Lesson 4 of 4
Prep Centres
What a prep centre does, what it charges, and how using one takes packing and shipping out of your week.
A prep centre takes the physical side of the business away entirely. This lesson covers what they do, what they charge, and the questions to ask before signing up, because the differences between them are in the details rather than the headline price.
What a prep centre does
- Receives your stock directly from online retailers or wholesalers.
- Checks it in.
- Preps it: bubble wrapping, poly bagging, bundling, labelling.
- Packs it into boxes or onto pallets.
- Ships it to Amazon.
You never see the goods. Stock goes from the retailer to the prep centre to Amazon, and your work becomes sourcing and buying.
That is the real point. Prepping and shipping is the part of the business that scales worst: it grows in exact proportion to your volume, it requires space in your home, and it is entirely mechanical. Removing it means the business can be run from anywhere and can grow without you finding somewhere to put boxes.
What it costs
Indicative figures from the lesson, in dollars or pounds:
- Per item: 0.50 to 1.00. Higher for items needing special preparation.
- Per box: 2 to 3.
- Possibly a monthly subscription on top, depending on the provider.
Prices change, so confirm current rates. What matters is building the cost into your buying criteria: at around 1 per unit, a prep centre takes a real bite out of a thin margin, and it may push your minimum acceptable profit up.
The questions to ask before committing
Cost, in full
Ask for every charge, not the headline rate. Is there a subscription? What is charged separately? Bubble wrapping, poly bagging, bundling and labelling are often priced individually, and a quoted 0.50 per unit can become considerably more on real stock.
Turnaround
How long between stock arriving and it being sent on to Amazon? This is working capital sitting still. A centre that takes a week longer than another is a week of delay on every purchase you make.
What is required from you
Processes differ. Some want a spreadsheet per shipment, some have their own software. Many operate tiers where cheaper plans require more work from you and premium plans do everything.
Understand exactly what you have to do per order. A cheap plan that requires an hour of your admin per shipment is not cheap.
Damaged, wrong and missing stock
Ask this one specifically, because it happens constantly. Retailers send the wrong item, send fewer than ordered, or send something broken. When you are receiving stock yourself you simply see it. When a prep centre receives it, you depend entirely on them to notice and tell you.
So: do they check incoming shipments against your order? How do they report discrepancies? What happens to a damaged item? Who deals with the retailer? A centre that just forwards whatever arrives will pass your problems straight to Amazon.
Returns and removals
Can they receive Amazon returns and removal orders on your behalf? This matters more than it appears. The unfulfillable inventory lesson recommended having returns sent back to you so you can inspect and relist them. If you have no premises, the prep centre is the address that makes that possible, and they need to be willing to do the inspecting.
Pallets
If you are moving into wholesale, ask whether they handle pallets. Smaller prep centres often cannot, and wholesale stock frequently arrives that way.
Retailer restrictions
A practical one specific to online arbitrage. Some retailers block known prep centre addresses. Prep centres receive orders from hundreds of sellers, which looks like reselling activity, and retailers cancel those orders.
Ask directly whether there are retailers they have problems with. If a centre is blocked by shops you buy from regularly, it is the wrong centre for you regardless of price.
Location
Mainly a United States concern, where the state a prep centre sits in can affect the sales tax you pay. Worth checking with an accountant.
How to find one
Ask in Amazon seller communities, or search online. Recommendations from sellers with similar volume are more useful than a directory listing, because the questions above get answered honestly.
The step after a prep centre
One idea worth knowing about early. Once you are large enough that prep fees are a significant monthly cost, renting a warehouse and hiring staff starts to compare favourably.
And there is a further step that many existing prep centres took themselves: once you have the space and the staff, offer prep services to other sellers. Their fees cover the warehouse and the wages, and your own stock is prepped alongside theirs. A cost centre becomes a business.
That is a long way from a first shipment, and it is the natural end of the path this module describes: stop doing the work, then stop paying for the work, then be paid for the work.