Is it better for brand owners to find cosmetic processing factories for OEM or to take stock

In the cosmetics industry, whether to choose OEM/ODM production or spot goods depends on the comprehensive judgment of the company's resources, goals, and market strategies. The following is a comparison of two modes and recommendations for applicable scenarios:

1、 Advantages and disadvantages of OEM/ODM production

Advantages:

Brand Personalization

Customizable product formula, packaging design, functional selling points, creating differentiated brand image, suitable for long-term brand building.

High profit margin

Higher independent pricing power, especially suitable for the mid to high end market, with greater profit potential.

flexibility

Adjust the formula and packaging based on market feedback, iterate the product (such as launching seasonal limited edition).

exclusive

Avoid homogenization with competitors and creating technological or design barriers.

inferiority:

high cost

We need to bear the upfront costs of research and development, design, molds, and filing, with a high minimum order quantity (usually starting from 50000 to 100000 per item).

Long cycle

It takes 3-6 months from research and development to mass production, which may miss the market hot spot window period.

High risk

The risk of inventory backlog is high, and it is necessary to accurately predict market demand.

2、 Advantages and disadvantages of taking spot goods

Advantages:

Low cost and fast start

No R&D investment required, low minimum order quantity (can be tested in small batches), suitable for new brands or channel partners with limited budgets.

Buy and sell now

Without waiting for the production cycle, it can quickly distribute goods and seize the market (such as riding on short-term traffic dividends).

Zero inventory pressure

Purchase on demand to reduce the risk of unsold products.

inferiority:

Serious homogenization

The product is similar to its competitors, making it difficult to establish brand awareness and prone to price wars.

Low profit

The factory has reserved profit margins, but the brand's premium ability is weak.

Passive product selection

Due to the existing product line of the factory, it is unable to meet personalized needs.

3、 How to choose? The key lies in the stage and goals of the enterprise

The situation of choosing OEM/ODM production:

Medium - and long-term brand planning: plan to deeply cultivate the industry and create its own IP (such as Perfect Diary and early model of Huaxizi).

Strong differentiation demand: targeted at segmented populations (such as sensitive skin, pregnant women) or innovative categories (such as micro ecological skincare).

High channel premium capability: Entering high-end shopping malls and beauty collection stores requires high value-added product support.

Selection of spot goods:

Testing the market: Start up teams validate business models, or cross-border sellers test products (such as TikTok's popular products being sold alongside).

Low cost distribution: Social e-commerce/live streaming sales require fast updates and low requirements for brand tone.

Supplement product line: Fill basic categories (such as makeup remover wipes) with stock, and concentrate resources to create core products.

4、 Precautions

Factory qualification review

Regardless of the mode, it is necessary to confirm that the factory has a "Cosmetics Production License" and that the product meets the filing/registration requirements (especially for special cosmetics).

Contract Risk

Clearly define the ownership of intellectual property rights and the division of quality responsibilities during the branding process; Spot goods need to confirm whether they have authorized sales qualifications.

Market compliance

Claiming that functions such as "whitening" and "anti wrinkle" require corresponding efficacy reports to avoid false advertising.

5、 Trend Suggestions

Light asset model: In the initial stage, spot goods can be used for trial sales, while collaborating with factories to develop 1-2 customized star products, balancing risk and uniqueness.

Pay attention to policy trends: Under the new regulations in 2023, evidence must be submitted for cosmetic efficacy claims, and factories must ensure compliance support when labeling.

Summary: Short term survival requires spot inventory, while long-term development requires OEM. It is recommended to prioritize factories with research and development capabilities and high cooperation, gradually transitioning from spot goods to customization, and balancing investment and brand growth.