Welcome to Part 2 of my “Cosmetic Manufacturing Options for Your Skincare Startup” blog series. In Part 1, we covered the ins and outs and pros and cons of contract manufacturing. In Part 2, we’ll dive into the private label skincare startup option.
What is private label skincare?
Private label skincare is when you take a pre-existing product that’s already being produced for and marketed by another skincare brand, and sell it under your own label. This is not the same as contract manufacturing with stock products, because the private label houses are not necessarily the ones manufacturing the products. They essentially function as a middleman between you and the manufacturer. They order the products to retail under their own brand, and then they offer whatever they don’t sell under their own label at a price slightly higher than wholesale to anyone who wants a turnkey skincare brand.
Private label skincare is the most popular option among aestheticians, spa owners, wellness centers, and other practitioners who aren’t necessarily looking to mass market a skincare line. Instead, they are looking to serve their existing clientele or audience with a product line that complements their services. However, many skincare startups who are not practitioners or spas choose private labeling to start their skincare line.
Private label skincare pros:
Private labeling is a way to get a complete, professionally manufactured product that’s been tested for stability and microbial contamination, but for very low MOQs and opening order minimums. Though getting started with private label skincare still might require setup fees, your initial investment is far lower than what you’d pay for contract manufacturing, and you will get your products faster. Opening orders still might take several weeks, but repeat orders are faster, as long as the private labeler has the products in stock.
Some private label houses also stock different bottles to choose from, and label templates, though the choices will be limited compared to contract manufacturing (where the possibilities are pretty much endless). You might also be able to piggyback on the private label house’s product liability insurance policy (though this is not always the case).
All in all, private label may be a great way to get your skincare line started, especially if you are lucky enough to find a house that carries formulations and packaging you like, made from ingredients that meet your standards.
Private label skincare cons:
Though private label skincare might seem attractive due to the low minimums and faster turnaround time, when all is said and done, it will ultimately be the worst profit margin of the three cosmetic manufacturing options.
Anytime there’s a middleman involved, you will always pay more per unit. You are essentially paying a higher price for the product itself than you’d pay for wholesale (sometimes because private labelers actually private label their own products–there might be more than one middleman that you’re not aware of). Wholesale pricing itself is usually a 100% markup of the actual product cost from the manufacturer. So you pay wholesale plus the private label house’s markup and fees, and then you still have to pay for all the branding, marketing, sales, support, etc.
You will also have to figure out storage and fulfillment. Fulfillment centers cost money and have minimum requirements too, so it might be more feasible for you to handle your own packing and shipping–which means you will need storage and space for that.
Another issue (and perhaps the biggest con of private label skincare) is that you do not own the formulations, nor do you have any control over the ingredient quality, sourcing, or formulations themselves. If the private label house chooses to reformulate the product, you (or your customers) might not like it as much. If they choose to discontinue the product, then you will have to scramble to find a replacement.
I have seen it happen that a skincare brand’s product has been discontinued, and they have reorders without a way to quickly fulfill them since it takes time to find a suitable replacement. Since you do not own the formulations, you cannot take the product to another lab to have it manufactured, unless you were to obtain written permission/intellectual property rights from whoever owns that formulation.
Since many practitioners and spas often private label from the same companies, it’s not uncommon for spas to carry the exact same products, just with different labels. While not all customers will notice that, these days consumers are so savvy that it might get noticed.
Who is private label skincare best for?
Private label is best for people who do not want to create their own formulations or make their own products, but do not have the resources or infrastructure in place to make contract manufacturing feasible. Private label is also a great starting point for aestheticians, cosmetologists, spa or salon owners, or other skin wellness practitioners who want a branded line to offer their clients and patients, but don’t necessary plan to sell the line outside of their practice.
There are some really great options for private label now in the natural and organic/clean/green beauty sector. However, it can be limiting if you want to scale your business, and it is not always possible to find formulations for all the products you want in your line through one house, or that meet your brand’s criteria on what clean/green/organic really means.
Private label skincare is also not always a one-stop shop solution, and it can be hectic to manage getting private label skincare products from different houses. The available packaging might not match, and the lead times for reorders might not be the same.
Some contract labs also offer private labeling services, so that when the time comes to scale or if you need to customize a formulation, you have more options available.
You should still understand how to formulate and source ingredients, even if you choose the contract manufacturing route for your skincare startup.
Even if you don’t make your own skincare products, I highly recommend having a strong understanding of skincare ingredients and formulations. If you don’t, then you won’t know what questions to ask, or what answers are actually thorough answers. As the owner of your skincare brand, you need to be able to answer questions about ingredient quality or sourcing questions that come in from customers. With private label skincare, it can be very difficult to find answers to these questions, since your private label rep often has very limited information beyond basic features and benefits of the products.
Customers are extremely savvy nowadays, and ask far more specific questions than they might have even 5 years ago. Without the ability to quickly answer even the most obscure questions, you might wind up with difficult customer service issues.
I can help!
If you want to learn skincare formulation–even if you plan to have your products professionally manufactured–I can teach you that in Create Your Skincare Pro. You will also learn about ingredient selection, ingredient sourcing; as well as how to set your business up for success, market, and sell your products.
If you would prefer a more private learning experience, or you would like my help on a specific project or formulation, or finding the right private label house for your skincare brand, I also offer private formulation and brand consulting. Learn more and book your appointment here.
Coming up next in this series…
In Part 3, we’ll cover the ins and outs of manufacturing your skincare products yourself. Read that HERE.
Do you have questions about cosmetic manufacturing options for your skincare startup?
Go ahead and ask in the comments below, or I invite you to attend a live, virtual Herbal Skincare Tea Time Q&A call on Fridays at 2pm EST. RSVP HERE.