14 Min Read |
It’s an exciting time for anyone considering entrepreneurship with the beauty industry. As an entrepreneur you have probably considered a number of options and avenues you think would best suit your skill set, and ultimately focused on an area where you see the greatest opportunity for growth.
As excitement surrounding your idea grows and you spend time researching how to start your own beauty business, many options and choices will appear on how to actually get started.
Yet typically, many entrepreneurs encounter unforeseen challenges that cost them time and money when it comes to finding the right cosmetics manufacturer for their beauty business. Finding the right partner is tough work and can be at times frustrating.
In this article, we’ll cover all you need to know as your search for a reliable manufacturer for your new business. Taking into account where to start your search, the best way to approach potential partners and how to qualify them.
Table of Contents
- The Fundamentals: What Are You Looking For?
- Domestic vs. Overseas Manufacturers
- Where To Start Your Search For A Manufacturer
- Requesting A Quote
- Evaluate Bid Submissions
- Negotiating Supplier Contracts
- Monitor Supplier Performance
- Ready To Start Your Journey?
The Fundamentals: Where to start?
For the sake of the simplicity we’ll refer to manufacturer as anyone who is the position to supply your business with the required inventory. At times this may also include suppliers, distributors or wholesalers.
Starting out, there are a few key points you need to consider.
Firstly, you need to think about what the type of manufacturer you want to work with. This will establish the research guidelines for your requirements. There are a number of options you should consider, including:
- A manufacturer that will produce a product unique to your requirement
- A manufacturer who creates private label products then allows others to sell them under their brand name.
- A white-label manufacturer produces their own produces but allows other companies to rebrand and sell them as their own. These in some scenarios may also be suppliers, wholesalers or distributors.
- A manufacturer who is also a dropshipper, ready to fulfil orders of existing brand and products from their warehouse so the retailer does not need to hold inventory.
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Domestic Vs. Overseas Manufacturers
A major consideration will be whether you decide to manufacture overseas or domestically. Through research you will discover many of the overseas manufacturers are based in European or Asian countries, like France, Singapore or South Korea. Traditionally countries like China or India have been known to produce cosmetic products at the lower end of the quality scale, this has been partially driven by access to cheaper manufacturing costs such as labor or raw materials. It will often be cheaper as start-up entrepreneur to source your product from these countries when establishing your business. However, there’s much more to consider than just the initial outlay for inventory. Both domestic and overseas manufacturing are advantageous in their own right:
- Higher standard of quality and labor.
- Typically, easier to communicate, and accessible if face to face meetings or site inspections are required.
- Carrying a “Made in…” that identifies a western country is generally still more desirable from a consumers point of view.
- Western countries are usually more heavily regulated and therefore it is straightforward to identify reputable manufacturers.
- Quicker delivery times.
- Intellectual property rights are protected by international law.
- There is greater security and recourse when it comes to payment.
- Manufacturing costs can be high – labor and production costs.
- Restricted product choice. Some products may not be manufactured locally.
- Reduced manufacturing costs. Manufacturing a product overseas is typically less expensive than manufacturing it domestically.
- Greater variability, with a higher number of manufacturers to pick from.
- Easy to find. International manufacturers can be found with very little effort using well-known platforms such as Alibaba.
- High-volume capability. International manufacturers are often equipped to efficiently produce high volume orders in a single production round.
- Perceived inferior quality manufacturing by customers.
- Less secure intellectual property rights. Without the stringent protections of U.S. and EU intellectual property laws, it’s more likely (though still uncommon) that your idea could be stolen.
- Difficult and expensive to verify a manufacturer and visit if a meeting is necessary.
- Longer shipping time, and increased shipping costs. When products intended for domestic sale are manufactured overseas, the cost of shipping them back to the original country can often override any savings made from the reduced manufacturing expense.
- Less protection for payments and little recourse.
- Cultural differences. Cultural norms may be difficult to navigate in business practice and language barriers may complicate communication.
- Limited oversight. Without hiring a third party or making a trip to the facilities, there’s no way to keep an eye on how the facilities are run or to witness the production of your product.
- Product importation and customs clearance. However, experienced overseas manufacturers may have the necessary knowledge to help their customer mitigate domestic costs.
- Exposed to currency fluctuations. For instance, if your company is based in a country with a weak currency compared to overseas regions, it would be cheaper to source materials locally.
Other challenges posed by international sourcing include hidden costs such as trade protectionism, emerging new suppliers and technologies, economic disruptions, and regulatory shifts.
