In the e-commerce age, shipping is one of the most challenging aspects. Matching orders with addresses and tracking inventories is a daunting task considering you have other business processes to run. Instead of running a mediocre business and compromising on your reliability in prep and ship, it is easy if you involve a fulfillment company that is specialized in FBA prep and ship services.
The whole idea is outsourcing responsibilities to a third party to gain more time for more important part of business such as sourcing, re-ordering, marketing etc. On the other side you can easily lose money or maybe even entire business because of poor quality and inefficient services if you don’t find the right company to manage the logistic side of your business.
What is FBA prep?
The primary tasks here are packaging items correctly and applying correct labels. The prep stage is crucial because once you make a mistake it’s hard to reverse it so you may deal big consequences. If you or your supplier mislabel one product, not only you will have to remove the entire inventory but it may also hurt your account metrics.
Outsourcing does not mean being careless and leaving all the work to third parties. You should still stay in touch with your prep center, lead and teach them what kind of operation would be more helpful for your business.
So should I outsource?
Outsourcing prep is usually better option for most sellers except for the sellers that sells extremely customized products where they can’t trust third party to handle it.
Ask yourself this question. Will you prefer spending your time on receiving shipments, sorting and prepping the products or focus on how to sell more, reaching out more suppliers, increasing your conversions? You may think that you will save money by doing everything on your own or even renting your own space and hiring employee(s) but here is why you are wrong.
Your Prep Cost:
· Rent: Even if you try to rent a small space, you won’t be renting a small warehouse space anything less than $750 and this number can go significantly high depending on your location. Small spaces usually don’t have loading docks which means whenever you order from a supplier that ships on pallets, you will have to deal with lift gate fees. (around $75-125 per shipment) Don’t forget that you will have to sign a lease to have your own space.
· Employees: Even if you hire 1 employee who can manage this type of work, it will still cost you over $2500 per month.
· Slow Processing Times: Since you don’t have many people working, larger shipments will take extra time to process and you may stay out of stock for a while.
Regardless of your numbers, you will be spending over $3000 per month easily.
· No Rent: Most warehouses allow you to rent a space and the price is usually as low as renting your own space. But you only pay for how much space you use and you don’t have to sign a lease or commit long terms. Of course, if you commit longer terms, you can get additional discounts. No need to worry lift-gate fees for most warehouses.
· Easier to Scale: This is the most important part of outsourcing FBA prep. Warehouses have many employees that can help you scale your business. You can send 500 or 5000 units and they will still prep your items quicker. In other word, you will start selling your items sooner.
· Pay as You Go: Many warehouses offer pay as you go service that means you only hire them when you need their service. You will get charged small amount of prep fees depending on your products and how complicated your work is.
According to Serkan Yildiz, Founder of Shipontime.com, most of his high-volume clients have increased their sales while lowering the cost because they would end up paying a lot more if they rented their space and hired their own employees. He said “Would you prefer sticking labels on 2,000 units or engaging new clients or new suppliers? Its no-brainer that you would prefer increasing your sales rather than preparing your items especially when it costs less than how much it would cost to you.”
Choosing the right FBA Prep services
In most cases, it is wise to engage with FBA Prep services other than doing it by yourself. It saves times and money. The services are widely available but that doesn’t mean you can work with all of them. Suitability of an FBA Prep service is dependent on your business structure and expectations of your customers. Also, your sales volume determines where and who to outsource.
Here are some factors that you should consider;
Business is about balancing expenses and income to make profit. Of course, this is not the only factor but is likely the first question every seller will have in mind when considering outsourcing.
You should not only ask the different price packages but look into details of any hidden charges.
When you are contacting FBA prep services you should ask the following questions:
1- Do you have membership fees or monthly requirements?
2- How much you charge for FNSKU labeling, product inspection, forwarding, polybagging, bundling? (ask what services you need)
3- Confirm what the price includes and excludes? For example, many companies charge receiving separately so sellers see these warehouses advertising $0.15 for labeling but then finding out bunch of hidden fees.
4- Ask if they have volume discounts.
Best way to confirm your pricing and understand their pricing, provide them an example of your shipment (include 3-4 ASINs) with quantities and which prep services you would need and get a quote from them. Make sure they are clear about what’s included or excluded.
Price is important but it should not stop you choosing the right service provider. So make sure to check how long they have been in business, what kind of background the owner(s) have, their online reputation. Especially if your Amazon business is your main income and you have some volume, you should make sure that third party service suits your business model.
Location of the FBA Prep service company is crucial. You should consider choosing an FBA Prep service company near the Fulfillment Center that your shipment will go. It is easy if you categorize your items and send them as specific products to a specific fulfillment center. Proximity to Amazon Fulfillment Center should be top on your priorities when choosing a prep service. You can create sample shipments and use prep centers address as ship from address on seller central to see where your items are going and how much small carrier or LTL carriers will cost.
If you are doing online arbitrage, sales tax can be costly depending on your items. So you may need to check warehouses located in Sales Tax Free states.
If your business model is wholesale or private label, you may need to have east coast and west coast warehouses to lower your shipping cost to these warehouses.
You can use warehouses as a storage facility and forward your boxes or pallets when needed. Many sellers opt to use these services for storage other than sending the inventory to Amazon Fulfillment Center ahead of time because it may be more cost effective and increase your inventory score.
If you are not good to manage your inventory on Amazon, you may end up paying high long-term storage fees which can hurt your business.
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