Is Private Label Cosmetics Profitable?
With any business comes great responsibility, so outsourcing the production process of your cosmetic products to expert manufacturers can be truly beneficial - and it’s now easier and more profitable than ever.
As consumer demand for wider and more responsible product selection grows, private labelling is fast becoming common practice in the world of cosmetics. There’s plenty of information available to prove how private label cosmetics could be hugely profitable - and here it is!
Is it Profitable to Sell Cosmetics?
It’s no surprise that COVID-19 lockdowns had an impact on the cosmetics industry, but adaptability is key, and the last couple of years have seen rapid growth in online sales and at-home ‘kits’. In short, yes - cosmetics is a highly lucrative business continually growing in popularity, and popularity means profit! For context:
- In 2020, global sales in the cosmetics industry totted up to an impressive $483 billion, and with a 4.75% annual growth rate, global revenue in the industry is set to hit a whopping $716 billion by 2025.
- Another significant trend in the cosmetics industry in recent years is sustainable beauty - whether natural, cruelty-free or vegan, it’s worth noting that by 2027, the global market value of clean cosmetics is expected to reach $54 billion.
How Do I Start My Own Cosmetics Brand?
The first and most important tip is to do your market research and find the perfect products for your brand - what will your target audience love? What do you want to sell? Once you’ve decided on that, here are some other important points to consider.
1. Know the Regulations
Depending on where you’ll sell your products, it’s a legal requirement to know and abide by the regulations surrounding manufacturing and labelling cosmetic products. Plus, strong and up-to-date knowledge of the products your selling is never a bad idea!
2. Pick Your Niche
As previously mentioned, sustainability is an increasingly popular trend in the cosmetics industry, but your niche depends on what you know and are most interested in. Pride yourself on diversity? Maybe your brand offers a diverse range of inclusive foundation shades. Whether it’s clean cosmetics, inclusivity, haircare or skincare, once you have your niche it’s important to stick to it.
3. Test Your Products
Before beginning to sell, testing your cosmetic products is important to gauge what other people think - you might predict your vegan lipstick to be a bestseller, but after giving out samples may find that it’s the eyeshadow palette that receives rave reviews. Only sell what gets a positive response - it’s as simple as that!
How Much Does it Cost to Start a Private Label Cosmetics Business?
A huge benefit of private labelling in the cosmetics industry is the lower initial investment when starting your business. When going it alone, huge amounts of money need to be spent on trialling various ingredients/combinations of those ingredients, manufacturing your products and sourcing appropriate packaging.
When you outsource production of your cosmetics, the groundwork has already been done - you can focus your money and energy on other aspects of your business.
Deciding on where you will sell your products is important in the early days, as is considering marketing strategies - using social media, for example, could significantly lower costs.
Predicting the costs of any individual private label brand is difficult, but in general you will need something in the range of $10,000 - $20, 000 to invest in your business upfront. Some other general start up costs to consider are:
- Product Development and Manufacturing - once you’ve decided on a manufacturer, you’ll need to figure out the cost of developing and producing your cosmetics.
- Business Expenses - think about rent, utilities, wages.
- Marketing and Sales - as discussed, online is a smart option. Running a website can cost around $500 per year.
Why is Private Label More Profitable?
Generally speaking, private label cosmetics are more profitable because it is usually easier to keep costs down - with certain products, manufacturing and distributing a private label brand can cost 40%-50% less than a name-brand.
Private labelling not only offers you the freedom to know exactly which ingredients make up the cosmetics you are selling to your customers, it also means you don’t have to go through the lengthy and pricey process of sourcing ingredients and making the products yourself. Buying the rights to an existing product to sell under your brand is cheaper (and easier) than doing it for yourself - increased profits, decreased stress!
Conclusion: Is Private Label Cosmetics Profitable?
All things considered, private labelling your cosmetic products is surely profitable. Given the benefits of lower costs and high quality assurance, you can offer your customers affordable retail prices and focus your energy into growing your brand. Private labelling in the cosmetics industry is the way forward.