Private label dropshipping is a term you probably often hear if you’re involved in the eCommerce business.
Lately, the term has become a buzzword in the dropshipping industry, especially with so many people claiming that it’s much better than the standard dropshipping model.
So, here comes the five things you need to know about private label dropshipping.
1. What Is Private Label Dropshipping?
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.
Private label dropshipping refers to products that will be manufactured specifically for you and with your branding.
This type of branded dropshipping is more suitable for tested bestselling products.
That does not mean that you’ll be the one manufacturing the product. Usually, you’ll have a contract with a third-party factory that will manufacture the product based on your specifications of quality, look, branding, packaging, sizing, materials, etc.
2. What’s the Difference Between Private Label Dropshipping and Standard Dropshipping?
The differences between private label dropshipping and generic dropshipping are mainly in the products you sell and the process of sourcing.
As mentioned above, private label dropshipping entails that an entire line of products is manufactured specifically for you. If using a dropshipping agent with a fulfillment center, the order doesn’t have to be shipped to you but directly to your end customers.
On top of that, you can build a brand with private label products, gain customer loyalty, and stick out from your competitors.
With dropshipping generic products, you market several different products, and as soon as someone buys, you place an order to your agent or supplier and pay for it to be sourced and shipped.
Usually, private label dropshipping is focused on one product only, while you can do standard dropshipping with many different niches of products until finding the right one.
The differences between private label dropshipping and generic dropshipping are mainly in the products you sell and the process of sourcing.
As mentioned above, private label dropshipping entails that an entire line of products is manufactured specifically for you. If using a dropshipping agent with a fulfillment center, the order doesn’t have to be shipped to you but directly to your end customers.
On top of that, you can build a brand with private label products, gain customer loyalty, and stick out from your competitors.
With dropshipping generic products, you market several different products, and as soon as someone buys, you place an order to your agent or supplier and pay for it to be sourced and shipped.
Knowing the difference, how do you choose between the two approaches for beginners?
If you’re still haven’t figured out their best-selling product, it’s better to go with standard dropshipping.
However, if you’ve located and reached your target audience already and you’ve found the best selling product for you, go ahead with private label dropshipping.
3. What Are the Advantages of Private Label Dropshipping?
Product branding
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.
Exclusiveness
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.
More returning customers
When selling an unbranded dropshipping product, most customers probably won’t remember your name a few weeks after the purchase. With private labeling, this isn’t the case. A private-labeled product includes your company’s name and logo, which positively affects customer loyalty and word-of-mouth marketing.
4. What Are the Disadvantages of Private Label Dropshipping?
Higher costs
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.
More risk
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.
Minimum order quantity in place
When dropshipping, you will often be able to buy products from your supplier one by one. Since a private-labeled product is far more unique, some suppliers have minimum order quantities to avoid having to produce the products one by one.
More expensive price
In general, private-labeled products are more expensive since they take longer to produce and are produced in smaller batches. Things like a custom logo and packaging take extra time to create and drive up the manufacturing price.
5. How to Turn a Dropshipping Store Into a Private Label Dropshipping Business?
Here comes the simple process.
Product Research
At first, it is better to test which of your products is selling best.
Target Audience
Test different target audiences to see what works best. Having a pre-set target audience is crucial.
Finding a Bestseller
Product testing and audience testing should show you which product is your best-selling one, and the type of buyers you should focus on.
Finding a Manufacturer
Manufacturers such as factories will always give you a better price than private labeling with Alibaba, so try to collaborate directly with factories.
Fulfillment Center/Dropshipping Agent
They can source products directly from factories and agree to a private label service. Additionally, they usually offer a quality inspection and factory audits to ensure the end product turns out precisely as you need it.
Design and Branding
Once you’ve chosen a reliable dropshipping agent, you can go ahead and start designing your logo, brand, colors, etc. Once you create your design, make sure you know what your brand identity is.
Marketing Strategy
Once you’ve settled the above backend technicalities, you can proceed towards defining your marketing strategy.
Order Fulfillment and Shipping
Once you sell a product through your eCommerce store, you have to fulfill the order promptly. You can stock your private label brand product in their warehouse, and they’ll take care of the entire order fulfillment process, including the shipping.
To sum up,, private label dropshipping is a very profitable eCommerce business model when done right.
Generally speaking, the most important thing to not forget when it comes to branded dropshipping products is to develop your branding well, find the right dropshipping agent, and have a tested product that works!