Where To Start Your Search For A Manufacturer
At this stage you should have more clarity on what exactly you are looking for, along with an understanding of the advantages and disadvantages of domestic manufacturing vs. overseas sourcing. So where should you begin? Internet search is the most logical place to start, and there are a number of resources in particular that will assist you:
- Online Search
- Exhibitions & Events
- Local & University Libraries
Many of the best free resources are online directories. These platforms list the profiles of thousands of manufacturers, suppliers and distributors. Here we have listed some of the more well-known portals for sourcing both domestic and overseas suppliers:
- Kompass: A leading online global business directory with nearly 4 million registered businesses in 60 countries.
- Alibaba: An international business-to-business (B2B) site connects suppliers with buyers across the globe on a single marketplace platform.
- eWorldTrade: a US-based B2B platform for sourcing manufacturers, suppliers and distributors.
- Made-in-China: A platform to connect with mainly Chinese suppliers and manufacturers.
- DHgate: a Chinese B2B and B2C e-commerce website facilitating trade for manufacturers, distributors and small to medium size retailers.
- Global Sources: A Hong-Kong B2B platform that facilitates trade from Greater China to the world.
- AliExpress: An online retail service based in China that is owned by the Alibaba Group, made up of small businesses in China and other locations,
- IndiaMart: India’s largest online B2B marketplace, connecting buyers with suppliers.
- Sourcify: One-part product management tool and one-part directory of hundreds of pre-vetted manufacturers, all of which are personally sourced and approved by Sourcify.
- ThomasNet: An online platform for supplier discovery and product sourcing in the US and Canada.
- Maker’s Row: An online marketplace that connects American manufacturers with small, medium-sized, and product-based businesses.
Although the above directories are listed on Google, there are manufacturers in the market that have actively built their own online presence. Many manufacturers unfortunately are poor at developing and maintaining their online presence and often have old, badly optimized websites with outdated information. However, some manufacturers that are commercially astute have kept up with the times in order to generate business outside of online directories or B2B platforms.
So where should you start your online search for a manufacturer? They say the best place to bury a body is on page two of Google as nobody ever goes there, however beyond the initial search results you can find an abundance of information to help you find a suitable partner. You’ll need to use a mixture of search terms. For instance, using the term ‘cosmetics manufacturer’ and ‘makeup manufacturer’ may produce different results, therefore it will be trial and error until you find what you are looking for.
Attending industry events and exhibitions is another great way to find suppliers and examine their products and services. Although beauty brands and entrepreneurs often work largely online, and many start-ups use e-commerce platforms, there is value in connecting face-to-face with a potential manufacturer. For instance, Beautyworld Middle East is hosts over 1,800 exhibitors and 40,000 visitors from the B2B beauty industry in Dubai over three days.
Attending a beauty industry exhibition in person can lead to long lasting professional relationships that can help you grow your business. It’s an ideal situation to source samples, speak to potential partners and collect valuable feedback from peers and other beauty industry professionals.
Local & University Libraries
Although it may seem like an outdated suggestion in an age when you have access to the internet at the tip of your fingers, but local or university libraries can be good source of information. Some libraries require a monthly fee to access their resources, however checking first if they have directories that fit your requirements can save you time and money. These directories should have an extensive global database of manufacturers, wholesalers and distributors,
Referrals can be some of your best sources of leads for sourcing a manufacturer. Asking professional connections within your network for recommendations can put you on the right path immediately. You should not be shy about asking for recommendations, in fact seek out those you know have found success and are willing to share their contacts.
Networking on social media has made it easy to approach contacts within the business. LinkedIn particularly is having its moment with just over 610 million active users on the platform, most looking to share ideas and advance their businesses. Facebook groups are also an excellent source of information. Platforms like Reddit and Qoura are a great way to tap into niche communities and ask people for their thoughts or feedback.
As you begin to reach out to potential manufacturers, be sure to ask them for direction if they turn out not to be the right fit for your business. Being from within the industry means they will likely have a broad range of contacts that could potentially help you.
As you do start to uncover suppliers, even if they aren’t the right fit for you, be sure to ask them if they can point you in the right direction. Being in the industry means they’ll likely have great contacts and would be happy to refer you to an option that might be a better fit.
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Requesting A Quote
When you have narrowed down your search and have selected the manufacturers you see potential with, it’s time you contact them. Naturally, your first question is going to be “What’s the cost?”, however first consider the questions you need to ask.
Being clear about your objectives will increase your chance of getting a response and the information you need. Below are some important questions you need to ask:
- Minimum order quantity?
It is important to check this; it can vary significantly depending on supplier.
- Sample pricing?
You will probably want to see samples before you place an order, these samples are usually not free.
