When learning how to start an eCommerce business, it’s easy to feel overwhelmed by the sheer amount of information out there. Getting your eCommerce business license, finding products to sell online, making a website, and marketing your goods is daunting.
Thankfully, your eCommerce venture doesn’t need to be entirely complex or expensive. If you want to invest minimal upfront time and money, private label dropshipping is the way to go.
Let’s look at what private label dropshipping is and how to get started.
What Is Private Label Dropshipping?
Private label dropshipping is shipping third-party products, relabeled as your own, directly to customers, without storing any inventory yourself. It affords maximum flexibility in what you sell to your customers, how you ship products to them, and how the products are repackaged.
Private label dropshipping is a direct to consumer business model, meaning you can sell goods to customers without the usual middlemen involved. It’s also a business that minimizes the amount of work you need to do. Many dropshipping services provide fast shipping and handling, so you don’t need to rely on third-party logistics (see what is 3PL).
If you don’t have a lot of capital for starting an eCommerce business, private label dropshipping is a great option to consider. Your inventory carrying cost is zero because you never need to stock products on shelves.
You should also consider the differences between white label vs private label. They sound similar but have important differences. Private label is a third party exclusively selling one supplier’s products. White label is a generic product being sold via multiple retail locations under different brands.
Both strategies have upsides, but that doesn’t mean you need to employ both. If you want to launch an eCommerce store quickly, white label may be for you. If you’d rather develop a brand around specific products, private label may be a better fit.
The normal cost of goods sold (COGS) is also eliminated, because you aren’t responsible for manufacturing, production, or warehouse costs. You will, however, still have other costs, like marketing, staff, and operational expenses. It becomes much easier to determine the right profit margin (see markup vs margin) when you have fewer costs to calculate.
Dropshipping vs. Private Label
Given that both private labeling and dropshipping are powerful strategies, you may be wondering what the differences between them are.
Here are the core characteristics of dropshipping:
- Shipping products only after they’re sold
- Selling items without storing them as inventory
- Working with a reliable dropshipping supplier
- Shipping goods remotely, quickly, and cost-effectively
- Outsourcing warehouse management process flow
Here are the main characteristics of private labeling:
- Selling products you didn’t design or manufacture
- Working with a supplier to sell their goods exclusively to your audience
- Simple ways to profit from existing products
- Going straight into marketing and sales rather than research and development
- Selling through an online marketplace, if desired
As you can see, you can use either approach you need or combine them for increased flexibility. The solutions that match your business depend on your goals, funds, marketing, and customer needs. You can also compare the advantages of both to see what will benefit your business right now.
These are the key benefits of dropshipping:
- Zero need for inventory management
- Fast order fulfillment process
- Minimal reliance on pipeline inventory
- Greater range of eCommerce shipping options
- Flexibility in how profit is made
Here are the top benefits of private labeling:
- Wide range of products to sell
- Exclusivity in branding a product as your own
- Opportunities for profit grow with your product line
- Less reliance on wholesale items
After researching your options, choose one method and experiment with it. Track your eCommerce KPIs so you can measure the impact of your changes.
If sales and reviews move in a positive direction, you know to make the changes permanent. If sales don’t seem to be picking up or business becomes more complicated, it may not be the best fit for your venture at the moment. Business success relies on flexible, thoughtful tests, so above all remember you’re in a long-term game.
Dropshipping with Private Label Products
When it’s time to combine the power of dropshipping and private label products, great things can happen. Thanks to eCommerce software and constant market innovation, you can create a thriving business from your office or bedroom.
Here are best practices to employ when using the 21st century magic of private label dropshipping:
- Design your digital catalog early. A benefit of spending no time on product development is that you have more time for other tasks. That doesn’t mean your marketing should suffer, though. Make sure your customers can quickly and easily find the products you sell from day one.
- Make sure your supplier is reliable. The last thing you want as a company that doesn’t manufacture your own products is your supply chain drying up or long lead time. This can cause a low fill rate, meaning you’re unable to fulfill all customer orders at any given time. Research your partners before you agree to work with one, especially for exclusive agreements.
- Develop a robust eCommerce marketing strategy. Since dropshipping is so doable, thousands of people are making money with it. In order to stand out, you need a powerful brand presence on one of the best dropshipping websites. Highlighting your products’ strongest features with quality visuals and great copywriting is a key to customer retention.
- Consider different eCommerce shipping companies. Many dropshipping services partner with shipping services, but it doesn’t hurt to be well-researched on your own. After working with a particular company for a long time, you may prefer them. Getting products delivered on time is a key part of how dropshipping works. Make sure you don’t skimp on this.
- Have a backup plan. In the event any aspect of your private label dropshipping business falls through, you need a way to bounce back. Perhaps you have a friend who sells similar products or know how to print shipping labels at home. Each component of your business should have a replacement on the rare occasion that things don’t go as expected.
Ultimate Convenience in eCommerce Business
Once you’re acquainted with the power of dropshipping, you’ll see why few people look back. Making sales with your new eCommerce venture is much more fun when you don’t need to worry about warehouse organization or ABC analysis.
As you develop your private label brand, continue taking advantage of relevant resources. It’s easier to know how to make money dropshipping when you’re reading the dropshipping books and taking a dropshipping course. Your excitement will grow as your knowledge is leveraged to increase eCommerce sales.