What is an Amazon Prep Center and Why Should I Use One?
What is an Amazon Prep Center?
As you begin to scale your Amazon business, it may be hard to stay on top of prepping your products to stay in line with Amazon FBA policies for inbound shipments. This is where a prep center comes into play. However, using a prep center is not always used because of a scaling issue but sometimes has to do with state taxes!
There are two main reasons people use a prep center. The first reason is so sellers can scale easier because they can't keep up with prepping all the items they are buying themselves. The second reason is to take advantage of no sales tax. Many prep centers are located in states that don't have sales tax. So if you live in a state with any sales tax, then this will cut into your margins especially as you buy more. So shipping to a prep center saves you a ton of money even though you are paying these centers money to label and/or bag the products!
How to choose a prep center?
Depending on what you are looking to do as far as your selling strategy will determine what kind of prep center you will want to use. The most basic and common strategies when selling on Amazon are as follows:
• Online arbitrage
• Retail arbitrage
• Private Label
These four basic selling strategies will determine what prep center you will want to use because not every center will cater to how you are selling. The best way to know if they will cater to your selling strategy is simply by calling and asking questions that will determine if they can fulfill certain prep styles. Some basic question you can ask is if they have a loading dock. Can they handle pallets? Do they offer discounts for bulk items? How many units can they process every day or week for you? These are some of the most basic questions you can ask because if they have a loading dock and can handle pallets then you will save on freight. If you are wholesaling and pushing a ton of units through then you will want to opt into getting a discount for processing a high volume of units.
You have to remember that prep centers are going to be charging you per unit they prep so the more you have at a time then the bigger of a discount you will receive!
When you are choosing a location, it's important to think about where the majority of the items you are sourcing are coming from. For example, if you are sourcing a lot of products from our of country such as China, India, or Mexico, then you will want to opt for a prep center near a city with a port. This will make it cheaper on freight but also allow your item to get to the prep center and process to Amazon faster compared to a company located far away from where your items are coming in from.
Turn Around time:
Depending on how busy the place you choose will determine how quickly they are able to process and ship your items out to an Amazon fulfillment center (FC). When you are searching for prep centers and you end up calling some of the interest then these are the questions you will want to ask them so you know how long the items will be sitting for after you had paid them. Some companies will have same-day services while others may have a backlog that will take time to get to your items.
As discussed in the beginning of our passage we talked about some of the reasons why a seller would opt into using a prep center. One of the points we made was about saving on sales tax. States such as Delaware, Oregon, Montana, and New Hampshire do not have sales tax. So if you live in a state that does then you could be saving a huge amount of money for sellers who practice online arbitrage. Even though they are paying these prep centers a fee for prepping each unit they send to them, they are still going to be saving a ton of money because they won't be paying taxes.
However, it may sound great to ship to companies in sales tax-free states but you have to be careful to make sure you are not paying more prepping them than you would have if you had just paid the sales tax! If you are someone who doesn't have to worry about sales tax such as wholesalers or private label sellers then it might be to your advantage to check prep centers within states with sales tax as they will oftentimes be much cheaper!
Did you know Amazon offers its own prep service?
Amazon offers their own prep service and it may seem like a no-brainer to use them but there are a few reasons why you don't want to use Amazon to prep your items! Before we get into it, please take a second to view how Amazon pricing works when prepping your items!
Above is pricing that was pulled directly from HERE!
Why would you not want to use Amazon Prep Center services?
There are many reasons why you would not want to use Amazon to prep your items. The first reason is if an item changes their UPC or the UPC that is on the Amazon listing is different then Amazon will not know how to label your products. In order to process your products correctly, they need to match the information on the listing exactly. Not ever seller who makes an Amazon listing does this which could result in your products being mislabeled or rejected!
Another reason why you would not want to use Amazon to prep your items is that often times you will come across items that need to be sold as a set so they need to be packed together or you will get items that come in a set and Amazon breaks them apart. If this happens then its only your fault and not Amazon and they still will charge you for this. There is a lot of room for error and going to Amazon and complaining will not do anything.
Using a third-party prep center?
Unlike Amazon, These prep centers want to ensure they give you the best experience possible so that you continue to do business with them. If they are constantly making mistakes that are costing you money or marks on your Amazon account then they know that you will find someone else to do business with. So Amazon prep centers have a lot of the rules down to what they should be doing and what they should not be doing! If they mess up and lose you as a customer then it cost them money but if Amazon messes up and you don't go back to them then they do not care!