OEM stands for Original Equipment Manufacturer and the term describes a web of relationships among hardware vendors, component makers and channel partners such as resellers and distributors.
Many cosmetic and health supplement companies, especially startups see an OEM partner relationship a way to grow their business and expand their markets. However, just like any relationship, sometimes it works well and others not realising their goals.
Here is a guide on the Pros and Cons of Cosmetic OEM, and what you should consider before making a deal.
Pros
Cost-Effective Products
You will benefit from the cost as the supplier will be creating bulk amounts of goods to sell. This will lead to a higher profit margin, especially if your private label product will be competing with branded products, which usually cost more.
High-Quality Products
Often you will receive high quality products because the cosmetic manufacturer will test according to their strict testing standards.
Technology
You will benefit from the technology that OEMs provide, especially if you are just starting up, and don’t have the expertise or technology to create cosmetics or dietary supplements. Additionally, it saves you a lot of time and money spent on testing.
Intellectual Property
When you use an Original Equipment Manufacturer, you keep all trademarks and intellectual property rights associated with your design and products. Just make sure you register your private label before start selling.
Professional Service
An OEM company usually provides an efficient and professional service. Why? Because B2B companies can be more demanding than B2C customers. So to keep the customer, offering a good service, a high quality product and a great support is a must.
Control
Since you are the creator, you control the prices and production of the products. You can modify the cosmetic or dietary supplement depending on the needs and requirements of buyers.
Brand Name
Because you are creating your own private label product, your brand name can become valuable over time and bring along good profits.
Cons
Even though there are more advantages than disadvantages, you should consider the following before making a deal with an OEM cosmetic manufacturer.
Lower Price
Many private labelled products can be sold at a lower price, in comparison to branded products. This could be a problem, especially in the initial state, in which you are spending lots of money on private labelling, leaving a lower profit margin.
Hard to Find an OEM Cosmetic Manufacturer
As most OEM Cosmetic Manufacturers only deal with companies that have high demand, it can be hard if you can’t sell enough products. However, there are also OEM manufacturers that offer higher flexibility, such as Ori Bionature
Intellectual Property Rights
You will have to register all your designs and components, to prevent other companies from stealing your creation. This could take a lot of time if you have no idea how to go about it. Talk to your OEM Cosmetic Manufacturer if you need further advice.
Additional Costs
Creating your own logo and packaging for your private label product can incur some additional costs.
When you establish a business relationship with an OEM cosmetic manufacturer, the most important thing is to understand your company and the market you are targeting.
It is a good idea to create a Partner Requirement document, so you can tell the manufacturer what your company wants. Also explain to the manufacturer your idea, your product, who it competes with and how is it differentiated.
If you can establish good communication with your OEM manufacturer from the beginning, your chances of success can be greatly increased.
As you can see as with any other business, finding a good OEM cosmetic manufacturer can be challenging, but once you find a good company to work with the possibilities are endless.
The key here is patience. Additionally, the process will depend on your budget and experience selling products.
The better you are at selling and marketing your products, the higher your chances you can become successful in this business.
The cosmetics industry has been growing rapidly over the past few decades and is still attracting more and more newcomers.
With thousands of outsourced manufacturers around the world, it’s now easier than ever to build your roster and get into the game, even on a personal level.
In this article, we’ll take a general look at OEMs in the cosmetic industry, and then discuss the pros and cons of using an OEM company to build your own cosmetic line from the inside out.
Finally, we will share some of the features we offer as an OEM Co., Ltd.
Might be a bit “too much information”, but it’s always good to start with the basics. Let’s take a look at what OEM stands for and how it differs from ODM.
You may have seen the term “ODM (Original Design Manufacturer)” before, sometimes in the same paragraph as “OEM” and may be wondering what the difference is.
Simply put, an ODM is a company that designs and manufactures products. In the cosmetics space, many companies use the word as a “we do everything for you” statement. However, this actually means that ODM companies rebrand existing products in their catalogs for other companies to bring to market.
Aside from the branded prints on Amazon, you’re likely to come across a lot of products that look exactly the same. This means they are products from the same ODM.
OEM, on the other hand, is the manufacturing company that originally designed the product for you or produced the product designed by you. If we go back to our Foxconn and Apple example, you’ll see why it’s an OEM and not an ODM.
The benefits of using an OEM cosmetic manufacturer.
1.1 – High initial cost
2.2 – Inventory Management
3.3 – Production Limitations
With OEM, you can develop formulations and package them from scratch.
This solution gives you more flexibility when creating new beauty products. You work with cosmetic manufacturers to design your own formulas, shade ranges, and packaging. This means that you still have more room for differentiation in the market, as you can develop a variety of cosmetic products that are completely unique and communicate your brand values.
If you are confident enough to put your efforts into every step of the production process, then this is the right path for you!
With private labeling, you can pick up some “off the shelf” products, customize and give them your name.
Compared to OEM or contract manufacturing, private label has less room for customization, but startup costs are much lower because you don’t need to invest in R&D.
In fact, we are a private label cosmetic company that has developed and tested all of our products. With so many formulas in our library, you can pick and choose to curate the perfect collection for your beauty brand.
You can enjoy high-profit margins by buying products at wholesale prices and charging customers a premium for the brands you create. Note that choosing this solution doesn’t mean you’ll get a cheap product, not at all! Even if you rely on a manufacturing company partner to produce your hair or skincare products, you can get high-quality products (even luxury beauty products).
Soft matter formula, light-as-air texture that provides a gentle hug to lips from our OEM lipstick.
Matt & Glitter velvet-like eyeshadow palette made in South Korea and available for fast OEM with a diamond look.
Rich-pigmented and long-lasting stick shadow, which has cream-to-powder formulas.
OEM Primer: silicon-free, vitamin bomb, fresh grapefruit fragrance. Improves, brightens and cleanses skin tone.
Want to get to know more about our OEM Cosmetic Manufacturer Formulations? Get in touch: HERE
See more of our other formulations here: Private Label Makeup Manufacturer – Our Private Label Formulations – (sourcing-lab.com)