Making an Exclusivity Deal Work for You

Scottsdale, AZ-based DBL Distributing doesn’t need software to help it rate-shop or consolidate packages, says director of operations Jerry Pelosi. That’s because the wholesale distributor of consumer electronics in May signed an agreement with United Parcel Service to give it 100% of its business. In exchange for shipping exclusively with UPS, DBL received discounted rates.

“Through economies of scale, we were able to come to the bargaining table with leverage,” says Pelosi. “We were able to reduce rates in pretty much every package category we had, no matter if it was a 5-lb. package going to California or a 10-lb. package going to New York.”

DBL, which Pelosi says is growing 30%-40% a year, was able to promise UPS a sizable volume of business. In addition to shipping to 30,000 independent retailers, the cataloger fulfills orders for 1,500 other direct marketers. All told, DBL ships approximately 2,500 packages a day.

But Pelosi says smaller companies can nonetheless negotiate favorable exclusive contracts with carriers. Just make sure your deepest discount is where it will help you the most: “The key is knowing and understanding your package characteristics and knowing it better than the carrier does,” Pelosi says. “If the carrier will give you a deep discount on packages over 30 lbs., it’ll do you no good if 50% of your packages are under 5 lbs. It’s important to know what to ask for when you go in there.”

And what if you’re locked into an agreement with a carrier and a better offer comes along? Unless your contract specifies otherwise, Pelosi says, you are free to renegotiate at any time by giving 30-days’ notice. DBL, for instance, was in the middle of a two-year contract with another carrier when it chose to renegotiate to establish UPS as its primary shipping provider.

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