Dropshipping is a popular option when you decide on the type of ecommerce store that you want.
Every aspiring entrepreneur must consider the pros and cons of each before taking the plunge.
Let me simplify it: Dropship first and then private label. ).
Dropshipping is a great way to find high-quality products with minimal investment. After you have mastered the basics and are familiar with the workings of dropshipping, you can easily move into private labeling.
Don’t take our word for this! We’ll help you make an informed decision about dropshipping vs. private labels in this article.
What is Dropshipping?
Dropshipping allows you to sell your products without having to touch them or purchase inventory. Dropshipping is selling products from suppliers through your online store, social media or other sales channels.
You make the customer’s purchase from your supplier and then the supplier ships the product(s).
Dropshipping: The pros and cons
Entrepreneurs can reap the following benefits from dropshipping
Dropshipping Advantages
Low investment
Dropshipping is much cheaper . Your initial investment is minimal because you won’t have to buy inventory or create a product line.
A wide range of products
Dropshipping allows you to choose from many products to sell online. Dropshipping allows you to look at the inventory of several dropshipping suppliers, and then choose what you believe would be most popular.
Negligible risks
Dropshippers don’t have to book huge product inventories. You can sell items that aren’t in demand and stop listing them. You can still buy new products and list them in your store.
Dropshipping has its flaws, however.
Dropshipping disadvantages
More competition
Dropshipping is easier than you might think. You will find other entrepreneurs who are using the same business model and selling the same products as you. This can make it hard for you to stand apart.
No product branding
Dropshipping is a nightmare for those who don’t have their branding. Although the product you sell may be branded by the supplier, it isn’t your branding. You cannot control their pricing and rely on them to increase customer retention.
What is Private Labeling?
Private labeling, as the name implies, means that you can label the products you sell with your personal label or brand.
This is different than dropshipping where you sell your suppliers products exactly as they make them and have little control over what your customers receive.
The pros and cons of private labeling
Private labeling has many benefits and may be the best business model for some entrepreneurs.
Private labeling advantages
Branding products
Private labeling lets you create your product brand. The manufacturer will put your company name and logo on the product. They can also apply any branding (colors or fonts, etc.). You have provided packaging guidelines.
Pricing control
You can control the branding of your products and set the price. You also eliminate the possibility of your competitors selling your brand at a lower price than you, so they can’t sell it as cheaply.
Exclusiveness
Private labeling allows you to create your own identity and increase customer loyalty. You can, for example, be the sole source of your products, and customize the shopping experience to increase customer loyalty.
However, private labeling can have its consequences.
Private labeling disadvantages
Higher prices
Your investment budget might not be sufficient to launch a private label company if you are just getting started in ecommerce. Setup costs can run from $1,000 to $1500. Dropshipping, on the other hand, has lower startup costs and is simpler to manage.
More risk
To source products for your private label, you will need to meet minimum order quantity (MOQ) requirements from the manufacturer. If your product brand fails customers, you could end up with an enormous pile of unsold inventory.
Dropshipping vs. Dropshipping vs. Private Label
Dropshipping, in a nutshell is selling branded products from another company.
Private labeling refers to the selling of products under your brand. You may have complete control over product development and manufacturing. You may also be selling pre-made products that feature your branding and logo.
Dropshipping is different from private label because you don’t have to ship and manage your products. Private labeling does.
Private label dropshipping is another option. Private label dropshipping, as you might imagine, is a mix of both.
You can use your branding and manage your inventory.
You’ll discover that there are many definitions of private labeling and private dropshipping. Even the term “white label” will be included in the mix. This can be confusing so keep in mind that there is only one way to interpret it. The fundamentals of the term are the same regardless of who uses it.
Dropshipping vs. Private Label
Dropshipping under your brand may be possible. Your manufacturer might ask you to select between “private label” or “white label” options. However, there is a difference between the labels.
Private label dropshippers have the exclusive right to sell items that you source directly from the manufacturer. You can make modifications to the product’s design, color, and size.
Dropshipping white-label products means that you buy generic goods from manufacturers and then rebrand them to sell as your own merchandise. Although it is cheaper than purchasing private label products, you do not have much control over how the product will be made. Packaging, label, branding are the only things that you can control.
Dropshipping private labels gives you greater control over the products. Although it is more expensive to source private label products, they can bring in large profits if properly marketed.
Clear? Good. Let’s now get to the fun part: How to dropship private-label products.
