If you are looking to get into dropshipping, then there are a number of different options available depending on how you want to run your eCommerce business. Dropshipping is an eCommerce business model where your online store sells outsourced products.
The main choice is whether you want to go with a private label or a white label approach. This guide will outline the differences, similarities, pros and cons along with everything you need to know when it comes to private label and white label dropshipping.
Private Label Dropshipping
What is Private Label Dropshipping?
Private label dropshipping is the process of selling products that are sourced, warehoused and delivered by a third party but are branded by another company. Private labelling means a dropshipping retailer can outsource production to an expert manufacturer.
Benefits of Private Labelling
There are a number of benefits when it comes to private label dropshipping, and many eCommerce businesses across all industries are already utilising it. Here are just a few benefits to private label dropshipping.
Private labelling allows you to create unique products associated with your brand. Making a label that is instantly recognizable to your customers. Additionally, you can take full control over your branding and how you want to reach your potential customers.
Having unique products through private labelling also increases brand loyalty and customer retention. If you are offering a product that a customer likes, the brand creates a connection between your business and the customer, making your brand credible. If they enjoy your product they will come straight to you over your competition, resulting in repeat purchases.
By using private label dropshipping, you can easily increase your profits and grow your business. This is because private labelling allows you to apply competitive prices to your products. Many retailers can increase their margins by 25-30% in comparison to manufacturer brands.
Because you have more free rein over your prices and margins with private labelling, you can also increase growth as a wholesale retailer. In addition, because you will have exclusive products, it increases their perceived value to customers leading to more customers buying a different exclusive product. Increasing your customer base and increasing revenue.
Cons of Private Labelling
Although there are many benefits to private label dropshipping, There are also some downsides. This looks at the dependency on 3rd party companies and their requirements as well as minimum order requirements.
Since you go through a 3rd party for your production needs, you are dependent on them for everything. As a result, even if your 3rd party is bad and charges a lot, you will still be dependent on them to reach your production goals. As a result, it is crucial to partner with a reputable, dependable, and reliable manufacturer.
Minimum Order Quantity (MOQ)
Every 3rd party private labelling company will have their own minimum order quantity or MOQ. So when producing a new product as a dropshipper you are diving into the deep end with your product as you will not be able to test it properly in the market. Therefore, if your product fails, you could have a backlog of stock you cannot sell, which is less than ideal.
White Label Dropshipping
What is White Label Dropshipping?
White labelling is the process of bulk ordered products on mass, then being made slightly different with the addition of a logo or brand name added to them. White labelling is a popular dropshipping technique of bulk ordering generic products with companies adding value through their branding.
Benefits of White Labelling
Much like private label dropshipping, there are many benefits and advantages of using white label dropshipping. It may depend on what kind of business you are but, you can take full advantage of smaller/no MOQ and the time and money it can save for your business.
Small Minimum Order Requirements
One of the best benefits of white label dropshipping, is that most white label companies have smaller order requirements, so you are not as tied in as a 3rd party dropshipping company. Therefore, you have more freedom in the quantity you want to produce a product in without the development costs as well.
Another advantage to white labelling small minimum order requirements is that it allows you to properly test your products in the market before you decide to mass-produce them. Manufacturers also sell white label products to retailers for wholesale prices so you save money on development and initial set-up costs.
Saves Time and Money
Using white label dropshipping also allows you to massively reduce your spending and spend less time developing your own products. It is a lot easier and cheaper to simply order pre-existing products and add your own labels and branding to them. It also makes the products more profitable to your business if you sell large quantities of them.
As mentioned before, white-label dropshipping requires a smaller initial investment than private label dropshipping as the products have already been produced and designed by the manufacturer.
Cons of White Labelling
Although there are many benefits to white label dropshipping there are a few cons. Cons like your branding limitations, the high competition of white label dropshipping and the products you have to choose from.
Limited Branding Options
With white label dropshipping, the manufacturer has complete control over the products that are available as they package and supply all the white label products. So it is much harder to put a stamp on your brand and your vision for a product through white label dropshipping. Therefore, as a retailer, you don’t have too much choice available to you and will have to settle with what you can get.
Fewer Product Choices and High Competition
Much like the issues you get with the branding, as a retailer using white label dropshipping you also have fewer products that you can select from. So you would not be able to create something new to sell and manufacture, removing the uniqueness from the products. This makes it harder to stand out from other businesses as other retailers will be selling the exact same product as you. It is also a downside for your customers as you are not producing something unique to your business.
Use a eCommerce Fulfilment Specialist
The most important choice when starting a dropshipping business of any form is to ensure you have a reliable, trustworthy partner. That’s where Honest FulPhilment comes in.
Get in touch with our team today if you have any questions.