looking at USPS, perhaps you are shipping low weight items. UPS is really never going to be competitive with first class mail rates, but you can look at UPS Mail Innovations for the really lightweight stuff (under 1 lb). There are minimum volume requirements there, though. I've heard in the area of 50/pcs per day.
     
  5. TooTechie

    TooTechie Geek in Brown

    When you say fulfillment warehouse it sounds like you want to use a drop shipper selling other company's stuff as your own. Usually the shipping can be arranged by the drop shipper where they may get a little better rates than you can or alternately you can use your own ups shipper account and forward the labels to the company to print out but there is a lot that can go wrong there.

    I used to sell online and used different drop shippers for everything from camcorders to big screen televisions. You'll find that for things under about 8 lbs USPS priority is cheaper then over UPS is cheaper.

    As for rates you can call a sales rep once you're established and try to negotiate a deal. Without volume you're paying standard rates.
     
  6. UPSforMe

    UPSforMe New Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Not at all. Fulfillment centers receive, hold and ship our own inventory. Some pass negotiated rates on to their customers and some keep the rate difference as a profit center.

    Some use USPS and FedEx Home and have decent rates but I prefer to use UPS so I am looking for a way to get the lowest rates we can while we build our business.
     
  7. Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    I want a steak....off the 99 cent value meal!!Let us know if you find it!!
     
  8. AMTK54

    AMTK54 New Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    If FedEx Home Delivery is offering better rates, get a quote from a FedEx sales rep and get a UPS rep to match it.
     
  9. UPSforMe

    UPSforMe New Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Helpful.
     
  10. Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Just like the customer that says.."can I have your cell phone number?"..I don't want to pay a service charge for a pickup!!Nothing in this world is for free.How bad do you want it? and what are you willing to pay??
     
  11. gotbrown

    gotbrown New Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    what he said this is your best answer ans best course of action. Call the sales reps. make them compete for your business.
     
  12. Funfact

    Funfact Well-Known Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Well according to one of the sale guys in my building they have no authority to negotiate shipping prices. Atlanta tells them what prices to tell the customer and it's a take or leave it price unless you are shipping out millions of dollars worth of product you SOL.

    UPS can do this because we offer better service than Fed Ex and the post office on both delivery and pick up services.
     
  13. UPSforMe

    UPSforMe New Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Thanks. Does the location of my distribution warehouse determine who I should call? We're still evaluating fulfillment warehouses and not sure where we'll be shipping from yet.
     
  14. Funfact

    Funfact Well-Known Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    That doesn't work anymore unless your shipping millions of dollars worth of stuff there is no negotiating shipping prices. It a take it or leave it price that the sales person gives out and that comes from Atlanta.
     
  15. TooTechie

    TooTechie Geek in Brown

    The rep is full of sh**. 3 different scheduled pickup accounts have shown me what they pay and it is all different. One account gets their NDA for the price of 3 day select.
     
  16. beentheredonethat

    beentheredonethat Well-Known Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    You are confusing that Atlanta does the pricing and 3 diferent companies pay different rates. The rate is based on our cost to serve. If the customer ships lots of pkgs that are small and heavey to locations that already get UPS deliveries, then our costs is low and we can give that customer better rates then a customer who ships a small amount going to sparsely populated areas where the delivery will be a unique stop. In the latter our costs are higher, so we can't offer the same kind of discount.
     
  17. beentheredonethat

    beentheredonethat Well-Known Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat


    Thanks for your wanting to do business with you, we do appreciate all of our customers. As a small startup, you may find that the fulfillment center (even including their markup) is cheaper then the discount you can get from UPS as you first startup. I would look into what the fulfillment center would charge you to utilize UPS on their rates. (The net rate from them). Shop around, also where are your customers located or for future customers where do you anticipate they will be located? You would do well to get from each fulfillment center you are looking at to get what their transit maps are for UPS and the others. They should all have that since UPS gives the fulfillment centers that information if they ask. Also, tax laws are uncertain (internet sales tax) however, for now there is none excluding the state you have a nexus in. So for West Coast fulfillment centers Nevada is really attractive.


    As another poster indicated, shop around, get rates from competitors and utilize it to lower negotiated rates with UPS.
     
  18. uber

    uber Guest

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Are you trying to ruin JackBurton's sales lead?
     
  19. worldwide

    worldwide Active Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Your first step should be to contact UPS directly to discuss your business, the characteristics of your shipments and the technology tools UPS has available to you. You can visit the following UPS site and get set-up with an account and incentives that are appropriate for a small business.

    https://www.ups.com/mrd/promodiscou...sWebDiscountJan2013_PX_U1_en_us&WT.svl=BnrMsg

    As your business grows, you can work with your sales rep on renegotiating a new agreement that is appropriate for the level of business you are shipping.

    You should also negotiate with the 3rd party warehouses so they compete for your business. Tell them you have an exisiting UPS account with incentives (which you can get from going to the UPS link above) and they need to do better than that in terms of the shiping rates they offer you. Just remember that anytime you get a 3rd party involved, they need to make some money and their cut is taken from the portion that would normally be yours.

    Good luck with your new business. What is the product you will be selling?
     
  20. UPSforMe

    UPSforMe New Member

    Re: Chicken or Egg Problem: Low rates for volume but can't get volume without low rat

    Thanks for the advice. We'll be selling personal care products.