The huge success of Amazon has spawned the success of other new industries, one of which is having a very quiet, but significant impact on the small town of Roundup, just north of Billings. Roundup has become “a nexus of international e-commerce”, says theverge.com, a website which follows trends in technology and science.
Roundup has become a “prep center” – a growing industry of businesses that specializes in preparing and re-packaging items to meet the requirements to be sold through Amazon’s automated warehouses. Prep centers are in no way connected to Amazon. They work instead in support of another growing industry that came into being with the rise of Amazon – that of some two million third-party sellers or resellers.
Both industries are squeezing themselves into the profit margins of the huge market place that is Amazon, in a practice that is sometimes called arbitrage. Arbitrage takes advantage of price differences and is a free trade manifestation in market situations that are out of balance.
In this case, resellers purchase goods they find at discounted prices, elsewhere, and then re-sell them on Amazon. For example, the going -out -of -business sales of Toys R Us, undoubtedly, provided an opportunity for resellers to purchase discounted Lego sets to be resold on Amazon at regular price. This industry has been additionally spurred by e-commerce platforms that allow the third-party sellers to simply sit at a desk, searching on line, for goods to buy, and then send them to Amazon to resell.
The prep center industry was started in Roundup by Krista Graham, who first became involved with Amazon in selling some books. She became “sucked into the world of Amazon,” and became a third-party seller.
She discovered that each item has to be repackaged, with appropriate boxing, packing materials, bar codes, pricing, etc., to meet Amazon’s requirements. She learned about prep centers, which are specialists in accurately and efficiently preparing items for sale on Amazon. Most prep centers, she discovered, were some distance away from Montana.
Prep centers emerge only in certain states – states that have no sales taxes to defray the margin of profitability. Besides Montana, non- sales –tax states with prep centers include New Hampshire, Oregon, and Delaware.
Prep centers have proliferated to “more than 150 million square feet of warehouses, distribution centers, and sortation depots located mostly in exurban sprawls and industrial zones, out of sight of the millions of customers who receive its goods on their doorstep.”
“Prep centers, automated software, and Amazon’s logistics network let arbitrage globalize,” says theverge.com. “Now someone sitting in Ontario or Manilla or Ljubljana can buy a hundred toasters from a Target warehouse in San Bernardino and send them to a prep center in Roundup and on to Amazon… and finally out to customers.”
This unintentional market manifestation “has helped Amazon both expand its catalog and sap its competitors,” says theverge.com., explaining that it makes it hard for competitors like Nike or Target to compete with Amazon.
They can’t even discount their own prices to lure customers away from Amazon, because resellers just buy their wares and resell them at a markup. “Amazon has made buying stuff so frictionless and habitual, delivery so fast — and for Prime members, free — that many shoppers don’t bother checking prices anywhere else.”
Gresham started her own prep center, in 2015, which she called Selltec. It quickly grew into being a booming business, employing as many as 20 people in Roundup. It grew from her garage, to a former car dealership building on Main Street, and then to a warehouse.
As others caught on to the gig, employees broke away to start their own centers, filling up empty spaces not only in Roundup but to the outskirts of north east Billings. At last count there were at least nine thriving prep centers, and it is estimated that Roundup is the destination each day of some 3,000 to 4,000 Amazon-bound packages.
And so the products come — books, k-y jelly, first-aid kits, soap, inflatable Santas, cans of chili, shoes, hair conditioner, animal toys, strollers, televisions, etc. – from all over the world — the Philippines, Greece, Malaysia, Canada, etc.
Because business is so great there is little sense of competition among the preppers and they readily visit and share ideas and tips with each other. When asked why they would help each other, Linda McAfee, owner of MT Prep ‘n’ Ship Pro, said “…there’s no competition, there’re so many sellers out there.” Their biggest challenge is keeping up with what is an overwhelming flow of products. There have been times when rather than courting new clients, they have shut off clients.
For these women, who come from diverse backgrounds, the phenomenon of prep centers has generated opportunity in a community that normally has little opportunity. They have generated jobs for many others, and flexible jobs at that – jobs that can easily supplement incomes, or facilitate the need to be at home with children, or to serve as caretakers for family members.
The jobs typically pay better than most; occasionally, they can make almost as much as $50 an hour, if being paid on a piecemeal basis. And, besides being flexible, prepping is a more stable income than being a reseller.
The whole business of reselling and prepping is an amazing example of how unexpected and surprising a robust and dynamic market place can be in spawning new ideas and opportunities that might otherwise never happen.