Every dropshipper will want to scale their operation to generate more profits and build a sustainable business that they can run for years.
But generic dropshipping is not a sustainable business model. It has many limitations that truncate the potential for profits and longevity. That’s where branding shines though.
Branding or Branded dropshipping is the next logical step-up from generic dropshipping. In most cases, it’s the perfect way to increase profits, build a trustworthy brand and a sustainable business operation that will have return customers and brand value.
In this post we will explain everything you need to know about branded dropshipping.
So, Let’s dive in.
- What is Branded Dropshipping?
- What are the Benefits of Branded Dropshipping?
- Is Branded Dropshipping Better than Standard Dropshipping?
- When Should You Transit to Branded dropshipping?
- How to Build a Branded Dropshipping Store?
What is Branded Dropshipping?
Branded dropshipping is an amalgamation of two different businessm models that are very closely connected to each other.
Dropshipping – Where you source generic products from a supplier who then ships it to your customers without you having to stock large quantities.
Branding – Where you brand the same product under your brand name. Only this time, you have to stock inventory up front in large quantities.
Branded dropshipping takes the best of both worlds and combines it to make one great ecommerce business model that will allow you to scale your operation ten-fold.
You take a winning product from the marketplace, brand it with a custom logo, colors and packaging that separates it from other run-of-the-mill dropshipping businesses.
Then, you sell this product under your own brand name, without having to deal with the backend of the supply chain. So, you don’t deal with inventory management, quality checks, shipping, logistics.
You’d still have to buy inventory up front, which is an aspect of branding that you must deal with. But there’s a way to mitigate the costs here too.
With branded dropshipping, you create a brand around a winning product, channelizing your efforts and energy towards the marketing and branding of that product.
It’s a win-win!
What are the Benefits of Branded Dropshipping?
As a dropshipper who’s maybe generating a decent amount of sales already, you might be wondering whether branded dropshipping is really worth it.
It does seem like more expenses up front considering that you are stocking the inventory in certain quantities. That too personalized inventory. What if it doesn’t sell? What if a competitor undercuts you?
We know the doubts. But let’s talk about the advantages first, shall we?
1. Brands Build Trust
If there’s something that history tells us, it is that business thrives on trust. Your customers will trust you more if they see your brand everywhere, from the product packaging to the email marketing campaigns. It gives them a sense of certainty and pride in their purchase.
Whereas when you are selling a generic, unbranded product, it’s exactly that. A product that anybody in the marketplace can sell. You are part of the crowd. Branding takes that away and gives you an identity.
Brands build a story around a product. There’s always a reason why people purchase things, whether it’s for use or decoration or gifting purposes. The branding tells that story, giving your customer a reason to buy.
2. Brands Bring Accountability
Customers seek accountability from businesses. They need to know that in case things don’t work as planned, there is someone they can talk to about it. Which is why, having a brand behind your dropshipping business increases the level of accountability you enjoy as an entrepreneur.
If you make an extra effort towards building customer trust, then there’s no reason why you can dominate the marketplace despite not having a unique product.
3. Brands Scale up Profits
As we mentioned before, branded products sell better than generic dropshipping products because people associate quality with brands.
The branding gives you the edge over other generic dropshippers who are competing for the same product. You are in a position to charge higher prices for your products because you’ve invested in building customer trust.
Is Branded Dropshipping Better than Standard Dropshipping?
Like all things in business, it’s never binary. There are certain situations in which branded dropshipping is undoubtedly the better bet. But there are a few where a dropshipper might be better off with a standard dropshipping business.
Let’s look at the merits and demerits objectively.
What is the Difference between Dropshipping and Branded Dropshipping?
Dropshipping and Branded Dropshipping are two models that enable dropshippers to build and operate online businesses on their own terms.
Dropshipping is a popular business model where the dropshipper doesn’t have to carry any inventory for sale. Instead, they source wholesale products from dropshipping suppliers and sell those products directly to consumers at retail rates to generate a profit.
When they generate a sale, the supplier fulfills the order by sending the package directly to the consumer. All you need to do is set up a store and bring in customers. Sounds easy right?
Branded dropshipping on the other hand is something that is becoming increasingly popular in the e-commerce world.
It involves branding, packaging, and pricing your products to make them unique. You are no longer selling a product that a 100 others are also selling. It might well be the same product mind you.
