Why Amazon FBA Prep Services Should Be Done in China (not USA)

Michael Michelini wrote about Amazon packaging, and he mentioned the FBA prep services. I discovered a whole industry popped up and is probably growing fast.

What do they do? In Mike’s words:

Basically, a third-party prep service does everything on your behalf, including:

1. Inspect your items to ensure there is no damage, especially if you’re selling “new” products.

2. Carefully remove any stickers from the products, if there are any.

3. Prepare the inventory according to Amazon’s requirements.

4. Pack and provide box content information.

5. Get the package ready for dispatch.

6. Inform you through email when the package was shipped.

7. Track your packages as they are in transit to the designated Amazon fulfilment center. 

And, I was thinking, most (probably 80%+) of the goods that go through these prep centers are made in China! 

Some might not have been packed the right way (e.g. multipacks, bubble wrap, etc.) by the manufacturer. And the mistake might have been detected too late. Yes, I am sure that happens. 

But I’d guess some FBA sellers plan to import the goods from China and get them through one of these prep service centers. Wow. What a waste.

All of this can be done in China, before shipment, for a lower cost.

First, the manufacturer can be requested to follow the proper packing and labeling. And they should be able to keep the proportion of defective products down to a level acceptable on Amazon (and consistent with the product category and positioning).

I wrote about this before in How Amazon FBA Sellers Should Control Quality in China and in Quality Control of Products Shipped Directly to Amazon.

Second, if this is not realistic, you need to take another route. The good news is, there are small Western-owned contract manufacturers located in China that are happy to do this. And it comes with four very important benefits:

1. Cost of labor is lower.
2. The cost of developing and making labeling and packing elements is lower.
3. In case some defective products are found, they can be sent back to the factory for re-work. Or simply for a rebate on the order (reworked products often come with lower quality, anyway, so why take them?).
4. As the factory gets the rejects, they learn about what is acceptable and what is not.

Now, one issue with this setup is, the Chinese supplier probably won’t agree to deliver the goods to another location without having been paid in full. They might agree to extend a rebate for the defective goods they receive, but that only works when it is only 2% of the order quantity… If it is 50%, they are not likely to honor their word.

However, this happens when their customer is an oversea company. They are more prone to extend a credit when their customer is another China-based manufacturer (which won’t disappear overnight). I have seen a number of cases where a China-based, foreign-owned, contract manufacturer pays suppliers 15 or even 30 days after they get the products.

In that situation, if it turns out that 30% of the goods have a serious issue, they can simply all be returned to the supplier, and payment can be done for the good pieces only. This a much better setup than finding out about quality issues in Los Angeles or New York City!