If you’ve ever thought about having your own cosmetics brand, then the thought of private labelling must have crossed your mind. In that case, this article will go into depth about the steps you need to take.
The global cosmetics industry is worth an incredible $533.96 billion in 2022 and is expected to become $670.43b by 2026. It’s a competitive market, and in order to be successful, you will need to find the right strategies for creating, promoting and selling your products. For example, K-beauty (Korean beauty) products were assessed at an astounding $10.3 billion and projected to reach $20.8b in 2026, alongside the rise of K-Pop, which would make this a good time to look to Korea for a private label manufacturer.
Whether you’re a retail veteran or just getting started, you’ll need to gain an advantage over your competitors in order to succeed.
Let’s look at the steps you’ll need to take.
Branding & Positioning
The key to any successful business is to find the right niche and differentiate yourself from the competition, and cosmetics isn’t any different. You can start by identifying gaps in the market or unexplored areas that aren’t currently being served by existing businesses. Or could you add your own unique twist to an existing concept? Reef-safe sunscreen? Zero waste skincare? Women-owned business enterprise? Currently, there are some very interesting trends in K-beauty that are expected to dominate in the next couple of years, including plant-based skincare, products with fermented ingredients, retinol-based skin products as well as peptides to make your skin firmer.
Of course, if an idea is good there will be competition already, or there will be very soon. However, you don’t always have to be a great innovator to have a successful business. Many successful businesses started by taking an existing concept and just executing it better.
Be prepared to experiment and listen to customer feedback to consistently improve customer satisfaction.
If you know your audience well enough, just the right branding combined with effective execution can work wonders. Remember, you’re looking to create meaningful connections with your audience. Offering outstanding customer service also goes a long way in building long-term fans for your brand.
Finding a private label supplier
Once you’ve identified what products you’re going to sell, it’s time to find the right private label partner to work with. While there are plenty of choices, choosing the right type of manufacturer who will deliver high-quality products for your target audience at the right price can be challenging. However, here are a few things you should keeping mind when choosing a potential manufacturer:
Minimum order quantity – this refers to the smallest number of units a manufacturer is willing to sell to a customer. New sellers should start with small order quantities to avoid tying up their cash in inventory in case it doesn’t sell as well as expected.
Quality standards – The global cosmetics market involves a strict set of ever-involving regulations. Look for a manufacturer that not only invests in high-quality ingredients but also understands your local market’s regulations and is certified by the relevant local authorities.
Packaging design – In a world that revolves around branding, attractive packaging can be extremely beneficial in helping your brand to stand out. Do the packaging choices reflect your brand and appeal to your target audience? Some companies, but not all, offer the option to supply your own packaging materials. Find out if the company offers help with label design to help differentiate your products from others.
Research & development – The best private label manufacturers help you stay ahead of the curve by investing in continuous research and development as well as customer research in order to anticipate demand.
Once you’ve shortlisted a few companies you’d like to work with, you should contact them to order product samples. Test them on your own skin and ask feedback from friends and family to help you.
We’ve covered some additional tips on researching private label partners in this blog post.
So how much does it cost to start a private label cosmetics business? The truth is that there is no simple, one-size-fits-all answer. It all depends on a number of factors. The biggest expenses will most likely be related to ordering samples and initial product runs, but there are quite a few other expenses you’ll need to consider.
For example, if you’re planning to sell online, do you already have a website? What about advertising costs? In general, retail businesses should spend roughly 7-8% of their annual sales revenue on marketing and advertising. However, new businesses may spend anywhere between 10%-50% or more of their gross revenue.
At a minimum, you should include product costs, designing your brand identity and packaging as well as marketing costs in your budget.
One of the biggest problems with any new business is cash flow. Inventory can tie up a huge percentage of your working capital and end up crushing your cash flow, which is one of the most common reasons why new businesses fail. That’s why it’s usually best to start small and not invest too much cash in inventory until you’re certain that you can sell your products.
If you’re uncertain about demand, look for a private label partner with low minimum order quantities and work your way up from there.
Marketing lets your brand get creative; with numerous options available, new cosmetics brands can cast their net further and faster than ever before.
Having your own sales channel has the advantage of giving you control over just about everything from design and brand voice to product information, payments and returns. However, just building a website isn’t enough. Promoting your online store requires consistent effort via paid ads, social media, content marketing and/or SEO. Keep in mind that unless you already have experience in online marketing, you may have to invest considerable time in learning at least the basics or hire someone to do it for you.
A blog is a fantastic way for brands to build their online presence, become the go-to authority in their niche and build trust with customers. Shine the spotlight on your products, discuss current trends, and discuss your brand message.
Blogging requires consistent effort to get the most out of it with detailed keyword research to produce compelling content. Blogs are strategic pieces of content that need work. Blogging can be time-consuming but when done right, it can be one of the most cost-efficient ways to drive organic traffic to your site in the long term.
To decide what media platform to market with, look at other similar brands and where your target audience spends their time. Whether you choose to promote on Facebook, Instagram or TikTok largely depends on your target demographic.
Video content has been shown to be 54% more effective than any other form of social media posting. Videos are also the best way to showcase your products with demonstrations, reviews and tutorials.
You can reach out to influencers in your niche to create videos for you - sometimes all they need is a sample of your product. However, many successful influencers charge fees on top of product samples, which will cut into your marketing budget. Nevertheless, 49% of customers rely on influencer recommendations, making it one of the most effective marketing strategies for today’s brands.
There are a few options for selling your product line, including in stores, on your website or online marketplaces.
A store will sell your products on your behalf and always have a certain amount of products in stock. That means as customers buy your product off the shelves, a store will keep buying more stock from you.
A new brand can break down the barrier of building trust with customers organically by partnering with a reputable retailer. However, unless you already have a retail business, pitching to stores and persuading them to invest in selling your product will require a lot of effort.
On your website.
Today, brands are almost expected to sell their products on their website. Online ordering makes it more accessible, and you don't have to convince another seller to sell on your behalf. A website should already be part of your marketing strategy, and the funds for creation should be in your start-up budget. The disadvantages of selling via your own site mainly revolve around the cost of advertising and promotion, unless you’re already generating healthy organic traffic.
This is often the best strategy for a lot of new sellers. Ecommerce giants, such as Amazon, Etsy and Ebay offer a way to showcase your brand for millions of prospective buyers, and start-up costs are minimal (the platforms usually get a commission for hosting, advertising and selling your products to customers). You’ll have to work hard to build and maintain a good reputation, and it’s not necessarily the best way to build loyalty for your brand. The key takeaway is that Amazon and similar marketplaces are good to include in your overall strategy, but you shouldn’t rely on them exclusively for long-term growth.
Starting a private label cosmetics business in a nutshell
Partnering with a manufacturer to start a private label cosmetics business is a fast, cost-effective and low-risk way for new businesses to begin.
Once you have made all your business decisions regarding your brand, what products you will sell and for who, it’s time to find a reliable private label partner.
Then, decide how you will sell your products for the best customer experience and profit margin, and determine your marketing strategy and how you will connect with customers.
You’ll also need to set realistic financial goals to avoid blowing up your budget too soon. Your first year should be all about managing your expenses and maintaining positive cash flow.
For more information on partnering with a K-beauty private label cosmetics company, contact Cosmax today.