How private label dropshipping works and why you should use it
In order to figure out the best course of action for your online business, a good idea is to understand the different kinds of dropshipping and draw a comparison between them. While the basic concept is the same, dropshipping can be categorized into the following types:
· Private label dropshipping
· White label dropshipping
For newcomers, it is hard to make a clear distinction between the two, and they would opt for the option with lower risk factor. However, experts suggest that private label dropshipping is the best choice, for several reasons.
So let’s discuss the basics, and pros and cons of private labelling, to make an informed decision about why to implement it.
What is private label dropshipping?
Private label dropshipping allows the seller to advertise products with their own, personal branding. They deal with the manufacturers directly to make certain changes to the products or establish a minimum order quantity (MOQ).
While this is a more costly approach than basic dropshipping, it allows the seller to be more in control of their products. Even though the products are bought in bulk, you could make an agreement with a third party to take care of the warehouse safety and shipments.
According to the Private Brand Intelligence Report, over 81% of shoppers buy private label products every time they shop. This goes to show the growing popularity of this business method.
How is it different from white label dropshipping?
Private label dropshipping does have a lot in common with white labelling. For instance, in both cases the items are produced by third party manufacturers and the company can sell them under their own brand name. Yet, private labelling can be distinguished in the following ways:
- Return of investment
- Customizing the product
White label dropshipping only allows the seller to brand another manufacturer’s product as their own. This does not make their products one of a kind, and many other companies could be selling the same item with their own brand name attached to it.
In private labelling, changes can be made to the product according to the sellers’ desires. While this means that initial investments would be high, it also leads to greater returns.
Apart from the factors which sets it apart, private labelling provides many opportunities and advantages as opposed to basic dropshipping, some of which are states below.
Advantages of private labelling
· More revenue growth
With a specific brand name and better product qualities, private label dropshippers can increase their prices more than others. With higher profit margins, their business grows more rapidly and successfully than others. Customers are also more drawn to branded products, so you would find it much easier to make a sale.
· Controlling brand sale and brand value
Setting up a brand of your own is a good way to ensure better relationships between the seller and consumer. It is a more useful approach than selling products which are not your own. Moreover, it is more helpful to know the buyer and where the product is delivered, as it allows removal of third party sellers and platforms more efficiently.
· Customer loyalty
With the growing popularity of e-commerce and dropshipping, more customers prefer locally available products with a reputable brand name. It is difficult to find reliable stores online, but once your store makes a successful sale, buyers would be more attracted to your store and buy more and more products from there.
Disadvantages of private labelling
While there are several pros to this type of dropshipping, there are also some negative aspects to consider before starting it.
· Minimum orders
The ‘minimum order quantity’ (MOQ) stated previously is one of the requirements for any dropshipper to begin their business. Oftentimes this amount is so high, that beginners in e-commerce cannot afford the entire stock and they choose to avoid the risk of buying items beforehand.
· Dead inventory
Sometimes sellers make the wrong choice of inventory to stock up on. They do not conduct any prior research on what kind of items would have higher selling rates, and end up with many products that cannot be sold. Private labelled products are difficult to reimburse and make any investment from later on.
So why implement it?
While there is a high risk factor involved in private labelling, there are also many advantages that make it a suitable option. Every entrepreneurship business begins with some sort of risk and although sellers should be weary of getting into such a field, it is also important to put in effort to make the venture successful.
After weighing out the pros and cons, we can establish that there is a greater chance of your store becoming more popular among customers, and higher profits as opposed to white label or basic dropshipping.