White Label vs Private Label Dropshipping

white label vs private label dropshipping

Let’s talk about white label vs private label dropshipping. Although white and private label products had solid momentum two decades ago, they have gained enormous popularity in recent years. Over the years, both white labeling and private labeling have become a common practice throughout many industries, including dropshipping.

Many online retailers express great interest in using white and private label dropshipping because they do not want to go through the headache of manufacturing themselves.

Despite their popularity, the terms ‘white labeling’ and ‘private labeling’ are often used interchangeably. Though they are often subbed in for one another, they do not have the same meaning. They sound similar, but they are actually different from one another. There is a subtle difference between them.

But as a new online store owner who wants to succeed in either white or private label dropshipping, it is important to know that minor difference. So, let us tell you the difference between the two.

What is private labeling?

A private label product is manufactured by one business for sale under another business’s brand. It is sold exclusively by one retailer or dropshipper.

For example, an online retailer with a dropshipping business has a million-dollar idea for a product. But they do not have the financial means to take the steps necessary to turn their idea into reality. Or they simply do not want to engage in a process of manufacturing.

So they start looking for a private label manufacturer that can manufacture that product for them. When they find the right private label manufacturer, they contact the manufacturer and start working together. The dropshipper specifies everything about the product – what ingredients should be used, what the package should look like, etc.

In short, the dropshipper designs the product and gets it manufactured by a private label manufacturer. And they sell it under their own brand. They become the exclusive seller of that product.

private label versus white label dropshipping

Advantages of private label dropshipping

More control over the manufacturing process

Private labeling gives you greater control over the entire manufacturing process. It enables you to tell the private label manufacturer what your product should look like. It allows you to design the look and purpose of your product. With private labeling, you can finally launch own product line you have always dreamt of.

But do not forget that the quality of your private label product lies in the hands of the private label manufacturer. Therefore, you must partner with well-established private label manufacturers to create your products. We have a complete guide to finding the best private label manufacturers on Dropship5.

Control over manufacturing costs

As you have total control over the manufacturing process, you can also set and control the manufacturing costs to maximize your profits. No matter what types of products the manufacturer is about to create for you, you can determine the pricing according to your own budget.

Low competition

As an online merchant who is about to launch your own private label product, you can send all the specifications of the product to the manufacturer you intend to cooperate with. That is to say, you have the exclusive right to sell the product and other online retailers cannot sell the same product.

By selling private label products, you establish yourself as somebody being the only source for that product. This stops you from dealing with high competition.

Cons of private label dropshipping

Bigger initial investment

With private labeling, you do not have to invest a lot of money into large manufacturing facilities (as you are not a manufacturer yourself). Instead, you are able to set and control the manufacturing costs.

But you still need a considerable amount of initial capital to pay the private label manufacturer for your products. So if you are on a small budget, you must start small.

Minimum order requirement (MOQ)

When you are interested in creating your own private label products, chances are you will come across the term MOQ. This term stands for the smallest amount of products that must be ordered in one delivery from a manufacturer.

Almost all manufacturers have a minimum order requirement for customizing private label products to meet your needs. In order to manufacture your products, they may require a certain minimum order quantity per item under your own label. This is considered one of the major disadvantages of private labeling.

Customer perception

People usually recognize and trust well-established national brands. But when it comes to private label brands, people find it hard to trust them. You may have a brilliant product idea, but you will not make any money if you do not have an audience of eager shoppers.

So it is absolutely vital that you know your audience and be familiar with their desires and preferences before investing in private labeling. Remember that private labeling may be a gold mine – if done right, of course. If your brand earns consumer trust, then you can reap immense rewards.

What is white label dropshipping?

Like the private label product, a white label product is also manufactured by one business for sale under another business’s brand. But unlike the private label product, a white label product is a generic, non-branded product, meaning that it is sold by many retailers or dropshippers.

To put it simply, the generic product is manufactured by a white-label manufacturer but sold by a dropshipper. The dropshipper does not specify anything about the product. They just pay the manufacturer to put their own branding and logo on the product.

Pros of white labeling

No product research and development

Creating a new product from scratch takes a considerable amount of financial resources — not to mention time. However, with white labeling, you do not design the product. You just pick a generic, ready-made product created by a manufacturer, and put your name on it.

Therefore, you do not have to worry about spending money and time on research and development. You can save time and money by selling white label products.

Decreased costs

As mentioned above, with private labeling, you have control over the manufacturing costs and can request the manufacturer to develop products that suit your budget. But the manufacturer has to build a specific manufacturing system to manufacture products exclusively for you. This can automatically increase costs.

If you opt for white labeling, you can choose from already developed products. The manufacturer does not have to build a specific manufacturing system for you. They simply offer you a generic product, which’s manufactured for multiple resellers or dropshippers.

Anyone can dropship white label products

In case you are not creative and do not have any ideas or skills to develop your own product, then white labeling is the best choice. White labeling does not require you to have an incredible product idea or basic skills to design a product.

Cons of white labeling

No control over the production process

The first disadvantage of white labeling is that you have no control over the manufacturing process. You cannot make special requests and tell the manufacturer to customize the product to your exact specifications. You cannot tell them to modify an existing feature of the product.

To make a long story short, white label manufacturers have full control over the production process. So it is recommended to order a product sample to verify quality.

Limited range of products

A generic, non-branded white label product is manufactured for multiple retailers or dropshippers. As an online reseller, you may want to expand your offerings. However, you can only choose from the assortment of already made products that the manufacturer offers to you. You cannot create something unique to sell.

Higher competition

As stated earlier, white label products are generic and, therefore, manufacturers offer the same products to many resellers. This contributes to high competition. The thing is, your white label products are likely to be identical to many other products already selling on the market.

With crowded markets and growing competition, it is critical to select white label products that are in high demand and effectively promote them. You must do so to beat the competition.

private label vs white label

White label vs private label: Which is better for your dropshipping store?

Now that you know the difference between white label vs private label, let’s move on to how to choose between the two models. Let’s assume that you have a dropshipping business and want to expand your offerings. In that case, you can choose between white label and private label dropshipping.

Before making that decision, you need to think about what your business goals are. If you are creative and want to build your own product that has the potential to truly solve an issue for your customers, then private label dropshipping may be the right option for you.

However, if you are not interested in developing a new product and want to generate large profit margins, then opt for white label dropshipping instead of private label dropshipping.

Regardless of your choice, you need to find a reliable manufacturer that offers dropshipping services and is able to deliver the products directly to your customers. Know any good manufacturers? Leave a comment below.

Note: In case you’d like to have a look at all types of e-commerce business models, we have an extensive guide to make sure to get the best possible information on our website.

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