But the moment it features a logo and a brand name, it stands out. Just like dropshipping, you do not have to deal with order fulfillment. Either a supplier, or a sourcing agent will handle that part for you.
The Merits of Standard Dropshipping
1. Low entry barrier
Dropshipping is a low barrier business model where you don’t have to invest a lot of money before making your first sale. It is one of the most beginner-friendly businesses that anybody with some decent business acumen can try.
2. Low initial investment
You can start dropshipping with very low capital. That’s because there are endless sellers and suppliers who work with dropshippers on a low or no Minimum order quantity.
3. Huge Variety
If you’re dropshipping, you can source products from a variety of sellers. You are not bothered about customizing it or developing it. You just have to research and source a product that you think is a winner. There are millions of products that you can dropship.
Demerits of Standard Dropshipping
1. Lower Profit Margins
Since you are selling a generic product, you tend to make much lower margins as compared to a branded dropship. You have direct competition from other stores selling the same product. At times, sellers even undercut your price to win deals.
2. Less Control over the Supply Chain
One of the biggest problems that dropshippers face is the reliability from sellers. There are both, good and bad sellers. The bad ones try every trick in the book to make a quick buck. They can defer on the quality of the products.
For example, a supplier might send you a lower-quality product or one that is cheaper than promised. You cannot moderate or control this aspect. But it builds a poor reputation for you.
Similarly, sellers might backtrack on their promises of inventory during peak season. You are then stuck with tons of orders in the pipeline and no inventory to fulfill it.
3. Huge Competition
Given the low barrier for entry, there are thousands of dropshippers out there. You have to stand out in order to differentiate yourself from the crowd. It is tough to get noticed with all the competition, especially on popular selling platforms.
We have already touched on the merits of branded dropshipping earlier. Let’s talk about the demerits.
Demerits of Branded Dropshipping
1. It’s Recommended for Successful Dropshipping Ventures.
That’s because the moment you brand a product, its your product. The supplier will not agree to take it back in case it does not sell. So you have to ensure that it is some popular product that would sell quickly and at a higher profit margin than Unbranded products.
In this case, a dropshipping store that’s already generating sales fits this bill. Whereas if you are inexperienced and starting your first store, the risk increases exponentially.
2. Sourcing has to be done with care
If your sourcing strategy isn’t spot on, you can find yourself in serious trouble if the supplier fails to deliver the products on time or even defaults on payment. It’s a delicate balance to strike as the supplier might be unreliable because of various reasons. Your success hugely depends upon your ability to spot these potential pitfalls from time to time and deal with them before they become a problem for you.
3. You Need a Reliable Partner to Handle Fulfillment
While some suppliers agree to handle order fulfillment for you, most of them don’t. That’s where a dropshipping agent comes into the picture.
Having a reliable dropshipping agent is hands down, the most critical aspect of branded dropshipping. It will make your life much easier. Right from sourcing from a trusted supplier to handling backend without hassles, sourcing agents are invaluable to a branded dropshipping operation.
Is Branded Dropshipping Legal?
It absolutely is, unless you are using a trademarked name, colors and logo to brand the product. A simple example is that you can source sneakers and brand it under any brand name of your choosing.
But you cannot copy Nike or Adidas’s branding, including their colors, logo or name. So for example, even if you sell a Nike shoe in an Adidas box, it’s not considered legal.
Another potential problem can arise if you are selling a copyrighted product under your own brand name. For instance, if you are selling T-Shirts with Disney imagery, then you have no right to brand the T-Shirts, unless you have a license or vendor agreement with Disney.
But as long as you are selling a generic, non-copyrighted product with your own unique branding, you are not doing anything illegal.
Is Branded Dropshipping more Profitable?
Most of the time , it is. The logic is pretty simple. You are selling a branded product and investing a fair bit of money and efforts towards branding and marketing.
Customers happily pay a premium for branded products. They are willing to pay even a hefty margin because they associate that product with the reputation of your brand.
For example, you can source generic T-Shirts at $5 each and sell them under your own branding for $29.99 each. You make a good profit on every sale without putting in too much effort or spending too much money.
But, there’s a caveat. You need to have a fair idea of how competitive the industry is and how to generate sales in the face of the lower priced competition. There will always be someone who’s selling the same product for a lower price.
