3 Cons to the Private Label Industry
What exactly does private label mean?
Private label means to purchase a stock formula from a private label manufacturer with your logo on the label. Private label was created to make it easier for a starter brand with little to no experience and/or capital to create a product line.
The manufacturer usually provides a catalog with stock formula choices based on a market category i.e. skincare, haircare, anti-aging, sun care, color cosmetics. If you see something of interest, the manufacturer usually sends you samples or a sample kit (costs may be associated). Your upfront manufacturing costs are usually minimal, there is usually a one-time setup fee and a plate charge (for your logo) and then of course your per unit cost based on volume.
The more you order the less your per unit cost is. Sounds simple enough, yes, manufactures try to make the process as simple as possible. However there are several limitations, disadvantages and horror stories to choosing private label over custom formulating.
When it comes to private label, you’re purchasing a stock formula. This same stock formula is sold and marketed to several brands. So what makes you different again? NOTHING! A lot of the times people can tell you are a private label brand by comparing ingredient lists to your competition.
When it comes to private label, you do NOT own your formula. This is the BIGGEST DISADVANTAGE and poses the most risk to your business. You have zero control over your business and zero control over pricing. What happens if your manufacturer goes out of business or your product is discontinued? You can’t take your production to another manufacturer – you don’t have a formula to give them because you don’t own your formula. What happens if your manufacturer wants to increase your pricing? You can’t get other quotes on production because you don’t have a formula to give them to quote – you don’t own your formula. Owning your formulas equates to owning your brand. Without your formulas, you have no brand.
There are pros and cons to choosing private label manufacturing. Though there may be less start-up costs, in the long run it will end up costing you more. If you are truly passionate and dedicated to the success of your brand, private labeling is not the route you want to go. Freelance Formulations offers custom formulations. We consult with our clients to gain clarity on their concept and vision to produce the best custom formulation.