Carriers and Rates Negotiation

There are many strange things done in shipping, but none more so than settling on a rate before discussing service levels offered to the customer, perhaps one of the most absurd practises that would not happen in any other industry.

Imagine as you walk through the door of a car dealership a sales man says, ‘We will sell you a car for $8,000’. The customer agrees to this and now the salesman says, ‘Which car do you want’?

At this point the salesman doesn’t even know what the customer is looking for. It could be a basic four-cylinder car to get from A to B, a family vehicle that will seat 6 or even a luxury automobile. This is essentially what shipping line sales people do when booking freight. But unfortunately this opportunity would never come up when buying a car.

Naturally, the salesman would ask what kind of car the customer is looking for. Then the salesman can give the customer a range of choices, and finally negotiate for a price that is agreed to by both the dealer and customer.

But this is now what happens in the shipping world. Shippers find it ridiculous. One major US importer told us that he is often astonished at the prices he is offered, even before the carrier has discussed service terms.

‘They’ll quote me a figure and then they will tell you what the service level is. And you will say: Hey you know what, I can live with that.’

There is no doubt as to why the customer can live with that, he knows he’s got a good deal, walks away with a low price that didn’t even require bargaining. The carrier meanwhile has more than likely sacrificed a portion of its profit by not negotiating a price with the customer, or finding out about his service requirements.

Reference: Shipping Gazette Newsletter – Daily shipping news, 24 Jan 2014, Carriers baffle customers by negotiating rates before discussing service levels.

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