Choosing between dropshipping and private label is one of the biggest decisions for anyone entering ecommerce. Both models can be profitable. Both can be run on Shopify. Both have produced successful online brands. But they work very differently behind the scenes, and the “best” option depends on your goals, budget, risk tolerance, and long-term vision.

Some entrepreneurs want speed and low risk. Others want brand control and higher margins. Understanding the real differences between dropshipping and private label helps you avoid costly mistakes and choose a path that fits your situation.

This guide breaks it all down in clear terms—how each model works, pros and cons, costs, profit potential, scalability, and which one suits different types of sellers.

What Is Dropshipping?

Dropshipping is a business model where you sell products without holding inventory. When a customer orders from your store, your supplier ships the product directly to the customer.

You act as the middleman:

• You run the Shopify store

• You market the products

• You handle customer service

• The supplier handles storage and shipping

You only pay for a product after you’ve made a sale.

How Dropshipping Works in Practice

A typical flow looks like this:

A customer places an order on your Shopify store.
You forward the order to your supplier.
The supplier ships it directly to the buyer.
You keep the profit margin between your selling price and supplier cost.

This model is popular with beginners because it removes major barriers like bulk inventory and warehousing.

What Is Private Label?

Private label means selling products manufactured by a third party but branded as your own. Your logo, packaging, and brand name appear on the product.

Instead of selling generic items, you build a unique brand around your product line.

How Private Label Works

You usually:

• Source a manufacturer

• Customize product or packaging

• Order inventory in bulk

• Store it yourself or in a fulfillment center

• Sell under your brand name

Private label is common in beauty, supplements, fashion, and home goods.

Startup Cost Comparison

Dropshipping Costs

Dropshipping has low entry costs. You mainly pay for:

• Shopify subscription

• Domain name

• Apps/tools

• Marketing

No bulk inventory purchases are required. This makes dropshipping accessible for people starting with limited capital.

Many stores launch with a few hundred dollars.

Private Label Costs

Private label requires more investment:

• Minimum order quantities (MOQs)

• Branding and packaging

• Product samples

• Shipping bulk inventory

• Storage or fulfillment fees

It’s not unusual to spend thousands before your first sale.

Key takeaway:
Dropshipping is budget-friendly. Private label requires capital.

Profit Margin Differences

Dropshipping Margins

Dropshipping margins are usually thinner because:

• Products are not exclusive

• Suppliers set base prices

• Many sellers may offer the same item

Typical margins range from 15–40%.

You rely on marketing efficiency and volume.

Private Label Margins

Private label often delivers higher margins because:

• You control pricing

• You build brand value

• Products feel unique

Margins of 40–70% are common when positioned well.

Key takeaway:
Private label can be more profitable per sale, but requires upfront risk.

Branding and Control

Dropshipping Branding

Branding is limited in basic dropshipping:

• Generic packaging

• Supplier branding sometimes visible

• Limited product customization

However, some suppliers now offer branded options, improving this area.

Private Label Branding

Private label shines in branding:

• Custom packaging

• Logo on products

• Unique brand story

• Perceived higher value

This makes it easier to build loyalty and recognition.

Key takeaway:
If brand ownership matters to you, private label has the edge.

Speed to Launch

Dropshipping Speed

Dropshipping stores can go live quickly:

• No inventory wait times

• No manufacturing delays

• Easy supplier integration with Shopify

Some stores launch in days.

Private Label Speed

Private label takes longer:

• Sampling phase

• Design approvals

• Manufacturing timelines

• Shipping bulk inventory

Launching can take months.

Key takeaway:
Dropshipping wins for speed.

Risk Level

Dropshipping Risk

Lower financial risk because:

• No bulk inventory

• No unsold stock

• Easy to pivot products

If a product fails, you simply test another.

Private Label Risk

Higher risk because:

• Capital tied in inventory

• Unsold stock possible

• Market demand uncertainty

A poor product choice can be costly.

Key takeaway:
Dropshipping is safer for testing ideas.

Scalability

Scaling Dropshipping

Scaling dropshipping focuses on:

• Paid ads

• Winning product testing

• Funnel optimization

But scaling can bring challenges:

• Supplier stock issues

• Shipping delays

• Customer service load

Scaling Private Label

Private label scaling is brand-driven:

• Repeat purchases

• Retail expansion

• Influencer partnerships

• Subscription models

Brands scale more sustainably long term.

Key takeaway:
Private label scales stronger for brand-based growth.

Customer Experience

Dropshipping Experience

Common challenges:

• Longer shipping times

• Limited packaging control

• Product consistency varies

Customer experience depends heavily on supplier reliability.

Private Label Experience

You control:

• Packaging quality

• Delivery speed (via local fulfillment)

• Brand presentation

This often leads to higher satisfaction and retention.

Competition Level

Dropshipping Competition

High competition because:

• Low entry barrier

• Popular products spread quickly

• Many sellers target same items

Standing out requires strong marketing.

Private Label Competition

Competition exists but:

• Branding differentiates you

• Unique packaging helps

• Customer loyalty builds moat

Private label reduces direct price wars.

Which Model Works Best on Shopify?

Shopify supports both extremely well.

Shopify + Dropshipping

Shopify integrates with:

• DSers

• Zendrop

• CJdropshipping

• AutoDS

You can import products and automate fulfillment easily.

Shopify’s checkout and app ecosystem make dropshipping simple to manage.

Shopify + Private Label

Shopify also supports:

• Fulfillment centers

• Inventory tracking

• Subscription apps

• Brand-focused design

Private label brands often use Shopify for its flexibility and scalability.

Reality:
Shopify is ideal for both models. The platform is not the limitation—your strategy is.

Who Should Choose Dropshipping?

Dropshipping suits people who:

• Have low startup budget

• Want to test products fast

• Are learning ecommerce

• Prefer low risk

• Enjoy marketing and ads

It’s often the best starting point.

Who Should Choose Private Label?

Private label fits those who:

• Have capital to invest

• Want long-term brand building

• Focus on customer loyalty

• Aim for premium positioning

• Think long term

It’s ideal for building a sellable brand asset.

Can You Combine Both?

Yes—and many smart sellers do.

A common path:
Start with dropshipping to find winning products.
Validate demand.
Then move into private label for those winners.

This reduces risk and increases success odds.

Final Verdict: Which Is Best?

There is no universal winner.

Dropshipping is best for:

• Beginners

• Testing markets

• Low-risk entry

Private label is best for:

• Brand builders

• Long-term vision

• Higher margins

Many successful ecommerce entrepreneurs start with dropshipping and transition into private label once they understand the market. The smartest move is choosing based on your current situation not trends or hype.

DropshipHubs supports sellers at different stages, whether launching a dropshipping store or moving toward a branded model. If you want a structured path into ecommerce with practical guidance, explore your options with us.