How to Dropship Private Label
Brainstorm product ideas
Private label dropshipping begins with an idea for a product. Your creativity and market research skills are key here. Consider the latest, trendier stuff you’ve found online or in a store.
One example: I saw an advertisement for bike saddles while browsing my Facebook feed. I am a keen cyclist and clicked through to find out that the online shop featured only comfortable bike saddles.
The product was brilliant, as I know that the saddle can make the difference between a pleasant ride and a painful one. It was also on trend, as there has been a significant increase in demand for bicycles since 2020’s stockout.
To ensure that a product sells well, you can validate it. You can use keyword research to identify the number of people searching for the product online. It can also be useful to analyze specific product parts for potential niches for your private label business.
Here are some facts about bike saddles
Keywords Everywhere was my research tool. As you can see the interest in this part of the bike has increased since the beginning of the year.
Locate a supplier that offers dropshipping under private label
Dropshipping private label is an option. There are many companies that can help you.
Private label dropshipping suppliers source the products you need and create a brand identity through custom branding packages. Packages can include flyers, logo stickers and gift cards.
You can also use product sourcing apps in order to locate suppliers and then contact them to inquire if they dropship private-label products. This strategy will allow you to quickly source items for your niche by sourcing a wide range of products from dropshipping suppliers.
Here are the top private label dropshipping providers and product sourcing apps that you can use to grow your business.
Oberlo
Oberlo, a dropshipping platform, connects you to suppliers that offer all types of products. Contact them to find out if they are able to dropship private label products.
To send a message, go to AliExpress.com and click on the “Connect Now” button in the sidebar.
Do your research once you have found a supplier to dropship private label products. To ensure that the products meet the highest standards, order a sample.
Apliiq
Apliiq, a LA-based private label and print-on-demand supplier that specializes on apparel products, is located in LA. If you are interested in opening an online clothing shop or selling under your own brand, please contact the company.
Apliiq has a wide range of fashionable items, including liner hoodies and patch beanies. The company does all the printing and guarantees high quality retail apparel.
Apliiq ships all orders within one week and sends tracking information directly the customer to let them know about the status of their order.
Dripshipper
The Dripshipper Shopify App is a great tool for starting your own coffee business. You can customize and design the packaging, labels, pricing, logo, and pricing of your product.
Dripshipper, despite being based in the US is committed to shipping fresh coffee around the world. Ground beans are shipped the next day after they’re ordered. Whole beans are sent the day they’re roasted.
Private label services by Dripshipper start at $30 per month
Online Store
Now you can start setting up your online shop.
This is your brand’s face, so choose a store template that appeals to you.
Shopify lets you choose from a variety of free ecommerce themes that you can customize – many of which are minimalist and elegant.
The ecommerce platform also has many other tools that can help you market your private label business. Access to a business name generator, video creator, and a logo maker are all available.
After you have set up your online store, it’s time to add your products to the website. Write compelling product descriptions and use high quality images to make your products more attractive to customers who cannot touch them.
Promote and Launch Your Private Label Brand
It’s now time to present your private label and store to the public.
This is why you need to look at the many ways that you can market your company.
Paid advertising on Facebook or Instagram can be a great way for you to get your name out there if you have the budget.
New stores can benefit from free marketing channels such as SEO and influencer marketing. They can also drive eyeballs to the brand.
Finding the Perfect Ecommerce Model
When you’re starting your own business, there are many decisions to make. There are many things to consider.
By carefully researching and considering all options, you’re doing the right things. Give yourself a pat on the back!
Dropshipping vs. private labels is a matter of personal preference. You should consider your budget, your product of interest, and your knowledge and comfort level in ecommerce.
Dropshipping is an option that’s easier for those just starting out in ecommerce. It has a lower barrier to entry than other ecommerce models and lower startup costs.
You don’t have to stop yourself from starting a private label company, provided you have the passion and budget.
Combining the two business models could be a way to achieve the best of both. Here’s a quick overview of private label dropshipping.
- Brainstorm product ideas
- Dropshipping suppliers for private labels
- Create an online store
- Market and launch your private label brand
No matter what decision you make, funding success is about learning and growing.
What makes private labeling make sense?
Okay, so the first question you need to ask when you are debating which option to choose is “Why?”
There are two main reasons I believe people have. The first reason they believe they will make more with private labeling is that they are more profitable.
