Contract Manufacturing vs. Private Label in the Makeup Industry

If you are looking for a cosmetics manufacturer to build your brand, your startup must understand the basic concepts of contract manufacturing and private labeling.

Contract manufacturing means the company outsources the product’s production process to a professional manufacturer. In other words, you find a cosmetics factory to help you produce cosmetics.

Private labeling means the company sells the manufacturer’s products under its brand name. You can put your brand logo on the products produced by the factory.

Knowing the difference between the two can help newcomers to the cosmetics industry choose the right production method, reducing risks and increasing their chances of success.

If you continue reading, I will explain the pros and cons of contract manufacturing and private labeling and give practical advice on when to choose.

Contract Manufacturing vs. Private Label

التصنيع التعاقدي

Contract manufacturing refers to a contract between an enterprise and a professional manufacturer. The professional manufacturer produces products, while the enterprise is responsible for providing the design and specifications of the products.

The contract manufacturing model is conducive to improving the utilization of existing resources on a larger scale, promoting the refinement of the industrial chain, and facilitating the specialization and scale of the industrial chain.

Advantages:

• Expertise: Contract manufacturers usually have rich industry experience and technology and can provide high-quality products.

• Flexibility: Enterprises can adjust production volume according to market demand and respond quickly to market changes.

• Risk Reduction: By outsourcing production, startups transfer all or part of the production work and responsibilities to the other party of the contract, which can reduce fixed investment and operating costs, thereby reducing financial risks.

Disadvantages:

• Brand Control: The company has less control over the brand image and product market positioning, which may affect brand awareness.

• Delivery Risk: The manufacturer’s delayed delivery may prevent the company’s marketing activities from being implemented as planned.

العلامة التجارية الخاصة

Private labels are products one company manufactures and sells under another company’s brand name. Retailers often use private labels to offer unique items, expand their product catalog, and undercut competitors on price.

For example, if a company sells its brand of liquid blush, the formula is unique and different from other brands. In this model, the company is usually uninvolved in product development.

Advantages:

• Brand Control: The company can develop original product ideas and fully control the brand image, marketing strategy, and pricing.

• High Return Rate: The company can choose the right manufacturer based on the product type, production quantity, and degree of customization, which may result in a higher return rate by obtaining private label products at a cost lower than the market resale price.

Disadvantages:

• Cost: The initial investment may be high, including inventory management and marketing expenses.

• Production Responsibility: The company must bear more production and quality control responsibilities. Smaller companies may choose the private label model to develop high-quality products they cannot produce independently.

• Low Innovation: The degree of customization of products may be limited in the production of private labels. Depending on the supplier and product category, retailers may not have as much control over the product design process as they would like.

The Difference Between Contract Manufacturing vs. Private Label

How to Start Your Makeup Brand in Xiran Makeup Factory

Market Research and Positioning

To successfully create your cosmetics brand, you must conduct sufficient market research. Understand the age, region, preferences, and other information of the target consumer group and conduct in-depth analyses of competitors’ products.

Through market positioning, determine the brand’s unique selling point, find the positioning of your products, and differentiate competitive strategies.

Choose the Right Cosmetics Manufacturing Method

Choose contract manufacturing or private labeling according to brand positioning and market demand. The following is an analysis of applicable customer types for contract manufacturing and private labeling:

التصنيع التعاقدي

Suitable type:

• Startups and small businesses:

These companies usually have limited resources, and contract manufacturing allows them to enter the market with lower capital investment and avoid high equipment investment and operating costs.

• Companies that need to expand rapidly:

Contract manufacturers can provide flexible production capacity to quickly respond to market demand if the company faces demand fluctuations or seasonal peaks.

• Companies that lack manufacturing capabilities:

For companies with product design but lack production facilities or technical capabilities, contract manufacturing provides an effective solution that allows them to focus on core business rather than production processes.

• Companies seeking professional technical support:

Contract manufacturers usually have rich industry experience and can provide companies with technical guidance and quality control to help improve product quality.

العلامة التجارية الخاصة

Suitable type:

• Brand-driven companies:

It is suitable for companies that want to sell products under their own brand name and usually already have a clear market positioning and brand strategy.

• Companies that want to have full control over product image:

Private labels allow companies complete control over brand image, marketing, and pricing and are suitable for customers who value brand building.

• Companies with specific financial strength:

Private labels usually involve higher initial investments, including inventory management and marketing expenses, so they are more suitable for companies with relatively abundant funds.

• Companies that want to launch new products quickly:

For companies that want to enter the market soon and test new product concepts, private labels provide a convenient way to achieve this goal without taking production risks.

Find the Right Supplier

When looking for potential suppliers for private label cosmetics, skin care products or beauty products, you can narrow your search to those with experience in private label cosmetics, especially those with specific products you are interested in producing.

Please get to know them, build relationships, visit production sites, and ask about minimum order quantities or volume discounts.

In addition, you need to consider the following additional questions:

● Is the U.S. Food and Drug Administration (FDA) approved the supplier?
● Will the supplier print labels and packaging for you?
● What are the costs associated with labels and packaging?
● How does the supplier’s ordering process work?
● What is the lead time for new orders and re-purchases?
● Can the supplier send product samples?
● Can the supplier produce specific products you need, such as products that only use organic ingredients?

Develop Product Formulas

Invest a lot of time and energy in product research, development, and innovation to launch innovative products that meet market needs. Consider working with professional cosmetics manufacturers to develop formulas that meet market needs, continuously improve product formulas and packaging designs, and enhance product competitiveness.

The formula complies with industry standards and regulatory requirements.

For example, to sell private-label cosmetics on Amazon, you must ensure that the product description and labeling are correct. Cosmetics must be sealed and unused, and the packaging must clearly display the manufacturer or distributor’s identification code, such as batch number or serial number. Labels must be in English and include the following information:

● Product name;
● Product purpose or use (e.g., moisturizes the skin);
● Content of the cosmetic product by weight, measure, number, or combination;
● Full list of ingredients;
● Name and address of the manufacturer or distributor and any required label warnings;
● They may not claim to cure, mitigate, treat, or prevent human disease unless the FDA approves the claim;
● They may not use the FDA logo and may not state “tester” or “not for retail sale” on the packaging.

Brand Creation and Design

When you start branding, you can share your trademark with them so that they can incorporate it into your product packaging. Whatever you decide, make sure your cosmetic logo is eye-catching and recognizable.

When you design the shape and design elements of the bottle, think about your target customer. Do they want high-end luxury or minimalist style?

Regardless of the channel in which you will sell your product, brand image and message consistency are crucial for social proof and consumer loyalty.

الخاتمة

Startups must understand the difference between contract manufacturing and private labeling. Each model has unique advantages and disadvantages, and companies should make an informed choice based on their needs and market conditions.