Dropshipping Vs Private Label: Which Is Right For Your Business?

Are you new to running an online store? If so, you might be wondering about dropshipping vs private label selling. Both options allow you to sell awesome products without having to store and ship items yourself. It's a great option for anyone looking to start their own online store for the first time.

Keep reading to find out more about a private label vs dropshipping model, along with the pros and cons for each.

What is dropshipping?

Dropshipping is a method of selling pre made products online without having to worry about any of the shipping process. You'll sell supplier's products via your website, but the supplier will still be in charge of all the packing, storing, and shipping. All you have to do is create the online store and market the products.

Currently, about 27% of online stores use dropshipping. It's expected to grow drastically in the next few years, so it's a popular business model for new online store owners.

However, like with any business model, there are pros and cons to dropshipping. Consider all the benefits and drawbacks to decide if it's the right option for you.

Benefits of dropshipping

• Low initial investment
• Wide range of products to choose from
• Someone else handles storing, shipping, and packaging
• You'll have more time to focus on other aspects of the business

Downsides of dropshipping

• You won't have control over product and shipping quality
• Lots of competition
• Offering unique products is difficult

What is private labeling?

Private label refers to when you sell existing products with your branded packaging. In some cases, those could be products you're storing and shipping yourself while others options could involve dropshipping. Private label products can be beneficial because they stand out from similar products and make your brand identity clear.

Even though private label dropship products are pre made, you can add whatever you want on a white label. For example, if you wanted to start a coffee dropshipping business, you could use a private label brand to add your own logo onto the coffee products. That way, you're selling quality coffee with your unique style.

Private labeling becomes more profitable each year. In 2022, 24.7% of total unit sales used private labeling. In 2023, private label items increased to 25.5%.

Selling private label products on your own can be tricky if you're new to running an online store. So, many people choose private label dropshipping instead, which is the best of both worlds.

What is private label dropshipping?

Private label can be another form of dropshipping, but it offers more customization for your products. With private label dropshipping, someone else is handling the manufacturing process, along with storing, packing, and shipping.

That part is the same as regular dropshipping. The difference is that you can design your own labels for the products, which helps your products stand out and is great for strong brand identity.

Overall, private label dropshipping offers a lot more uniqueness, but there are other aspects to consider. It's up to you to determine if the pros outweigh the cons.

Benefits of private labeling

• Offers control over product labels
• Someone else still handles storing, shipping, and packaging
• You'll have lots of time to focus on other business aspects
• Your products can stand out more
• Less competition

Downsides of private labeling

• Higher costs
• Not all product types have private label dropshipping
• You may need to meet a minimum order quantity for your supplier

Main differences for dropshipping vs private labeling

Even though white label shipping can be a form of dropshipping, the two options are still very different. Private labeling can be a huge advantage for some businesses, but it could add new concerns for others.

When it comes to private label vs dropshipping, you'll need to decide which will work best for your business.

Storage and shipping

Dropshipping is popular because it takes the responsibility of storing and shipping out of your hands. That makes it easier for new business owners to focus on other areas of their brand. You won't get to ensure quality control, but you also won't have to worry about storing inventory yourself.

Private label businesses can go either way. Some require you to store your private label products yourself and ship them out. There are also plenty of private label dropshipping options that allow you to put your branding on products without handling the shipping part.

So, a private label business offers more flexibility than regular dropshipping. With dropshipping, someone always does the packing and shipping for you. With white label, you can choose which business model is better for you.

Upfront investment

Not every new business can afford a large upfront investment. With regular dropshipping, the initial investment is affordable because you won't need to buy a stock of the product in advance. The company will have the products available and ship them out as orders come in.

Private labeling can have a higher upfront investment. If you store the products yourself, you need to buy a bulk order to have lots of products ready for when sales come in. If you use private label dropshipping, you won't need to have your own stock, but it may cost more for the company to have products available with your own branding.

With white label products, some companies might print on demand, meaning they only print your label after a purchase. Others may have them pre-printed, which would cost more upfront. Ask a company about their business models and shipping/storing methods before working with them.