There are many ways to drop-ship. Drop shipping basically means that you can fulfill orders. Drop shipping stores typically have a 30% net margin when I use my favorite lead-value optimization techniques.
Let’s say you have a dropship store and sell office desks at $1,000. The goal is to make $300 per sale.
This means that every order you place will result in a $300 net profit after you have paid for shipping and cost of goods (COGs), traffic and other business costs.
How do you make money with private labeling vs. drop shipping?
People often believe they should drop ship rather than private label because they make more money. This line of thinking must be approached from many different angles.
- Imagine that a desk costs $1,000 in your drop shipping shop.
- It is available for purchase by your drop shipping provider at $500
- You can make $300 profit per sale with a 30% net margin
- This still leaves you with $200 to spend on optimizations, advertising, and other related activities.
If you want to manufacture, you would be interested in lowering your advertising costs.
If you private label the same desk, or something similar to it, you can expect to pay $300 instead of $500 from a supplier. You would make $500 per sale if that were the case.
This is the common thought process for private labeling products to sell.
These are the two options available when comparing drop shipping and private labeling
Drop ship, process orders, get traffic and make $300 per month.
Or, you could find the person who actually makes these desks. You could also buy large quantities of desks. These desks could be brought in to a warehouse and stored there. Then you could send directly your customer. Instead of earning $300, you will make $500.
Do not forget to factor in private labeling business expenses
It’s not easy. It’s not easy, but it’s possible.
This is the most important thing you should realize. The $200 extra profit would go to other business expenses rather than dropping shipping identical desks. These are the expenses I am referring to:
- Shipping Container Prices
You will need to ship the goods from wherever they are coming from (China most likely) to the US. You will need to factor in “X Amount Of Dollars Per Unit” when shipping the items in a shipping container.
- Shipping by Ocean and Air
You will have to pay for shipping the container. Each container will be charged an ocean freight fee. Although it is faster to ship by air, it will be more costly.
- Transport from Port to a Fulfillment Centre or Warehouse
After your container arrives at the port where it will be shipped, it must be unpacked and taken off the truck. It must be taken to a fulfillment center or to a warehouse you will need to rent.
- Warehouse Prices
After that, you need to consider the cost of having a place where these items will be stored. If you need to rent a warehouse, that will obviously add up.
- Fulfillment Center Costs
You must pay the employees for their time if you are private labeling products to be shipped to fulfillment centers. They must be paid per hour. They will need to be paid per shipment fee and each package they send. This is how they make their living.
Private labeling does not automatically mean that you will make more money.
The $200 you thought you would make due to the difference in goods cost, is no longer there ….
Private labeling can be done. Trust me, this blog is not meant to convince you that private labeling or manufacturing your own products should be discouraged. I believe there is a time and place, but it’s important to remember a few things.
You’ll also have to handle things like returns, in addition to the other business expenses. This all takes more work.
Let’s now talk about the second reason people might want to do it. This one I can agree with and it is why I believe it makes sense.
Private labeling your items is a second reason to choose drop shipping over private labeling. Private labeling is a great way to make money.
How to make money shipping private labeled products
The first example I gave you is a good start. It’s not a great idea to create your own private labeled product line.
Let’s suppose you sell desks and come up with an entirely new way to do things. Perhaps there’s something unique about the design, style or assembly of your desk. You can be different from your competition.
This scenario is why I recommend that you drop ship all other products the same way as usual. You can still make money with a Shopify shop. You can then introduce your own products, physical products, or brands to your existing store.
This allows you to both make the same amount per sale with your suppliers’ inventory and a little more from your private labeled products.
Even if your brand makes the same profits, you can take your brand and have all your competitors sell it.
Let’s suppose that your store is surrounded by ten other competitors who all sell in the same niche. Your competition may be able to sell your product if they have a private labeled brand.
Last Thoughts
Although there are many of the same foundations, Shopify manufactures products in a completely different way than drop shipping.
Although there may be overlap between the business and private labeling, one product can be its own business. It is basically a spin-off of another product. It’s a different beast dealing with warehousing, importing, and fulfillment centers.
This is not a personal opinion. Before Drop Ship Lifestyle, I was actually private labeling. I have brought in many 40-foot shipping containers from China to all the ports in the United States. This is what I have seen firsthand.
Private labeling is a good option, but I believe there are times and places for it. However, if you’re reading this now and thinking, “Okay, I want eCommerce to get me started, but I’m more interested in drop shipping.” Perhaps I could invest some money in manufacturing …”
