How to Use an Amazon Prep Center to Scale Your Business
When to use a prep center and how to find one.
What is an Amazon prep center?
An Amazon prep center is exactly what it sounds like. It’s a service that receives your inventory shipments (either from wholesale suppliers or retailers), preps them for Amazon FBA, and then sends them into Amazon’s warehouse. Those prep services include any work you’d typically do yourself, such as labeling, bubble wrap, poly bagging, bundling, palletizing, etc.
How does it work?
Each prep center will have its own intake process, but it generally goes as follows:
You ship your inventory directly to the prep center from your supplier or retailer. Usually, the prep center will give you a specific suite # to include in your address field to help quickly identify the shipment as yours when it’s received.
You tell your prep center about the shipment. Most will have an intake form or online system where you’ll enter the details about the items (UPC, model #, quantity, tracking info, ASIN, sales price, and prep services required).
Your prep center receives, inspects, and preps the shipment. They’ll check for damage and then prepare your shipment as requested, including labeling.
Your prep center lists and ships your inventory within your Amazon account. This means you’ll need to provide limited access to your Amazon account. Your prep center can tell you the permissions needed but it’s typically just the ability to access your inventory information and shipments. Never grant permission to payments or account settings.
From there, your prep center will bill you for the work and then you’ll monitor the shipment as you normally would.
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What does it cost?
Per unit fees
You can expect to pay anywhere from $0.50 - $1.50/unit depending on how much volume you’re sending in and the amount of prep needed. You can expect that to run higher for additional prep services like bundling, bubble wrap, oversize items, etc.
I realize I gave a $1 range, which is pretty massive per unit. Truth be told, I’ve seen prices up to $2.50/unit. This is almost always because a prep center may charge more if you send a low volume of units per month. You will almost always get better rates if you can send a higher volume (500+ units). I would target under $1.50 if you’re a low-volume seller.
Note: You may also see prep centers charge more for arbitrage orders vs wholesale/private orders. This is because arbitrage is more of a pain for them to process.
Some prep centers will charge a monthly fee to make sure your account is worth the overhead. They may void the fee if you can send in a certain minimum per month. Prep centers with a monthly fee may also offer lower per-unit prices. Therefore, you can do the math based on the number of units you send in to figure out if it’s worth it.
I personally avoid prep centers with a monthly fee. However, it’s not a terrible option if they offer lower per-unit fees and have an outstanding track record.
Miscellaneous fees and services
Aside from the basics, your prep center may charge for:
Amazon removal order processing
Bundling (bigger bundles cost more)
Supplies (pallets and boxes)
These rates will vary quite a bit from prep center to prep center. I recommend focusing on the per-unit fee unless you have a high volume of a special service, such as bundling.
Note: Storage can be a nice option to have if you run into an issue with Amazon capacity limits or another odd scenario. However, pricing will be much more than you’d pay for a 3PL or even Amazon’s warehouse storage (not fulfillment center). So, only use storage for a short-term scenario (unless they happen to have great pricing).
But do you really need a prep center?
To answer this question, I’m going to assume you’re currently receiving arbitrage or wholesale shipments to your home. In the beginning, you should do all prep work yourself if you can. This will help you learn Amazon’s processes and systems, which is critical. It also helps you make the most of your limited capital.
But eventually, you will reach a breakpoint. Maybe you are starting to receive bigger shipments (pallets) and you can’t receive them at your apartment or neighborhood. Maybe your supplier won’t ship to residential addresses. Or maybe your family is simply fed up with the constant flow of boxes and the growing death pile of inventory.
Either way, you reach a point where you need to decide whether you need to start accepting shipments elsewhere. For most of you, your choices are using a prep center or renting your own warehouse space.