That’s where your skills as a dropshipper come to the fore. This is why we recommend that you venture into branded dropshipping only if you have prior success and experience with dropshipping.
When Should You Transit to Branded Dropshipping?
Many dropshippers are unsure about whether they are ready to step up on to the next level.
‘Is this the right time?’
‘Do I have enough experience to make this work?’
Here’s a quick checklist to consider before you switch over to a branded dropshipping operation.
- You are generating consistent sales – This is the biggest reason to switch to branded dropshipping. You are generating consistent sales every single day. This is an indicator that the product has demand and that you understand how to generate sales. Branded dropshipping might be a good choice for you at this stage.
- You can invest upfront for branding and inventory – Branded dropshipping requires you to procure inventory (the sourcing agent can stock it for you) in bulk and brand it. This is more investment-heavy as compared to standard dropshipping where there’s no need to source inventory in bulk.
- You are sourcing from B2C portals like Ali Express and the seller is unreliable – There’s nothing worse than being able to generate consistent sales but be stuck with an unreliable seller who does not fulfill the orders on time. Branded dropshipping takes the reins away from the seller and hands it over to you. You have inventory in stock and thus, no one can hold you ransom during peak season.
Private Label vs White Label (Dropshipping)
When it comes to branded dropshipping, you have two choices. There’s private label dropshipping and there’s white label dropshipping.
Both are very similar business models that allow you to brand your product as your own. So what’s the difference?
Private Label Dropshipping is a business model in which you develop a unique product with custom features or appearance, find a manufacturer who can produce it, brand the product under your own brand name and then sell it. The keyword here is ‘Unique’ or have differentiations compared to other generic products on the market.
White Label Dropshipping is a business model in which you source a generic product from a manufacturer and brand it under your brand name. It’s not a product you developed or envisioned. You source a winning product and resell it for a higher price. The keyword here is ‘Generic’. There’s a high chance that a lot of people are selling the same product.
The question is, which one’s a better bet for your business?
Here are some factors to consider.
Private Label Dropshipping requires more investment up front than say, white label dropshipping or, obviously, standard dropshipping. Because you are no longer sourcing a product that the manufacturer already manufactures. You are looking to get something custom made.
Anything custom made requires larger volumes of inventory. It’s basic commerce. The question is, are you ready to make that investment? If yes, then private labelling is a better option for you. You have the monopoly on the product. You have a special product that isn’t available in the market under your brand name. You can sell it for as much as you want to.
White Label Dropshipping allows you to create almost non-existent inventory investment. That’s because, many people are already selling a generic product in the market and you’re just entering the race with a branded product at different price point. The caveat is that you are no longer offering a unique product. So the competition will breathe down your neck.
Private Label dropshipping is for dropshippers who understand how product development works. There’s a lot more effort involved right from developing schematics to understanding the nitty-gritties, getting a manufacturer who can match your requirements, terms and quality. In the end, you have a product that’s uniquely yours and there’s hardly anyone around who can replicate it. But the effort is much higher than what white label dropshipping requires.
White Label dropshipping is perfect if you do not want to deal with the hassles of product development. This business model allows you to focus on your marketing and customer acquisition skills. You can generate more revenue than standard dropshipping as you have a unique branded product. Not as high as private labelling. But certainly more than what you make with standard dropshipping.
Learn More: Private Label vs White Label
How to Build a Branded Dropshipping Store
All things said and done, how do you seamlessly switch over to branded dropshipping from your current standard dropshipping store?
There are numerous ways to be honest. We are going to list each one down so that it gives you a fair idea of the pros and cons of the method you choose.
Option One – Dropship Branded Products from Aliexpress
One of the easiest ways to set up a branded dropshipping business is to look for branded products on Aliexpress. This takes away tons of hassles that you would otherwise have to encounter.
For instance, the supplier will offer you ample marketing material like images, videos etc., which you can set up easily and start using on your site for sales. If you source an unbranded product, photography and videography is an additional expense.
Also, the MOQ on Aliexpress is generally lower than what private suppliers demand. So your inventory investments will be much lower too.
Besides, the supplier will handle fulfillment. All you have to do, is find a winning product, check if there’s a branded version on offer on Aliexpress and strike a deal.
The process is pretty simple.
You find the product on Aliexpress that’s been working great for you. Make a list of the top vendors who offer a branded version of this product and then reach out to each one of them with a request to resell the product.
