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Drop Shipping or White Labeling: Which Is Right For You?

What is the main difference between these two business models, and is one better than the other?



What is the main difference between these two business models, and is one better than the other?

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May 29, 2021 5 min read

Opinions expressed by Entrepreneur contributors are their own.

With the fast-growing trend of starting businesses from home, there are two business models that get mentioned all the time: drop shipping and white labeling. Both harness the power of the internet and can be run from a laptop, but is one better than the other when it comes to passive income?

Pros and cons of drop shipping

Drop shipping can be very hands off. This is when you create a website and list products from other brands. You don’t own the products on your website, nor buy them in batches. You become an authorized dealer for the brands that make the product you want to sell, and when you make a sale you turn around and place the order with the brand/manufacturer. They in turn ship the product to your customer and charge you the dealer price. And since you were paid full retail from the customer, you make a profit.


Almost zero financial risk: You can sell products without having invested your own money until after a customer has paid you for it, so the financial risk is very low.

Hands-off: You don’t have to store the products in a warehouse and have overhead costs associated to storage facilities and staffing. You literally never have to touch a product.

No prior product knowledge required: This may be surprising, but you really don’t need to be an expert of the product you sell from day one. Obviously you should become an expert and learn as much as you can, but you can get started with very little knowledge of the niche.


Competitive: Since it’s so easy to get started with no upfront capital, the barrier to entry is extremely low so it’s a competitive space if you choose to sell products in popular niches.

No control over the supply chain: Since you rely on the manufacturers to ship the products you’re selling, when they run out of stock you run out of stock. This can cause your sales to stop overnight and there’s nothing you can do about it.

Low margins: The manufacturer decides the margins the reseller makes and it’s often non-negotiable. Gross margins are usually around 30%, but if you sell heavy items that require freight shipping, that 30% can be as low as 10%. There are some other payment processing fees too, so 10% is not unusual when all costs are factored in.

Related: 6 Steps to Building a Successful Online Drop Shipping Business

Pros and cons of white labeling

White labeling is similar is some ways. Also known as private labeling, you reach out to a factory that produces what you want to sell and you place a minimum order of units of the product. The factory will put your branding on it and ship it to you. Then it’s up to you to sell those units, whether through a website, a physical store or both.


Good margins: Since you are no longer the middleman, you buy directly from the factory so your margins are much better. You can expect anywhere between 50% – 80% profit when you sell full retail price.

Use drop shippers to sell your product: Since you are a brand with your own product, not only will you sell to the customer directly, you can leverage the drop shippers to sell more of your products for you.


Upfront financial investment: Unlike drop shipping, you need to source and order a quantity of the product and have it shipped to a warehouse or fulfillment center. So you have to foot the bill for the order, ship (often from China) and pay for storage. If you don’t have your own warehouse, you can use a 3PL (third-party logistics) company that will receive your containers, store them and ship to your customers when you get orders. The 3PL will charge you for the storage and handling.

Knowledge of the niche: Before spending tens of thousands of dollars on a product, you should know the product and market very well. If you don’t, you could find yourself with a lot of product that is not sellable.

Related: A Brief Guide To Ace Order Fulfillment For Your E-Commerce Business

Which business model is for you?

Both have their benefits and challenges, but how do you choose which to start?

If you are already involved in a specific market and know how to improve on an existing product, you can start a white-label brand. Of course, you have to have the cash to get started. If you are looking to earn some extra cash each month without too much of an upfront investment, then drop shipping is a great method for you.

Both drop shipping and white labeling can be somewhat passive. White labeling has the additional logistics to be on top of so it’s a little more hands-on, but you don’t need to see or touch the product if you use a 3PL.

From my experience in ecommerce, I normally recommend starting with a drop ship store selling a product that you know, and when you have understood the market and what all the brands are selling, you can transition into white labeling your own product in that same market.