- Production pricing?
It may seem obvious, but you need to know what your production cost per unit will be. Furthermore, if economies of scale are taken into consideration then what discounts are available for bigger orders?
- Turnaround time?
Understanding our lead time is important, it will help you plan future orders and determine how quickly you can fulfil your customer orders.
- Payment terms?
Upfront payment is typically the norm for any new businesses. Inventory is a major cost unless you are using a dropship model, therefore payment terms are important to know.
Finding the right cosmetics manufacturer is not easy. Many get inundated with a ‘Request for Proposal’ (RFP) or a Request for Quotation (RFQ) from businesses that may not be serious, therefore manufacturers may not reply to every request, particularly if you are a new business. When emailing a manufacturer for the first time be clear about who you are and what you’re looking for.
Your first email should include information about the products or services you need, along with quantities, delivery dates, and quality standards identified in your criteria. Ask the manufacturer to provide detailed information on the processes they use, the stability of their raw material suppliers (if applicable), and reasons why you should choose them.
Be patient, a lack of supplier responsiveness is a common criticism from new start-up entrepreneurs.
It is worth bearing in mind that if you choose to contact or work with overseas manufacturers, they may be using programs to translate communication between both of you. Keep emails short and to the point, in order to avoid information getting lost in translation.
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Evaluate Bid Submissions
After you receive all the requested information from every preferred supplier you have spoken with, compare each submission you receive against a checklist of criteria. This will be help you determine information or items that are missing and give you greater clarity when selecting the best option to go with.
Review the scope of the deliverables outlined in the proposal and consider whether they match your requirements. Decide on each criteria’s importance and score all submissions against this for an objective method of evaluation. Identify what the agreement or contract period with each potential supplier encompasses to ensure you don’t end up in a scenario that could be damaging to your business.
Negotiating Supplier Contracts
Once you have decided to move forward with a specific manufacturer, it is important for you to record the terms of the agreement in a written contract. Contracts are beneficial as they outline the expectations and deliverables of both parties and minimize disputes about each party’s rights and responsibilities.
- Negotiating Minimum Order Quantities
If this is your first time dealing with a cosmetics manufacturer for your beauty business, then you need to understand minimum order quantities. It is likely your preferred manufacturer will ask you to commit to a specific number of units for your first order. As a start-up entrepreneur this can be sometimes difficult as it typically requires a financial commitment at a time when the business has limited funds. However, most reasonable manufacturers are open to negotiation on a minimum order commitment.
Treat this relationship with your new manufacturer as a long-term partnership and understand there is risk on their side also. Before you negotiate, consider why the manufacturer has imposed a minimum order. Is there significant work upfront? Do they have a prior commitment to larger customers? Knowing the reasons behind a minimum order value will put you in a better position to negotiate and propose alternative solutions. Counter offers can range from paying a higher unit cost for a smaller order to suggesting a deposit for a larger order.
- Supplier Agreements
As a buyer it is preferable to have the written agreement drawn up from the purchaser side, however many established manufacturers will have their own contract templates prepared. Written agreements document all the specific details, such as what you want, what you’ll get, how much you’ll pay and when it will arrive.
Supplier agreements cover such issues as:
- Supply conditions, including volume, price, discounts, ordering periods, take or pay and delivery times.
- Payment terms.
- Specifications of goods or services supplied.
- Warranty periods for defective goods or services.
- Limited liability; to cover situations where there is risk of loss or damage.
- Intellectual property.
- Dispute resolution.
- Termination and exclusion clauses.
It is advisable that an experienced lawyer reviews any documents or contracts before the final agreement is signed, and operations start.
Monitor Supplier Performance
Sometimes even the most reliable manufacturer can make a mistake. Ensure you are assigned an account manager or have a direct point of contact within the company for any urgent issues. It is advisable to have regular performance reviews as the relationship progresses. This will help both parties share feedback on the progress and ensure both parties are fulfilling their obligations. It will also ensure there are no major surprises when it comes to contract renewal.
By following this advice, you should be confident moving forward when selecting a supplier who can help you build your business, ship the right product you need on time and deliver within budget. Having a reliable manufacturer you can trust will improve your productivity and efficiency as a business, and guarantee you are delivering to your customer the best quality product in the market.
Ready To Start Your Journey?
Finding a cosmetics manufacturer for your beauty business is a trial and error process that requires research, time and effort to select the most suitable partner. Looking for the right manufacturer is an important decision for your new venture.
There will be times when it is frustrating and situations arise that seem to create more setbacks than progress, however patience is key to finding the right partner for your beauty business.