Xune Business Growth Insights

Dropshipping VS Private Label (Which is Better)

Manager who runs a Dropshipping or Private Label Warehouse

What is Dropshipping?

Dropshipping is the process of selling products without having to keep any stock. Instead, a third-party or fulfillment center ships the product directly to the customer. The third-party takes care of your orders and the product’s shipment leaving you to do all the advertising and selling.

What is a Private Label?

A private label is a product that is manufactured by a third-party manufacturer but your brand or label is placed on that product. You decide everything about the product, how it looks, what goes in it, how it’s packaged, how it’s labelled etc and then pay a manufacturer to produce your product and ship it to your store. In this case, you’re the designer and the third-party manufacturer is the builder. 

Advantages of Dropshipping and Private Label

Dropshipping:

  • It lowers product costs. With dropshipping, you don’t need an investment before you can sell products. It also allows you to launch your entire eCommerce store without having to invest thousands of pounds in products upfront.
  • You can save money on storage. When looking at dropshipping vs holding your own stock, dropshipping doesn’t require you purchasing or renting storage facilities in order to hold your stock, as you don’t hold it yourself. This can save you a lot of money in the long run.
  • You are able to offer a wider variety of products. Your business isn’t limited by your shop, storage facilities or impractical products that are hard to sell. You can sell pretty much anything, offering a larger market than those of a private label.

 

Private Label

  • You have production control. With a private label, you’re in charge of the products you’re selling. You get all the say in how the product is packaged, branded, labelled and so on. It’s tailored to your priorities and how you want your store to be portrayed. 
  • You control the price. You also have all the control over how much you sell your products for. This allows you to work out potential profit margins and make an appropriate profit from your business.
  • It’s more adaptable. With having all the control over the products you sell, you can adapt to the constantly changing trends, times and consumer preferences. This makes your brand look more focused on the consumer and tending to their needs.
Warehouse Operator Drposhipping Goods

Disadvantages of Dropshipping and Private Label

Dropshipping

  • Lower profit margins. As dropshipping is easier and cheaper to get started with, it’s a popular option. Therefore you end up with more businesses to have to compete with. Having this amount of competition often leads to price lowering in order for people to choose your products over others in order to grow revenue.  
  • It’s harder to keep track of stock. Unlike with a private label, you probably have several sources of products making it much harder to keep track of the daily changing inventory of stock.
  • Shipping is more complicated. Most dropshippers have multiple suppliers, this can lead to complicated shipping issues. For example, if a customer purchases multiple products and they’re all from different suppliers, you end up with multiple shipping costs and it wouldn’t be a good idea to make the customer pay for these separately.  

 

Private Label

  • You’re dependent on your manufacturers. With a private label, you’re in control of what you say you want your product to be and look like but you don’t have control over the actual production and manufacturers getting your idea right. You have to put your trust in the manufacturers you have chosen to provide the high-quality products you’re looking for.
  • It’s harder to be found. Quite often, consumers are loyal to a specific brand. With dropshipping, their brand is most likely in a lot of different places making it easier for them to find a purchase. Having a private label can limit your products to your store only, making it harder for customers to find you.

So, Which is Better?

There is no right or wrong answer here, it all depends on your priorities as a business owner, abilities, expenditure allowance and how you want to run your business. Dropshipping and private labels both have plenty of advantages and disadvantages but it’s up to you to weigh up your options and figure out which would work best for you. 

If you’re wanting to have more control and be more hands-on with your products, a private label might be the one for you. If you are wanting to get up and running quickly, not have to invest thousands of pounds upfront and not have to think or worry about storage facilities, dropshipping might work better for you. 

If you’re still stuck with deciding between dropshipping or a private label, don’t be afraid to get in touch and talk to our experts. Where we can help with as much or as little of your ecommerce business as you desire.