Even if you use a dropshipping company with little to no investments, there are other upfront costs to consider when starting your business. You may need to pay for a website domain, a Shopify plan, or market research tools, so consider those costs too.

Product options

With standard dropshipping, you can sell almost any product type you want if you can find a dropshipping supplier to work with. As long as there isn't anything copyrighted involved, you should have no problem finding and selling the products of your choice.

However, using white label products limits your options slightly. With private labeling, you can only choose from products that you can easily add your own logo to. If you have a specific product in mind, you'll need to find a dropshipping supplier that offers a white label product of that type.

Some private label product ideas include clothing, coffee, skincare, supplements, electronics, and pet care.

Branding and customizability

The biggest difference between dropshipping and private label dropshipping is branding. A private label dropshipping supplier offers a lot more customization than standard dropshipping. With private labeling, you'll have more control over the look of your products.

Customizability is important because it helps you build a successful brand reputation. If customers buy your products and love them, they'll be more likely to support you again if they recognize your logo and branding.

With regular dropshipping, that's not possible, but with private label products, every product will be linked to your brand.

Profit margins

Profit margins are often higher with private label dropshipping. With regular dropshipping, you'll likely be selling generic products. Yet, with private labeling, your products will have a unique look. Most customers will pay more for products from trusted brands.

Your earnings also depend on the type of products you're selling. Private label dropshipping could be less profitable than regular dropshipping if you're choosing products that have too much competition or aren't trending.

For example, dropshipping coffee can be profitable, especially if you use private labeling. Coffee is in demand, but it doesn't have too much competition. Having unique branding on it and following ideal marketing strategies can help you ensure your dropshipping coffee business works well.

Customer experience

When you personalize your products with white label dropshipping, it could increase the number of positive customer experiences.

Some private label dropshipping suppliers allow you to send custom notes with your products. So, you could add a messages thanking your customers for their purchase, along with information on how to follow the brand or reach out with questions.

Adding a unique touch to a brand is a great way to build customer loyalty. So, a private label business can help you achieve a better relationship with customers.

Other ways to sell products without inventory management

Dropshipping and white label dropshipping aren't the only ways for new business owners to run online stores without inventory. Below are a few more options you may want to consider.

Print on demand

Print on demand is a service that only prints products when orders come in. This typically applies to products that you can print a design on, such as clothing, tote bags, and mugs. Authors often sell books through print on demand services too.

This option is great because no one has to store customized inventory. The designs are only printed onto the products before they're shipped out. While it's a convenient choice, it only works for certain product types.

Sell digital products

If you have products you can sell digitally, they're no need for anyone to hold inventory. These items could include music, ebooks, online courses, and photos. Of course, you will need to dedicate some time upfront to creating these items, but once you're ready to sell something, it's all done virtually.

By only selling digital products, you can save time and money on storing, packing, and shipping. Then, you'll have extra time to focus on other areas of your business.

Fulfillment by Amazon (FBA)

If you're selling products online via Amazon, you can use FBA as a way to store and ship your products through Amazon fulfillment centers. The manufacturer can ship the products to Amazon so everything will be shipped out with Amazon packaging to make the brand identity feel more reliable.

Step-by-step: how to start a dropshipping business

Are you leaning toward a dropshipping business but don't know how to get started? Here are a few tips to give you an idea of what the process is like.

1. Choose your product niche

First, before you set up your business, you need to choose what you want to sell. Choose a niche that you're passionate and knowledgeable about for the best results. Ideally, the products you choose should also have a consumer demand without having too much competition.

With any business, you need to think about the logistics and product research. In simpler terms, consider what products are good to sell and how you'll sell them.

Once you have an idea of what you'll sell, you can look at similar businesses for inspiration. Check out reviews of competitors' products to see what customers liked and disliked, implementing that information into your own brand.

2. Find a dropshipping supplier

Next, you'll need to find a dropshipping supplier that can store, pack, and ship these products for you. You should do some research to find out which suppliers have the best reviews and quality control.

If you sell through Shopify, the Shopify app store has lots of dropshipping apps to help you find suppliers to connect with. Check to see if any of those suppliers offer the products you want to focus on.

