Selling Online
July 22, 2022

Private Label Dropshipping Guide: Is it a good idea in 2022?

Are you interested in dropshipping but don’t know where to start? Then you might want to try out private label dropshipping.‍Private labels have the potential to cultivate a loyal following and increase sales for your dropshipping business.‍There are companies that specialize in private label dropshipping you can partner with. 

Joana Regulacion
Table of Contents:

Are you interested in dropshipping but don’t know where to start? Then you might want to try out private label dropshipping.

Private labels have the potential to cultivate a loyal following and increase sales for your dropshipping business.

There are companies that specialize in private label dropshipping you can partner with. 

What does private label mean?

Before we dive in, let's learn about this kind of dropshipping online store. 

Private label is the brand name of a retailer appearing on a product. This is a product sold by the retailer but made by another supplier. You might wonder: “what’s the big deal?” Isn’t it just going to be so much work?

Now, despite the fact that just one-fourth of shoppers did so in 2020 and 2021, approximately 8 out of 10 people who were polled said they planned to buy store brands in the future. This means that private label dropshipping is a promising business model.

From 2019 to 2021, worldwide e-commerce sales grew from 15% to 21% of overall retail sales. Currently, it accounts for an estimated 22% of sales. There’s already so much potential for income here, why not kick it up a notch?

Do you want to start dropshipping?

What Is Private Label Dropshipping?

Private Label Dropshipping?

Dropshipping third-party products under your own brand name to your consumers is known as "private label dropshipping," Now because it is still under the dropshipping business, it allows you to avoid having to keep any inventory.

Private label dropshipping can be a terrific method to gain a loyal following and develop a close bond with your customers. In fact, the sales of private label consumer packaged goods in the U.S. in 2019 and 2020 amounted to $158.8 billion.

Consumer packaged goods or CPG is an industry term for products that people use up and replace on a frequent basis. This includes food, cleaning products, cosmetics, and beverages.

Dropshipping under your own brand is a cost-effective way to get started in the ecommerce industry.

Dropshipping private label products, in contrast to other private label enterprises, does not need a big initial investment from you. A third-party dropshipping supplier handles startup costs including product development, warehousing, and order fulfillment.

Dropshipping vs. Private Label

Around 23% of online sales were fulfilled via dropshipping in 2016. This means that dropshipping earned around $85.1 billion. It totally makes sense if you are interested to get into dropshipping.

On the other hand, branded products increase the perceived value of your product and build brand awareness. With that, you can get higher return rates as well as higher sales. Generally speaking, the profit margins for Amazon wholesalers range from 10% to 25%, while private label sellers may experience profit margins of up to 40%.

Private label dropshipping is an ecommerce business model that incorporates private label selling and dropshipping. With it, you are getting the best of both worlds! 

Dropshipping earned around $85.1 billion in 2016. With dropshipping, you can have a profit margin of 10% to 25%. But with a private label you can get 40%!

Is it advantageous to have your own private label? In general, private label products are more profitable to sell than wholesale ones since it is easier to keep expenses low.

When compared to name brands, the manufacturing and distribution costs of store brands might be as much as 40% to 50% lower. From clothing to phone cases, find a reliable supplier and get the product specs to sell the products that fit your brand vision and goals.

Also, customers' preference for private brands can be a benefit to you. As I mentioned earlier, retailers often profit more from selling private labels. Quality private label have the potential to cultivate a loyal following and increase sales for you.

Private Label Dropshipping vs White Label Dropshipping

When you engage in dropshipping, you buy the manufacturer's product then simply sell them under the manufacturer's brand. This is not the case when using white label dropshipping. With white label, you sell the product to customers rebranding it under your company name.

How is this different from private label dropshipping?

Private label and white label are actually almost the same. However, private label products can only be sold by the private label manufacturer to one retailer and cannot be sold by other retailers.

It all boils down to the agreement you have with the manufacturer.

White labeling is an agreement between a retailer and a manufacturer that allows the retailer to rebrand and resell the manufacturer's product using their own distinctive brand and packaging design. 

