Thinking of starting your own e-commerce store? If so, you may have been wondering whether drop shipping, private label or private label drop shipping would be the better option for you.
This article will help you decide and make an informed decision. Let’s take a look!
What is the difference between dropshipping and private label?
Generally speaking, a drop shipping business allows you to sell products without actually holding any inventory. A third-party will ship the items to your customer, you pay your supplier and keep the profit made.
With private labeling, the items you sell are branded with your own label, making them unique.
Advantages and Disadvantages of Dropshipping.
Dropshipping has many advantages and drawbacks and is a great choice for entrepreneurs just starting up.
One of the great benefits of dropshipping is that you need very little investment in the beginning, making it easy to get started. You don’t need to buy any products or spend money developing and marketing your brand.
In addition, you can choose to sell any product that you believe will do well and can make you money.
Since you do not hold any inventory yourself, if you find that something doesn’t sell, you will not have lost out on the cost of the stock.
Another benefit is that your dropshipping business can be conducted from your couch and you don’t need to rent out business premises to keep stock.
Of course, dropshipping does have its disadvantages, the main one being that there is a lot of competition out there. This is understandable as it is dropshipping has become very popular over the past few years.
Being successful in your dropshipping business therefore means that you have to be one step ahead of your competitors and have a solid marketing plan.
Since you are not able to brand the products you sell with your own label, dropshipping means that you can’t set your own price and attract customers to your brand.
Benefits and Downside to Private Labeling.
A private labeling business, as the name suggests, is an excellent choice if you want to market your own brand.
Pros to starting your own private labeling company include having control over your pricing, thereby helping you to eliminate any risk of competitors trying to undercut your efforts.
Your brand is unique and anyone else will not be able to replicate it. This exclusivity allows you to build your brand name in the marketplace, personalize products according to your customers’ needs and create loyalty among your target audience.
The main downside to having a private labeling business is the costs involved when you start the business. Normally, you will need at least $1500 to get set up and you will need to ensure that your brand is attractive and appeals to your target market (which can be tricky to get right).
As a private labeler, you will have an MOQ (Minimum Order Quantity) requirement with your supplier, which can be somewhat risky if your products do not sell and you have to find a way to get rid of large quantity of dead stock.
So which one is better?
When comparing dropshipping and private labeling, it is difficult to say which one is superior to the other because (as you can see from the above), there are pros and cons to both.
In a nutshell, if you would like a simple e-commerce business that is easy to set up and manage, a dropshipping company might be best for you.
However, if you want the products you sell to be customized, unique and to carry your own, branded label, private labeling may be the way to go for you.