As you figure out which type of ecommerce store you want to build, it’s common to look at dropshipping vs. private label.
After all, there are distinct pros and cons for each that every aspiring entrepreneur should consider before they take the plunge.
To give you an extremely simplified answer: If you’re a total newbie, our recommendation is to dropship first, then private label (or private label dropship!).
We recommend this because dropshipping gives you the opportunity to find winning products for little upfront investment or expertise. Once you learn the ropes and know what works, you can move smoothly into the private label realm.
But don’t just take our word for it! In this article, we’ll flesh out the question of dropshipping vs. private label so you can make the decision for yourself.
Don’t wait for someone else to do it. Hire yourself and start calling the shots.
What Is Dropshipping?
Dropshipping is a business model where you never have to touch your own products or buy inventory before you’re ready to make sales. You’re essentially selling a supplier’s products through your store, social media, or other sales channels.
When a customer makes a purchase from you, you make the purchase from your supplier, then have the supplier ship the product(s) directly to your customer.
Pros and Cons of Dropshipping
Dropshipping offers the following benefits to entrepreneurs.
Relatively speaking, it’s much more affordable to start a dropshipping business. Since you don’t need to purchase any inventory or create a product brand, your initial investment will be quite low.
Variety of products
Dropshipping lets you choose from a wide range of products to sell online. You’re free to check the inventories of multiple dropshipping suppliers and choose what you think would sell best.
As a dropshipper, you don’t need to pre-book a gigantic product stock. If some of your items aren’t selling, you can stop selling them without worrying about leftover inventory. Meanwhile, you’re free to buy and list new products in your store.
However, dropshipping also has a few shortcomings that need to be considered.
As dropshipping is easier to start, expect to find other entrepreneurs using the same business model (and even selling the same products) as you. This can make it difficult for you to stand out.
No product branding
The real killer in dropshipping is the unbranded items. While the products you sell may carry the supplier’s branding, they’re missing your branding. As such, you can’t control their pricing or rely on them to increase customer retention for you.
What Is Private Labeling?
Like the name suggests, private labeling means that the products you’re selling have your own “private” label, or your own personal brand.
This is different from dropshipping, where you’re selling your suppliers products exactly how they produce them, and with little control over the final product your customer receives.
Pros and Cons of Private Labeling
Private labeling brings numerous advantages, and for some entrepreneurs, it may be the perfect business model to implement.
Private labeling advantages
Private labeling allows you to create your own product brand. You ask the manufacturer to put your business name and logo on the product, along with applying any additional branding (colors, fonts, etc.) and packaging guidelines you’ve provided.
Control over pricing
As a result of your control over product branding, you get to dictate the pricing of the items. Plus, you eliminate the risk of competitors undercutting your price, as they won’t be able to sell your brand more cheaply than you do.
With private labeling, you can build your own exclusive identity to increase customer loyalty and recognition. For instance, you can become the only source of your products and take steps to personalize the shopping experience, which can be a great loyalty booster for your store.
That said, there are some consequences involved in running a private label business.
Private labeling disadvantages
If you’re just starting out in ecommerce, your investment budget may not match the capital requirements of launching a private label business. The setup alone costs at least $1,000-$1,500. In contrast, dropshipping has low startup costs and is easier to run and manage.
As a private labeler, you’ll need to meet the MOQ (minimum order quantity) requirements of the manufacturer to source your products. This has its own risks, such as being left with a huge pile of dead (unsold) inventory if your product brand fails to win customers over.
Dropshipping vs. Private Label (vs. Private Label Dropshipping)
In a nutshell, dropshipping is when you’re selling another company’s branded products.
Private labeling is when you’re selling products under your own brand. In some cases, you have control over the product developing and manufacturing process. In other cases, you’re selling pre-made products with your logo and branding.
The key difference between dropshipping vs. private label is that dropshipping doesn’t require you to manage and ship your own products, while private labeling does.
And to add one more possibility to the mix, there’s also private label dropshipping. As you might guess, private label dropshipping is something of a combination of the two.
It gives you the ability to use your own branding while never having to manage your own inventory.
Note: As you keep doing your research on this topic, you’ll find that there are a lot of different definitions for private labeling and private label dropshipping. You’ll even see the term” white label” thrown in the mix. It can get confusing, so remember that this is just one interpretation. Regardless of who uses what term, the fundamentals are the same.
Private Label vs. White Label Dropshipping
When you decide to dropship under your own brand, your manufacturer may ask you to choose between “private label” and “white label.” Both options allow you to put your company branding on the products, but there is a distinction between the two labels.
As a private label dropshipper, you hold the exclusive right to sell the items you source from a manufacturer. This exclusivity allows you to make changes to the design, color, parts, or size of the products.
When dropshipping white label products, you essentially buy generic goods from a manufacturer, then rebrand and sell them as your own merchandise. It’s less expensive than sourcing private label products, but you don’t have a lot of say in how the product is made. The only things you may define are packaging, label, and branding.