In most cases, Aliexpress sellers are looking for additional sales opportunities. So you are likely to strike a deal quickly.
You can simply ask the supplier if they have any MOQ restrictions on how many products you can buy from them every month. However, this is not a brand you own. You are still a reseller.
So, your control on the supply chain is limited.
Option Two – Build Your own Branded Dropshipping Product
The other option of course is to build your own branded product. It’s always more profitable to own your own brand.
This way, nobody except you can control the supply. You are not dependent on a third party brand for business. You can control the pricing too.
Also, building a branded dropshipping product is not as difficult as it sounds if you know the right places to outsource the work, and have the right contacts.
First things first, you need a product that works.
1. Have a Proven Winning Product
You should not even attempt branded dropshipping if you do not have a winning product.
How do we describe a winning product?
A winning product can be anything that has consistent demand on sales platforms. One that has been able to cut through the competition and generate a steady volume of sales for you in your dropshipping venture. One that has little returns and complaints, where the quality is decent, the procurement price is low and the demand is not seasonal.
If you do not have a winning product, we highly recommend that you start with a dropshipping store and test multiple products. Having a winning product is crucial for success in branded dropshipping.
2. Choose the way How You want to Brand it
As we mentioned earlier, there are two ways to brand a product.
You customize the product by altering the specifications maybe, or in some way that makes it unique. You can also develop the product from scratch if no one’s offering it already. You trademark this design so that others cannot copy you. Then you brand the product with your branding logo and colors. This is called ‘Private labelling’.
The other option is to source the winning product as it is without making any customizations to it. Then you brand it with your branding colors, logo and packaging. This is called White labelling.
Pick an option that’s best suited for your business skills and experience.
3. Find the Right Supplier/Agent
Finding the right supplier is perhaps one of the most challenging tasks in the ecommerce space.
The challenges are many. You may not be located physically in the country that you are trying to source from. Language is a problem. Communication is a hit or a miss. Besides, you will, in all probability be dealing with a large MOQ. How do you ensure that you don’t sign up an unscrupulous supplier who tries to rip you off?
That’s why we recommend working with a trustworthy dropshipping agent instead. Agents have a different approach to doing business. Instead of trying to make profit from every sale, they are more interested in building a strong relationship with their clients.
They work on referral basis and make sure that they provide the best service possible. They generally have a vast pool of vetoed suppliers to choose from. People that they have worked with and can trust.
They handle the communications and the entire backend of the business. All of this for a very nominal fee. It’s a no-brainer choice.
4. Place the Order
It’s time to place the order. You don’t always have to start off with the MOQ agreed upon in the contract, mind you. Most manufacturers/agents will be more than willing to send sample orders to you.
A sample order is like the final step before the bulk order. Think of it like dotting all your i’s and crossing all your t’s. The sample order allows you to take a real-life look at the quality of the product, its design features etc. Ensure that the specifications and technical bits match what you had envisioned and requested.
You can negotiate with them on things like pricing, shipping, MOQ before placing the final order.
5. Launch Ads & Start Selling
You have a product in your hand!
Time to put it up for sale online so that people can purchase it. You will have to start advertising your new business, most likely with PPC ad platforms like Google Adwords or Facebook Ads.
One of the best ways to create an ad is to actually include the product image in the advert itself or a cool video. If you are inexperienced with PPC, you can burn your budget in no time. Work with a skilled PPC management team.
It will save you time & money and produce much better results. Once you start generating sales, it’s time to start fulfilling the orders.
6. Fulfill the Order
Order fulfillment is the final, but most crucial step.
Depending on whether you are working directly with a manufacturer who is handling the fulfillment for you, or you are working with a sourcing agent, they will have a system in place which is integrated with your store.
This is an automated system that requires very little manual input. At Sourcingbro, we have a custom dashboard that integrates with most ecommerce platforms. From inventory management to logistics, everything is automated.
But not all agents and manufacturers have a completely automated system in place. If you hate working with CSV files as much as we do, then you’d want to confirm this beforehand.
Conclusion
Branded dropshipping has immense potential to help you build a legitimate ecommerce brand. We hope that this article helped you understand the process better. We recommend only working with a good sourcing agent who will manage your entire business.
That’s because you’ll need to focus on other important aspects of ecommerce business – like marketing, customer service etc., rather than spending time finding quality suppliers and processing orders manually.