When do you use the term white label dropshipping

You use the term “white label dropshipping” if the product's qualities, components, ingredients, and manufacturing details are all under the manufacturer's control. In this kind of agreement, the manufacturer provides generic products to retailers, who have no role in customizing those products.

The key differences between the terms private label and white label depends on a seller’s agreement with the manufacturer/supplier.

The choice between white label and  private label depends on your company's objectives.  

Should you start dropshipping with a private label?

As an alternative to regional, national or international brands, private labels can be found in a variety of industries. In 2020, private label brands held a 19.5% market share in the United States.

If you decide to get into private label dropshipping, you get to specify the sort of items you want. You can also add any modifications or variants that differ from the manufacturer's generic product. You and the manufacturer will collaborate to produce the desired product with the desired adjustments in terms of ingredients, composition and packaging amount.

Your store will have complete control over the product's packaging and branding. Sometimes the manufacturer would even offer to provide this service to you.

However, private label dropshipping might not be a good choice for beginners. Mostly because it requires bigger upfront investments and beginners might not have the skills to market it properly yet.

Are you compatible with private label dropshipping? Here’s a checklist for you to find out:

✅You already have a product in your hands

If you have already designed or developed a product yourself, then private label dropshipping won’t be such a problem anymore. This is because you already know what goes into the production of the item.

✅You plan to manufacture your original product in the future

If someday you hope to produce your own unique product with your own design, then private label dropshipping can be a good first step. This can serve as a practice for your bigger plan.

✅White label products in the market don't compare to yours

If you have created a product that is already better than any white label products around, this means you are ready for the next step: private labeling.

✅You have the budget

You are a fit for private label dropshipping if it is possible for you to meet the manufacturer's minimum order quantity with your first startup money.

✅You want to save in operation costs

If you are hoping to keep operational costs low, private label dropshipping can help avoid the need to manufacture your original product.

✅Manufacturing your own product is not possible

If you don't have the capacity or ability to produce your own product then your best chance is dropshipping private label.

If you think white label dropshipping is a much better choice for you, Check out what Dripshipper offers!

If you think selling coffee is the best way for you to make money, Dripshipper is a great choice. All of your US customers' orders will be sent out within 3–5 days. You won't have to do anything to sell good coffee in no time with your brand on the package.

How to dropship private label products

Private label dropshipping products are becoming increasingly popular among small-business owners. The following are a few of the reasons for this:

1. Enhanced Product Ownership

Imagine if your distributor decides to withdraw a product that happens to be popular among your clients. What a bummer!

You can count on many private label manufacturers to keep trendy ingredients in stock for as long as you need them. This is good if you know your target market will respond well to their inclusion in your product line.

If you want to sell a well-known brand on your e-commerce site, you may have to follow strict guidelines. For example, wholesale distributors have significant influence on your product pricing in addition to distribution.

The good thing with private label dropshipping products? Pricing and order quantities can be tailored to your specific target market. There are even private label manufacturers who may process and deliver orders on the same day.

With wholesale you must also abide by laws and restrictions about how much and when you can receive inventory in your area if you use wholesale products.

2. Increased Profits

As mentioned earlier the manufacturing and distribution costs can go as low as 40% to 50%. This is why it is easier to keep prices down. This makes private label dropshipping products more profitable to market than wholesale.

Speaking of marketing, it’s just really easier to market your own brand. People trust you more and you build a better relationship with your customers.

You can even make extra money as a wholesaler. If you want, you can sell your private label dropshipping products to other retailers at a discount. This way you gain brand recognition as a bonus!

3. Exclusivity

Dropshipping makes it possible for every seller to reach clients all over the world. This also means that customers can compare your pricing with those of your competitors. You might end up offering the lowest price just to bag more sales.

Unfortunately, this decreases profit margins to the absolute minimum. 🔻

Many businesses fail because they can't compete on price.

When selling your own label, you won't have to worry about a competitor undercutting your sales by a few pennies. There is no limit on who can sell your product or if you choose to be a wholesale distributor. You can also take necessary steps to remove unauthorized merchants.