So private label dropshipping gives you more control over the products. And it’s costlier to source private label goods, they have the potential to bring in huge profits if marketed correctly.
Clear? Good. Now let’s move onto the fun part: how to dropship private label products.
How to Private Label Dropship
1. Brainstorm product ideas
The first step in private label dropshipping is to come up with a product idea. This is where your creativity and market research prowess come into play. Think about the trendy, newer stuff you recently came across online or in a retail store.
For example, I was browsing through my Facebook feed and saw an ad featuring bike saddles. Being a cycling enthusiast myself, I clicked through and discovered that the online store running that ad was dealing in only “comfortable bike saddles.”
Knowing that saddles can be the difference between an enjoyable ride or a miserable trip, I found the product brilliant. Plus, it was on trend as the demand for bikes has surged significantly after 2020’s stock out of the vehicle.
Of course, you can always validate a product to be sure that it will sell well. Keyword research can help you identify how many people are looking for the product online Also, it can be a good idea to analyze the searches for specific parts of a product, as they could also help you carve out a niche for your private label business.
Here’s some data on bike saddles:
I used Keywords Everywhere for the research. As you can see, interest in this bike part has grown since the start of the year.
Where else can you look for product ideas? Quite a few places:
2. Find a Supplier Offering Private Label Dropshipping
If you’re interested in private label dropshipping, there are specialized companies you can partner with.
These private label dropshipping suppliers source products for you, and help to give them a cohesive brand feel through custom branding packages. These packages can include offerings like logo stickers, flyers, and gift cards.
Additionally, you can use product sourcing apps to find suppliers and contact them to see if they dropship private label products. Since most dropshipping suppliers carry a variety of goods, this strategy can help you quickly source a selection of items for the niche you’re targeting.
Below are some of the best private label dropshipping suppliers and product sourcing apps you can use for your business.
Oberlo is a dropshipping platform that connects you with suppliers carrying all kinds of products. You can contact them to learn whether it’s possible for them to private label dropship.
Go to the supplier store on the AliExpress.com website and click the “Connect Now” button in the sidebar to send a message.
Once you find a supplier for private label dropshipping, do some due diligence. Your best bet is to order a sample to ensure the quality of products is up to the standards.
LA-based Apliiq is a print-on-demand and private label supplier that specializes in apparel products. You can contact the company if you’re planning to open an online clothing store and want to sell under your own brand.
Apliiq’s inventory consists of trendy items like patch beanies, liner hoodies, and pocket tees, so you’ll have plenty of products to choose from. The company executes all the printing itself, and it’s committed to delivering retail quality apparel (people pay more for this) on demand.
Plus, Apliiq ships every order within a week, and it sends tracking information directly to the customer to help them know the status of their package.
If you’re looking specifically to start your own coffee brand, make sure to check out the Dripshipper Shopify app. It lets you build and customize the product’s packaging, labels, pricing, and logo.
Although the company is based in the US, Dripshipper is committed to shipping fresh coffee worldwide. Ground beans ship the next day when they’re ordered, while whole beans go out on the same day they’re roasted.
Dripshipper’s private label services start at $30/month.
3. Create an Online Store
With your product idea and supplier covered, you’re ready to set up your online store.
This will be the face of your private label business, so make sure to choose an appealing store template.
With Shopify, you can pick from and customize free ecommerce themes – most of which have an elegant and minimalist design.
Plus, the ecommerce platform has plenty of other tools to help you brand your private label business. You get access to a logo maker, video creator, business name generator, and many other useful tools.
Once you’ve set up our online store, you can start adding your products to your website. As you do, make sure to write compelling product descriptions and use high-quality images – it’s the best way to make your items more appealing to shoppers who can’t touch them.
4. Launch and Promote Your Private Label Brand
Finally, it’s time to introduce your store and private label brand to the public.
For this purpose, you’ll need to explore the different ways you can market your business.
If you have some spare money, paid advertising on Facebook and Instagram is a great way to get your name out there.
For new stores, free marketing channels like SEO and influencer marketing can be equally powerful in driving eyeballs to their brand.
Finding Your Ideal Ecommerce Model
There are a lot of decisions to make when you’re starting a business. A whole lot.
You’re doing the right thing by carefully researching and considering your choices. (Pat on the back for you!)
When it comes to the question of dropshipping vs. private label, the key considerations are your budget, the type of product you’re interested in selling, and your level of knowledge and comfort in the ecommerce realm.
If you’re just starting out, dropshipping is a “safer” option, as it has a low barrier to entry and low startup costs in comparison to most other ecommerce models.
Then again, no one is stopping you from launching a private label business, especially if you have the budget and passion for it.
You could also combine the two business models to get the best of both worlds. Below is a recap of the steps involved in private label dropshipping;
- Brainstorm product ideas
- Find a private label dropshipping supplier
- Set up an online store
- Launch and market your private label brand
Whatever choice you make, just remember: funding success is all about learning and growing as you go.