3. Set up your product pages

Once you know what supplier you'll be working with, you can set up product pages using images of the products. Since dropshipping often includes generic products with lots of competition, you'll need to write compelling product descriptions to stand out as much as possible.

In your product description, highlight what sets your products apart from similar products. It could be a unique feature that not all products of that type have or it could be that your product comes in a wider variety of colors and designs.

While writing, make sure to include keywords that people might search for when looking for products of that type.

4. Market your dropshipping business

Just because your online business exists doesn't mean you'll automatically get sales. You'll need to market your dropshipping store to make sure your products reach people. Figure out your target audience to better cater advertising to their interests.

Paid ads are a common way to get the word out for your new business. Posting on social media, collaborating with influencers, and conducting email marketing are other ways you can attract some interest toward your items.

Step-by-step: how to start a private label dropshipping business

Does private label dropshipping seem like more your style? Here are some steps for what to expect when dropshipping white label products.

1. Determine your products and brand identity

Like with dropshipping, product ideas come first for private labeling. Since private label dropshipping offers more product personalization, it's important to choose products that you're passionate about selling, preferably ones you have experience with.

In addition to choosing your products, you also need to think about what your branding will look like. With private labeling, each product can have your brand's name and logo on it, making it easier for people to recognize your company branding.

So, think about what colors and designs you want to use for your private labels.

2. Decide if you want to store products yourself or use dropshipping

Private labeling doesn't always have to involve dropshipping. Some people prefer to get private label goods shipped to their home or business so they can store, pack, and ship the products themselves. While this gives you more responsibilities, it lets you oversee quality control.

If you're a new private label seller, you might prefer to focus on dropshipping instead. That way, you can run a new private label brand without having to handle all aspects of the business at once.

Neither option is right or wrong. It just depends on how you want your new business to operate.

3. Find a manufacturer for white label dropshipping

Regardless of which route you take, you'll need a private label supplier. A private label supplier can be harder to find than a regular dropshipping option because there's more work involved. Not only are they providing products for your ecommerce store, but they're also making personalized labels.

When deciding which private label dropshipper to work with, ask lots of questions. Find out what packaging they use, what their manufacturing process is like, how long it takes them to process and ship orders, and if they have a minimum order quantity. These questions can help you decide if the company's process fits your needs.

Of course, your white label supplier will need to have the products you're looking for. For example, if you want to sell pet care products, Supliful is a great choice because we have white label products like paw balm, waterless shampoo, and ear cleaner wipes.

4. Set up your product pages

Before you sell your own products, you'll need to set up your white labeling store. Include appealing images and descriptions of each product to help them stand out from the competition.

For photos, you can get images of each private label product from the manufacturer or you can order sample products and do a photoshoot from your home.

When creating product pages, make sure your brand's look and voice are consistent across each page. Whenever possible, try to add emotion to your descriptions to make people drawn to your products while trusting your brand.

Private labeling allows you to make your products unique from the competition. So, use that to your advantage. Even though just the label is different, you can use that customization to make your products look more appealing.

5. Market your private label brand

Private label dropshipping requires marketing just like every other ecommerce store. Use paid advertisements, social media posts, email marketing, and other methods to get the word out.

As sales come in, pay attention to reviews and feedback. If there are certain aspects of your brand that people love, lean into that. If there are things that they wish were different, make changes to your site if possible.

While it can feel like a hassle at times, a good private label business is always changing and growing to match trends and demands.

Private label vs dropshipping: which one should you choose?

White label dropshipping and regular dropshipping are both excellent options for people who want to run a store without handling inventory. Both have their pros and cons, so which is best for you depends on your specific needs.

If you want to get your business up and running right away and don't care about personalized branding, traditional dropshipping is better for you. If you want a similar business model but with your own branding on products, private label dropshipping is the way to go. Yet, if you don't mind extra work, you could consider a private label business that requires you to store and ship products from your home.

No matter what you choose for dropshipping vs private label, every option can lead to success with enough dedication. Think about what products you want to sell and how you want to sell them. Knowing those things can help you determine your storage and shipping method.

Once you have all the initial details figured out, you'll be ready to move forward with your new online store! Supplements, skincare, and coffee are just a few product ideas to explore, but consider other options too.