4. Building your brand

Private label products can be sold more profitably by building your own brand. Brand identity helps you differentiate yourself from your competitors. 

Large distributors buy hugely successful brands. Some people build their brands for the purpose of eventually selling them.

You will appear more established to your clients if you sell luxury goods under your own brand. In fact, they will remember you more when they see your products in their homes.

Brand loyalty may be built on your own products. Keep your brand expanding by involving your audience and listening to what they have to say. There’s so much you can achieve with a ton of research and of course lots of effort on your part.

You don’t have to sell products from a well-known company to have loyal customers. 

Now, let’s find out what you need to know to be successful with your own private label dropshipping company.

Focus on your passions

The best way to make money is to sell something you already have an interest in. What is it that you love? What are your passions?

Trying to market something you don't know anything about (or care about) is going to be hard. Your heart won’t really be into the product and if you don’t like what you’re selling —who would? As a result, focus on the items that you already own and enjoy using.

Those who love coffee, for example, might already be well-versed on the characteristics of gourmet coffee. You would already know what to look for when creating their own private label coffee products. You already know the aroma and taste of good coffee.

Read customer reviews

Verify the reputation of the manufacturer by reading customer reviews. Choosing a reliable dropshipping manufacturer is critical. This is because they will be responsible for the production, fulfillment, and shipment of your private label products.

You don’t want to lose customers AND your credibility because the other guy decided to ship out crappy products. Remember that your customers who buy from your private label dropshipping store won’t know about them. 

Shortlist a handful of companies and check out customer reviews before making a final decision. What should you check for?

  • working ethics
  • product quality
  • customer support

Investigate as much as you need because you are responsible for correcting any errors suppliers make.

Find out all you need to know about the product

Before you get into private label dropshipping, you should get all the information you need about the product from the seller.

Once you've found a manufacturer, ask about the following:

  • What are the product specifications? (weight, size, shape, material, color)
  • What are the packaging specifications? (packaging materials, logo file formats)
  • How fast is shipping? Where do they ship?
  • What are the product certifications? (FDA-approved)
  • What is their minimum order quantity?
  • What is their preferred payment method?

When you think you’re a match, send them your brand name and colors so they can customize the package.

Test the product

One of the things you need to do before signing with a manufacturer is try out the products. Order a sample or a batch of the goods you'll be private labeling from your supplier. Once you've made your decision, ask yourself the following questions:

  • Does each item in the batch look and function identically?
  • Are there differences in packaging and quality amongst products?
  • Will I buy this myself?

Just like any business, consistent quality control is necessary.

Testing allows you to know more about the product your customers will be getting. Judge the experience from the moment you open the package through the moment you use the product.

Set a target audience and find a niche

A niche dropshipping store only sells to people who are already interested in that particular niche. Because of this, more people buy from these stores and even come back.

Concentrate your efforts on a single product. Find out who your ideal consumers are, what they do with your product, and the reasons they buy it. To keep them interested, try a variety of marketing techniques, such as search engine optimization (SEO) or email marketing.

Do not succumb to the urge to offer a large variety of products. I know, it can be pretty tempting!

However, you need to know if there is even a market for what you want to sell. Researching a product is important. You need to have at least a basic understanding of how customers think and feel.

I think that one of the main reasons a dropshipping business fails is that most dropshippers don't do enough to get ready.

Finally, set up your online store with the best platform for you. You can then add your products with the right profit margin.

Private Label Dropshipping: Is it a good idea?

You can develop your own brand with private label items by using high-end ingredients that come directly from the manufacturer. You can expect large margins, exclusive access, and control over price and distribution.

Private label dropshipping may be a great strategy if you're looking for the most profitable products to sell. If you’re interested in selling your own brand, click the button below. 👇

 

About the author
Joana Regulacion
Joana is an engaging content writer and dynamic virtual assistant. ✍️ She helps business owners and entrepreneurs deliver a clear message to everyone and attract and engage the perfect audience. She is a proud wife, mom, and animal lover.‍ She believes that her love for learning new things is her key to writing engaging content.

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