By starting with selling other brand’s products, you get great insight into what customers really want. You can then go and get it, put your brand on it and make better margins. Eventually, you will have yourself an established ecommerce business with lots of traffic.

Related: Reinventing Last-Mile Deliveries: How the Pandemic Has Changed the Rules Of the Game




3 Simple Things You Can Do to Build a Healthy, Thriving Email List

Your list is only as good as the number of real people on it.



Your list is only as good as the number of real people on it.

Free Book Preview: Brand Renegades

Discover how two entrepreneurs used unconventional business strategies to turn their startup into a multimillion-dollar company.

June 18, 2021 5 min read

Opinions expressed by Entrepreneur contributors are their own.

Businesses that aren’t using email marketing today could be missing out like never before. Consider the fact that Americans spend an average of 143 minutes daily just checking email. There’s tremendous marketing potential in an email address.

Make the most of this opportunity by building a reliable, healthy email list. Otherwise, you not only decrease your ROI, but also your emails may end up landing in your spam folder or never arriving at all.

So, what should you focus on to build a list that is healthy and thrives? Let’s look at some of the most important steps.

Related: 4 Ways to Stop Your Emails From Going to Spam

1. Get people to confirm they want to be on your email list

Building a healthy email list means your subscribers intentionally signed up. To make sure of that, ask everyone to confirm they subscribed to your emails. The double opt-in method is the most effective.

How does it work? After entering their email address in your sign-up form, an automated email goes out instantly. It has a unique link to verify the person’s email address and that they agree to receive your emails. Once they click the link, they are added to the list.

Asking this simple action will lead to a more engaged audience. It ensures that nobody added someone without their permission: Your new subscriber wants, indeed, to hear from you.

Without using double opt-in, you’ll inevitably get people who mark you as spam. Keep in mind, spam complaints are one of the worst things that will hurt your sender reputation, which is a score internet and inbox providers use to direct where emails go. For all they know, if a lot of people are hitting the spam button, your operation is illegitimate.

So, if you haven’t already, set up this subscription confirmation process. It should be easy to do in your email service provider dashboard.

Related: ‘Abuse Emails’: What They Are and How They Impact Your Email Marketing

2. Use ReCAPTCHA to reach real people

Spambots are computer programs that can sign up a large quantity of email addresses (frequently fake) to mailing lists. You could be managing a healthy list and receive a deluge of sign-ups that will frequently be followed by spam complaints, unsubscribes or bounces. It’s because a bot signed up.

Obviously, a healthy, thriving list consists of human subscribers and not bots. One of the best ways to keep things real is to use ReCAPTCHA. You know those simple tests used to weed out bots by testing for human intelligence? ReCAPTCHA is Google’s proprietary CAPTCHA and you can install it fairly easily.

It adds an extra layer of protection against fake and risky email addresses. However, it’s often not enough to prevent malicious signups, so if you want more security, consider email validation.

3. Use an email validation API to keep bad data off your list

Email sign-up forms are great for allowing people an easy way to start getting your newsletters. However, if you’re not careful, sign-up forms are also gateways for bad data.

First, some people may accidentally make a typo while trying to subscribe. They might also sign up using a less than quality address. Oftentimes, when they want to access gated content without giving out their real email, people use a temporary address. There have even been instances of business competitors sabotaging a list by entering bad or invalid addresses.

On top of that, some of the people who sign up for your emails may be habitual complainers. You think you’re getting a great lead, but instead, you get someone who might label your email as spam.

These are issues you can’t prevent in real time, but an email validation API will. Once you set up the double opt-in and ReCAPTCHA, adding this software to your forms ensures your list stays healthy longer.

A reputable email validation service should have an API that you can connect to your sign-up form to block harmful emails. In most cases, if an address is typed in incorrectly, the API will notify the person that they’ve made a mistake. Keeping these invalid addresses off your list prevents bounces and spam complaints and keeps you off of blacklists.

