The Canal Guide to Private Label Dropshipping

October 12, 2022
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The Canal Guide to Private Label Dropshipping

As you look to scale and diversify your digital storefront to increase basket size, drive repeat business, and boost brand loyalty, expanding into private and white label dropshipping is a smart decision for many brands. In addition to outsourcing inventory and fulfillment, you can outsource the research, development, and manufacturing of foundational products.

Private and white label dropshipping make sense for established brands that want to provide commodity products to shoppers in a branded way. But if you want to sell differentiated products without holding inventory—and without R&D investment—partnering with other brands through partner label dropshipping is a better option.

What is private label dropshipping? 

Private label dropshipping is selling third-party products with your own branding, with order fulfillment taken off your plate. This option is best for brands that want to make a margin on commodities, since commodity goods have low brand differentiation and are easier to make. 

A strong private label offering can enhance your profit margins and become a driver for loyalty. Pricing these similar products at a lower price point will also drive revenue, as seen with the boom in sales around private label consumer packaged goods early on in the coronavirus pandemic.

Private label dropshipping is also an option for brands that have clearly defined their customer value proposition (CVP) and developed a distinct brand message. To do this, you need to look at your competitors to see which gaps are left to fill, and whether creating a private label line is wide enough to capture a profitable audience.

Private label dropshipping suppliers

To identify the best private label dropshipping suppliers:

  1. Make sure the supplier’s products complement your brand. Will the products contribute to the special feeling that your brand conveys? Don’t sell more for the sake of selling more.
  2. Request samples and assess product quality. Does the quality of the supplier’s products match the quality of products you’re already selling? A poor or mediocre product will tarnish a great brand.
  3. Request reviews from other brands the supplier partners with. Do they fulfill orders on behalf of other brands quickly and correctly? Fulfillment impacts a customer’s likelihood to return to buy more.

Some suppliers that offer private labeling may not offer dropshipping and ship unbranded products directly to you instead. If that’s the case, you'll want to consider a third-party logistics (3PL) company, something 90% of Fortune 500 companies use. Popular 3PL companies include DHL, ShipBob and Whitebox

Partner label dropshipping suppliers

For brands that want to sell differentiated products without investing in R&D, partner label dropshipping is a great option. This is when you sell products from other brands (partners) and pass through orders to them for dropshipping. Brand partnership platforms like Canal streamline these operations and introduce you to quality dropshipping suppliers.

Of course, you can work with partner label dropshipping suppliers while continuing to work with private label dropshipping suppliers and shipping your own products. Many brands start experimenting with partner label dropshipping by building a marketplace section on their ecommerce site. Then they start cross-selling, up-selling, and bundling partner label products with their own products.

The cookware brand Great Jones partners with specialty food brands to stock its digital pantry called Pantry Pals. And Fellow, a coffee equipment brand, partners with specialty coffee roasters to stock its coffee marketplace. They also include products from dropshipping suppliers in bundles to increase AOV and incentivize larger purchases.

How private label dropshipping works

  1. Determine the product you want to sell. From beauty to pet products, private label products span every industry imaginable. Private label dropshipping is almost a no-brainer if you’ve tested commodity products through traditional dropshipping and validated the business idea.
  2. Develop your CVP. Your customer value proposition is your north star for determining your overall brand strategy. Examine your target market and competitors to ensure you’re capturing a profitable audience.
  3. Create a visual identity. Communicating your brand through its visual identity will add value to the private label product. Leading retailers that focus on exceptional design draw in customers by conveying the product’s functional benefits. This design strategy can help to differentiate your product with similar national brands. 
  4. Find a private label manufacturer. Once you’ve narrowed down what you’re selling, make a list of manufacturers or suppliers who offer private labeling. Ask if there is a minimum order quantity (MOQ), lead times, and how long they’ve been in business. 
  5. Request and assess samples. Before proceeding with a full order, test the product before selling to customers. This may involve enlisting the services of a third party. For example, a food testing lab will determine shelf life and a microchem lab will analyze the quality of a beauty product.
  6. Arrange for fulfillment. Not all private label manufacturers offer dropshipping. If the supplier you’re working with doesn’t provide those services, find a third party logistics partner like Saltbox or C.H. Robinson to serve as a middleman between the manufacturer and the customer. 
  7. Start selling. Now for the fun part. Whether you sell on a marketplace like Amazon or have your own storefront, it’s time to launch your product. 

How partner label dropshipping works

  1. Join a brand partnership platform. This connects brands that are open to dropshipping products with other brands that have digital storefronts and want to widen assortment without increasing inventory. The platform also automates commission payouts, product syncing, and logistics with software integrations.
  2. Send a proposal. Reach out to a brand that aligns with your existing product offerings and brand values. A strong partnership proposal goes beyond talk about commissions and logistics by suggesting co-marketing opportunities.
  3. Collaborate and sell. After the proposal is accepted, start building interest with teaser reels for social, collab posts on Instagram, and emails. You also need to merchandise the products effectively through PDP cross-selling, in-cart upselling, post-checkout upselling, and shoppable content. 

As you can see, partner label dropshipping is a lighter lift than private label dropshipping.

Experiment with partner label dropshipping

One of the most interesting benefits of partner label dropshipping is brand-to-brand partnerships. In addition to creating new inventory-less revenue streams, you create new marketing channels. Similar to how your partners’ products become new sellable SKUs, your partner’s customers become new receptive audiences. 

Canal streamlines the technicalities of these partnerships and helps you discover new partners so you can focus on merchandising, marketing, and growing your marketplace. The best part? Unlike private and white label dropshipping suppliers, suppliers on Canal do not require minimum order quantities

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