The extent to which duplicate products exist on websites such as Amazon.com speaks to how a new phenomenon is propagating like a wildfire: dropshipping. Functional and legitimate business model, often sadly misrepresented as an hassle-free way to make money, what could be in some cases defined as the next generation of snake oil is the latest way people are trying to make money by thinking they can simplify corporate processes from the comfort of their homes.

Dropshipping is the “consumer” (and cheaper) version of private labelling. While the phenomenon is not all that interesting in and of itself (it is, after all, just a new face of commerce) a pretty noticeable takeaway is the fact people don’t seem all that aware of the difference between manufacturers and resellers. It is, evidently, the reason behind all the fake marketing, the reviews recycling and the exorbitant markups: if people knew about it they would be buying on AliExpress already but the fact the 3.00 $ product gets sold for triple on Amazon.com is telling us people clearly don’t know what those products really are.

Dropshipping and private labelling

First things first, the origin of this phenomenon, as aforementioned, could be tracked back to private labelling, the practice that consists in a manufacturer creating products with no label or branding (hence “private”) for other businesses to rebrand and resell. It is a form of B2B commerce that existed since the 19^th century and that has thrived in giving commercial activity-focused firms the opportunity to market their own products along the ones they already sold, as well as proposing some advantageous deals for manufacturers, to the point private label-only industries were born.

In fact, the production of goods that are destined to be put on shelves with a different brand can happen either aside the manufacturer usual (and self-branded) lines or as the company’s only activity. The first case is very common in mass distribution, where a supermarket franchise builds a lineup of convenient products with its own brand through the private labelling firm’s outputs, often buying from the very same companies that sell an equal, though labelled, product on the same shelves.

benefits for all parts

This sort of symbiotic relationship is not all that weird in and of itself: it is a natural way for manufacturers to dispose of their sub-par or unsold production by making money out of it by being able to discount their marketing-related markup, and an opportunity for distributors to widen the offer variety to lower price ranges, in many cases with equal quality.

The situation is particularly convenient for distributors as they have little to nothing to do in order to market their own product to customers, either businesses or clients. This way it’s almost as if the manufacturer gets the opportunity to compete on a cheaper side of the market without having to take care of all the pricey steps it would usually take to bring a new product to market.

The evolution of private labelling

In recent years, private labelling has undergone significant changes, initially shifting to a perspective in which lower prices were achieved at the expense of quality, hence reinforcing the common belief these alternatives were inferior, then going through a reform in the latter half of the 20^th century, rebuilding the perception of these products as viable alternatives. Fast forward to the present day, the food mass distribution sector, as mentioned, centralised private labelling as a strategic focus for distributors, allowing them to differentiate the offer, foster customer loyalty and achieve higher margins.

This happened due to consumer behaviours shifting towards a preference for cost-effective and reliable alternatives to national brands, growing the prominence of private labels in a landscape of supply chain disruptions and sustainability issues. The leverage appears even tastier in certain markets, such as that for certain national cuisines. These segments can be appealed to by distributors by acquiring private labels with strong extrinsic reputations, such as “Made in Italy” products, without them having to open a branch in a different country exclusively for this purpose.

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The role China played

Another perspective, and one that brings us back to the initial premise, is the growth various countries underwent in their volumes when it comes to commerce with China. The People Republic’s private label market has grown 22.7% between 2019 and 2020, a much more substantial increase compared to the fast-moving consumer goods market (FMCG) during the same timeframe. Although a smaller market when compared to Europe or the U.S., where countries like Switzerland hold 52% of the market share, China dominates private label manufacturing and exports in e-commerce. This is connected to the private label dropshipping mentioned at the beginning of this article.

what is dropshipping?

Dropshipping is a business model that achieved great success in the latest years, due to the apparent ease with which it can be employed by people looking for a remote, self-employed activity or just a way to make something extra. It consists in forwarding customer orders to suppliers that then ship the products directly to the customer.

Due to the nature of these products and the low upfront investment, the products’ quality, branding and packaging are not as in control of the seller, which is the reason this model is usually considered a different approach when compared to private labelling, where the seller owns a brand and invests with the manufacturer, commissioning specific branding and packaging. It is not hard to see, however, how the nature of the two approaches differs mainly in the availability of the manufacturer to brand products and in the intrinsic relationships that connect the factories with the entity selling their outputs to final customers.

Chinese manufacturers thrived with the production of generic goods, often sourced from AliExpress or Alibaba, offering custom branding even at low minimum order quantities (MOQ) for sellers who then market and position the product on Amazon, E-bay and Shopify-based websites, often taking advantage of specific programs, such as FBA (Fulfilment by Amazon), and customer behaviours, such as the low attention buyers pay to the sellers’ identity online.

Why the market changed

The phenomenon is the final output of a complex conjuncture, featuring a multiplicity of different factors. First is the variety of virtually indistinguishable products, sold at slightly different prices by different, all equally unknown hence indistinguishable sellers, which contributes to the aforementioned low attention that the sellers’ name or brand is paid to.

Moreover, the customers seeking for low-priced products, due in many cases to the unfavourable economic conjuncture certain countries or demographics are affected by, pushed a saturation of goods addressing exactly that segment’s demand. These products are often characterised by a generally low level of quality that customers are available to compromise with in order to acquire them at the previously mentioned low prices.

At the same time, savvy or frugal customers rightfully believe they can easily accept the compromise due to many luxury or mid-tier brands’ decline in quality, often aligning their throughput on the market with said dropshipped products in terms of worth beyond the brand. Finally, there’s the reviews, more and more often getting “recycled” from different products, when sellers rename and change the pictures and details to previously well-reviewed listings, either from their own profile or from bought accounts.

This way, the customer noticing the five stars review is not immediately inclined to buy the product anymore, but they have to check if the reviews correspond to the product or mention a different one first. Obviously, fraudulent sellers carrying out review hijacking don’t care about the brand image or the name as both are often interchangeable with new identities, even though they can’t exactly be bought cheap, especially when the accounts are established and feature many positive reviews, with estimates ranging up to $ 50,000.

“Disposable” alternatives

While the customer’s responsibility, which is luckily getting more and more a prominent and widely-discussed theme, is surely the crucial one, all these different factors contribute to a distraught market for “disposable” alternatives to typically durable products, moving cheap electronics, appliances, power tools, accessories, fashion, etc. closer to FMCG, limiting their lifespan (which isn’t even felt as that much of an issue anymore due to planned obsolescence) and their substitution rate. The ever-decreasing quality and, most importantly, durability is a widespread and concerning trend in commerce, affecting all industries with the rise of (Ultra) Fast Fashion, Dropshipping from dupes manufacturers and, among others, yet another cycle of quality decline in many private labelling firms’ throughput.