Bonus tip: Check your entire list in bulk regularly

Email validation is critical if you want an email list that thrives, but even the good contacts on your list can go bad. People change their email addresses for a variety of reasons, especially workplace addresses, so verify your email list in bulk a few times a year. There’s no value to sending emails if they will bounce. It only harms your deliverability and sender reputation.

Of course, it’s easy to get hung up on numbers. It’s only normal to want a massive list or compare your list to others. But the number of subscribers doesn’t always signify good engagement or a high ROI. What would you choose between a large, unhealthy list versus a smaller, but healthy list with interested subscribers?

The focus is an opted-in, valid email list of people who really want to engage with you.

Related: Why Email Marketing Is Better for Your Business Than Social Media



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Free Webinar | June 22: How to Grow & Thrive in an Evolving Business Landscape

SurveyMonkey CEO, Zander Lurie, shares how he’s embraced change over his 20-plus year career.



SurveyMonkey CEO, Zander Lurie, shares how he’s embraced change over his 20-plus year career.

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May 20, 2021 3 min read

Opinions expressed by Entrepreneur contributors are their own.

In the ever-evolving business landscape, it is important to embrace change to grow and thrive. In the next episode of our Leadership Lessons series, Comparably CEO Jason Nazar speaks to a leader who has changed the businesses he touched for the better in this constantly-changing global marketplace, SurveyMonkey (NASDAQ: SVMK) CEO Zander Lurie. A leader in agile software solutions for customer experience, market research, and survey feedback, SurveyMonkey empowers over 20 million active users from more than 345,000 organizations to analyze and act on this feedback to deliver better customer experiences, increase employee retention and unlock growth and innovation. With total revenue at $102.3 million in Q1 of 2021, an increase of 16 percent year-over-year, the San Francisco-based business employs approximately 1,500 people in multiple offices in the U.S. and globally (Ottawa, Dublin, Berlin, London, Amsterdam, Sydney, and a growing number of fully remote employees). In addition to Lurie sharing the most valuable lessons he learned over the span of his career — from his time at JP Morgan leading equity transactions and M&A to his executive roles at GoPro, CBS Corporation, and CNET — other topics include:

  • Digital transformation and data-driven analytics
  • The keys to making tough decisions under pressure
  • Empathy and agility in leadership
  • Throwing out the old playbook in a post-pandemic world
  • Advocating for diversity, equity, inclusion
  • Boosting employee morale in a hybrid work environment

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About the Speakers

Zander Lurie is CEO of SurveyMonkey and serves on its board of directors, which he has been a part of since 2009. Previously, he was SVP of Entertainment at GoPro; serving on the company’s board of directors since 2016. Prior to GoPro, Zander was SVP of Strategic Development at CBS Corporation, via its acquisition of CNET Networks, where he served as CFO and Head of Corporate Development. He began his career in the technology investment banking group at JPMorgan, leading equity transactions and M&A in the Internet sector. Lurie holds a JD and an MBA from Emory University, and a BA in Political Science from the University of Washington. He co-founded the California-based nonprofit organization CoachArt, which serves chronically ill children and their siblings.

Jason Nazar brings 15 years of experience as a serial entrepreneur, investor, and advisor to his role as co-founder/CEO of Comparably, a leading workplace culture and compensation monitoring site. Previously, he was co-founder/CEO of Docstoc (acquired by Intuit in 2013), one of the most visited content sites in the world with the widest selection of professional documents and business resources. Jason was named one of the “Most Admired CEOs in L.A.” by the Los Angeles Business Journal and appointed “Entrepreneur in Residence for the City of Los Angeles” in 2016-2018 by Mayor Eric Garcetti.



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The Unbearably High Price of ‘Free’

Using the word ‘free’ in your marketing is a quick way to get attention, but it’s also a double-edged sword that has tripped up a lot of businesses.



Using the word ‘free’ in your marketing is a quick way to get attention, but it’s also a double-edged sword that has tripped up a lot of businesses.

