One beauty of selling on Amazon is that a lot of the process can be outsourced. The top task that can be outsourced is prepping and shipping your product. The best way to do this is with a 3rd party prep and ship company.
In this article, you'll learn:
- How a 3rd party prep and ship company works.
- Whether you should use one.
- How to pick the right prep company for your business.
Let's get into it!
Stop Sweating It
Ironically, the more time you spend doing manual “hard” labor, the slower your business will grow.
This is coming from a guy who loves nothing more than the primal rush of “out sweating” his competitors. I wish you could use brute force to grow your business, but you can't. It will only take you so far before leaving you plateaued and burnt out,out, both physically and mentally.
Although it's necessary to get your hands dirty at the beginning, as you scale, manual labor in an e-commerce business becomes like running on a treadmill and expecting to get somewhere. Especially when you start buying bigger quantities, like scoring huge pallets of unclaimed packages, for example. You just can't do it all yourself.
Let's talk about how you can get past doing this all yourself and the steps to bring professionals on board to handle the process while you focus on higher-level tasks.
What Is an Amazon prep center?
If you don't use one already, I will assume it's because you don't know how awesome they are 🙂
A 3rd party Amazon prep and ship company is not the same as an Amazon fulfillment center. These are companies that work as intermediaries between you and the Amazon fulfillment centers.
Here's a very crudely drawn graphic showing the process 🙂
They handle the tasks that most sellers start by doing themselves.
- Receiving shipments
- Removing stickers and labels
- Inspecting items
- Creating shipments to Amazon FBA
If you buy wholesale, private label or online arbitrage, instead of having the goods shipped to your location, simply have them sent directly to the prep company you signed with.
Prices vary, but relative to the time you save, it is a tremendous investment if you manage it correctly.
You make money when you are sourcing products or making deals with suppliers. Monotonous tasks like prepping take you away from your core work (the stuff that YOU do well because you are experienced and have a particular skill set).
Are You Ready for a Prep Company?
Ask yourself these simple questions:
- How much time do I spend prepping and shipping my product?
- How much money do I estimate I earn when I am sourcing?
- How much would I earn if I traded my time prepping for more sourcing? Time Prepping x $/Hour Sourcing = (Value of Prep Company).
- How much would I spend on a prep company? This will be your estimated units shipped per month x prep fees. The rate maymay vary if you do wholesale or online arbitrage. There are also discounts if you pay quarterly instead of monthly. This is easy to calculate.
- Do your prep costs total less than your potential earnings sourcing? 9 times out of 10, it does.
If Prep Costs < Potential Earnings if Time is Spent Sourcing Instead --> Use Prep Company
If Prep Costs > Potential Earnings if Time is Spent Sourcing Instead –> Don't Use prep Company
How to Leverage Prep Companies to Make More Money
It is simple: calculate the prep costs into your buying parameters.
If an item would make you $10, estimate what it would make you after your prep fees and THEN ask yourself if it is still within your buying threshold.
You may pass up more items than normal after prep fees, but overall, you will make much more. You will now source MORE products because you will spend LESS time prepping and packing.
What if you could source 50% more products at 10% smaller margins total? Good deal to me.
OR what if you could source the same amount of products, but at higher margins and better returns even AFTER you pay your prep fees? That is what more sourcing time will allow you to do. Your time sourcing is always more valuable than your time prepping. You can take that to the bank.
When you crunch the numbers, it really is a no brainer.
How to Pick a Prep Company
Here are some important steps and questions to ask when choosing a prep-center to work with.
- Where is the prep company located? Logistics matter. If you do a lot of private labeling and Chinese imports, working with a west coast company may be your best bet.
- Are they in a tax free state? Many of the most popular prep companies are in tax free states. This is awesome because you can often pay your prep costs with the money you'd save on sales tax (depending on where you live). Currently, there are only 5 states without sales tax. They are Alaska, Delaware, Montana, New Hampshire and Oregon.
- What is their average turnaround time? You should aim for a company that works at around 3 business days or less during regular operating times (Q4 will always be slower).
- What are their hours and days of operation? These vary. Some companies work through the weekend while some don't.
- What is their pricing? Do they offer bulk discounts? Most companies offer tiered pricing.
- What are other people saying about them? It is not possible for one person to know about every single prep company.
- How long will they store your items? You may want to accumulate more of an item before creating a shipment. Make sure that this is ok with the prep company.
- Do the process bundles? Most prep centers do, but the fees are higher.
- Here is a very thorough list of prep companies from CleartheShelf.com.
- Here is a another list full of unadulterated reviews and feedback from the savages at Reddit.
- Here are 7 steps to help in your prep company selection process.
- Here is what Amazon sellers are saying on the seller central forum.