Kylie Jenner Isn't the Only Reason Ulta Gets Gen Z

6 Min Read |

Starting a beauty business has never been easier and sometimes it seems that a new cosmetics brand emerges almost every week. Major brands, bloggers, influencers and celebrities are all creating and releasing their latest products in the hope of capturing a share of a multi-billion dollar industry.

Many of these brands are finding manufacturers for their beauty products, and going to market with an offering they claim is better and more on trend than everything else we’ve seen before.

Some smaller start-up brands have been truly inventive. Megan Cox tapped into a growing trend for organic personal care products. Having tried many eyelash rejuvenating serums to help regrow lost lashes from wearing extensions, and being unhappy with the results, she decide to develop her own. Her chemistry background helped but found most of the information she needed on the internet. She developed a serum from all-natural ingredients designed to help regrow her lost eyelashes. Created initially for her own use, her friends convinced her to make it into a business. So she named it ‘Wink’ and began selling online with great success.

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The perfect Organic Beauty Duo. Shine & Wink #organicskincare #winklashandbrowoil #brighteningserum

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Formulating new products is not easy. There are health-and-safety and certification issues to be overcome that are beyond the capabilities of most start-ups and small brands. That’s why it’s generally left to chemists to create new formulas; Glossier recently introduced a mascara to their line. According to the product description it took 248 formulations to develop.

Major celebrities have capitalised on the attention of their existing audience and launched beauty lines and cosmetics ranges. Kylie Jenner built a business empire out of lip kits and fan worship, and Huda Kattan, a makeup artist turned digital influencer, with 27 million Instagram followers, started Huda Beauty in 2013 after three years of blogging about cosmetics. In December the company sold a minority stake to private equity firm TSG Consumer Partners.

The big players have the resources to use contract manufacturing for economies of scale. But for smaller brands, stores and start-ups that don’t have a background in chemistry, how do they do it?

For most brands there are two routes to market; private label and white label.

Private Label

Private label products are created and made by a manufacturer who then allows others to sell them under their brand name. A manufacturer will make products to be sold under another company’s label. The manufacturing company retains the control over the product (specifications, quality etc.). In other terms, the manufacturer remains the owner of the products, which are positioned as a low-cost alternative to well-known products of same or different brand. They and their products are fully certified, although a brand will need separate certification if a product is re-labelled.

Startups like Brandless are rewriting branding narratives by selling plainly packaged high-end cosmetics and grooming products at an affordable price point. The idea behind Brandless is that it can add value for the consumer by selling quality products without a so-called “brand tax.” Instead of having a big logo emblazoned on a their beauty range for instance, the actual attributes of the product are listed on the package.

Many superstores sell their own brands along with other well-known brands as they are generally more profitable to the store.

These manufacturers will have their own standard products but will often provide an option for brands to ‘tweak’ formulations; developing a bespoke product unique to a brand that’s not a copy of someone else’s. These products are typically made by the manufacturer to be sold exclusively by a specific seller.

Many products seen on the shelves or online are researched, created and packaged by private-label companies. Labs like Englewood, Mana and Radical cosmetics offer B2B solutions for brands to create their own products. Many also offer a creative service to design and create unique packaging. Allingham Beck Associates, a cosmetics innovation and brand development company says “Private label reflects the ethos, values and aspirations of the brand…it should support the aims of the brand in every way and aim to give it a marketing edge”.

One of the great advantages in using a private label lab is the ability to adjust a formula to give the brand a USP. Seeing a trend in the market towards a particular ingredient the company can adjust or re-formulate a product quickly.

White Label

Another option for those wishing to start their own cosmetics brand is white label. Generic cosmetics are produced in Asia and other places around the world, but they are still governed by the same regulations as any other product and can be just as safe and effective.

It might be surprising for consumers to learn that many cosmetic beauty products, from different brands, come from the same source and may potentially even have the same ingredients.

These generic products are sold for brands to label as their own. Salon owners, aestheticians, online sellers and others can build a beauty label without having to invest in the formulation, manufacturing and packaging. They are a great low-cost entry point for those wishing to extend their range or start a new business.

For a small brand or start-ups the advantages of using white label labs include no development costs, low minimums and no concerns about limited supply. The manufacturing company maintains a supply of product and all a brand has to do is apply their custom packaging and labelling to make the product their own. An individual can choose any combination of products, package them as they see fit and sell them under their own brand label. In a sense the brand is a curator rather than a creator.

White label is also a great way for beauty salons, boutiques and single stores looking to add value to their business. Order quantities are small and there’s little concern regarding formulations; all a client needs is money and an idea of what products they want to distribute.

One of the disadvantages is that their packaging and appearance is often bland and generic. But the manufacturing companies can often supply the product in an unbranded package, ready for re-branding, or in bulk form.

Transparency

There’s nothing inherently wrong with anyone using white label products and branding them as their own. There’s no issue with the products themselves. And there’s nothing wrong with making a profit. But it raises the question of transparency? A favourite buzzword for today’s cosmetics market.

The trend over the past few years has seen consumers looking for more transparency from brands. Whether it be the ingredients or their sources. So when a consumer buys a product, believing it to be unique to a brand, how do they know if it’s private label, developed by the company, or a white label product that’s had a brand label attached or been re-packaged? Well, they don’t.

Brands are not obliged to disclose if they’ve developed a product or whether they simply bought it and re-packaged it. Some many companies are giving the impression that they are selling products that they themselves have created, when the truth is they are generic products. This leads to a situation where two brands selling identical formulations can make different claims and sell at two wildly different prices, simply because of the marketing. With so many new brands entering the market this can lead to confusion and distrust among consumers.

If the practice becomes highlighted among the audience – easily done through social media – it could lead to a general mistrust that impacts on those brands who are genuinely trying to make a difference. And many brands have put a lot of effort into creating innovative products and building a reputation of trust with their customers.

A more open stance by those using white label products would be a step towards transparency. After all, if their customers trust them to choose products based on effectiveness and quality then their customers will still buy from them.

For consumers, white label cosmetics is a hidden issue in the cosmetics industry and one that has potential to cause problems for many brands in the future. Maybe some sellers should be more upfront about their business model.

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