Free Book Preview: Brand Renegades

Discover how two entrepreneurs used unconventional business strategies to turn their startup into a multimillion-dollar company.

June 13, 2021 5 min read

Opinions expressed by Entrepreneur contributors are their own.

One of the most powerful words in the English language is the term “free.” Do any of these phrases sound familiar?

  • “Buy one get one free.”
  • “Get a free gift with purchase, valued at $499.”
  • “Get a free eye examination.”
  • “Try our membership for FREE.”
  • “Get FREE delivery”

It seems like just about every company uses some kind of “free offer” in their marketing. So why is the term “free” used so liberally?

Because, frankly, it works — by appealing to our basic human emotion of greed.

The word “free” has appeared in more advertisements than there are grains of sand on a beach. And it goes way back to the genesis of advertising when giving free samples was the best (and only) new way to get customers. So what makes “free” work so well?”

Free gets attention. It makes people feel like they are getting a great deal. On a subconscious level, it works in reverse, too — you feel like you’re missing out if you don’t take advantage of something for free.

But using the word “free” in your marketing can be a double-edged sword, especially if you don’t use it correctly.

Related content: The 5 Triggers of Psychological Pricing

Is there a wrong way to use the term “free” in your marketing?

Absolutely. There are thousands of ways that using the term “free” in your marketing can trip you up, reduce your product or service value, and do irreparable damage to your brand.

Let me give you a real example. One of our clients was in the business of producing extremely high-end Italian-made leather shoes and bags for men. Their most famous pair of boots retailed for $3,500. Their most popular bag, a messenger-style laptop bag, retailed for $950. The company’s previous marketing agency advised them that the best way to double their boot sales would be to offer the messenger bag for free.

As far as irresistible offers go, that’s a pretty good one, and it did in fact, increase sales of the boots — in the short term. But it was a strategic disaster in the long term because now they had conditioned their clients to expect the messenger bag for free.

In other words, by offering it for free, they had completely devalued that product (remember it was the company’s top-selling bag.) Even worse, by offering something of high perceived value for free, they had also damaged their own luxury brand. Why would people ever pay full price again?

The good news is that people have a short attention span, and with the right strategic pivot and messaging, you can erase the damage of using “free.” But it takes time.

The same dangers apply when you start using discounts in your business. If you discount your products, why would people ever pay full price? They just wait for them to go on sale. When our Italian client came to us, they had a branding and sales disaster on their hands through no fault of their own. Fortunately, we were able to get them out of their pickle by repositioning their products and reinventing their brand — a move that resulted in them being purchased eighteen months later by a competitor.

Moral of the story: Using a free offer can be a slippery slope and must be used sparingly and carefully.

Related: The Price Is Right: How to Price Your Product for Long-Term Success

Before using “free” in your business, ask yourself:

  • Does this have a real value that we depend on for revenue?
  • By offering this item or service for free, will this adversely impact another related service or product (for example, if you offer the first consult for free, and expect to be paid for all future consults)?
  • Why are we considering offering something for free? What else could we offer that would help us achieve the same result?
  • What if it’s not your business using “free”, but your competitors?

    Now, if you’re on the other side of the fence and your competitor is offering something for free that you are charging for, it’s time to put your marketing into high gear.

    Just because there is no money exchanged doesn’t mean that it’s not paid for in other ways — for example, in lost time, huge frustration or poor quality.

    Think of the experience and quality of “free” healthcare versus a private plan. Draw these analogies in your marketing to establish your value in the minds of your clients.

    “Free” is still a mighty word used to grab attention in marketing. But handle with extreme caution, and don’t be lured into using it to stimulate short-term sales at the expense of long-term growth.

    Related: 3 Lessons About Setting Your Price Learned From a Vegas Prostitute

    It seems like just about every company uses some kind of “free offer” in their marketing. So why is the term “free” used so liberally?



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