Private Label vs. Contract Manufacturing

Starting a new brand with a manufacturer can seem complicated or intimidating at first. The first step is easy, which is choosing between two options: Private Label or Contract Manufacturing, so what is the difference?

The outcome for either service is the same; a product that you can sell under your brand name. The difference is the process, specifically the level of involvement between you and your new product(s). Some companies are strictly one or the other, while others offer both services, such as MARQ Labs and Private Label.

Private Label is the option where you choose an existing product from a manufacturer and put your brand name on it. Contract Manufacturing is the option where you are involved in each component of the product; formulation, packaging, and labeling.

Both routes are great options. It really just depends on what you’re looking for as a business, how much you can afford, and what you’re hoping to get out of your new brand in the long run. There are pros and cons to both, so let’s first discuss each option in detail, and then explore what that may look like for you.

Private Labeling – Choose Your Products

Private Labeling is the option typically better suited for small businesses who don’t have the resources or time to spend on creating a product. There are three components to a typical beauty product: formulation, packaging, and brand labels. If you do not have the resources or time to create these components, Private Labeling is the route for you. The highlight of this option is that it is turnkey. Once you find a Private Label company that offers the products your customers will like, you’re already halfway there.

Since Private Label products are already made, the process is extremely fast and simple for business owners. The order minimum is typically lower than those of Contract Manufacturing, so it’s more suitable for budget constraints and the sampling process. This also means fast shipping, so you don’t have to worry about missing products when you’re out of stock. Additionally, startup costs are low due to the lack of research and development on the entrepreneur’s side.

With so many options for products, you are able to curate the perfect collection to suit your brand. For example, Private Label offers a Coconut Water Formula for both the spray tan solution and self-tan mousse. You can choose to create an entire self-tan mousse collection that features all the formulas, or you can choose to create an “Extreme Moisture” line. It’s also easier on the business if they wish to mix different products, such as tanning and skincare, whenever a company offers a variety like so.

Due to the low cost, the business that goes the Private Label route will have high profit margins since they’re buying products at the wholesale price and charging a premium. Most Private Label companies will supply you with labels for your product, but keep in mind that branding is up to the business. Some companies prefer the Private Label route because they want to design the labels themselves, while others like the option of paying for the creation of the designs so that they don’t have to worry about it.

Pros

• Costs – smaller investment
• Profit – high margins
• Speed – time to market is reduced
• Order Minimum – low
• Focus – minimum involvement in creation process
• Restocking – time to ship is reduced
• Branding – logo builders make it easy to create your labels quickly

Cons

• Involvement – low level
• Branding – you may have to pay for designs if you don’t wish to design yourself

Contract Manufacturing – Create Your Products

Contract Manufacturing is the option typically better suited for larger businesses, or at least companies and entrepreneurs that have the resources to both pay for the product, and have someone create the product, who also oversees the process. The biggest difference in the two options is the level of control and involvement from start to finish.

Contract Manufacturing is ideal for business owners who want a product that’s completely unique to your brand, but there are a few cons to the process as well. Like previously mentioned, you’ll be involved in the formulation, packaging, and branding of your product. This, of course, costs more money and time than choosing an already existing product from a white label product line. Since the investment is larger and the process is more involved, this means the risk is much higher.

The first step is to choose a manufacturer, and that in itself is time consuming. You’ll want to first sample products and will need to make up that cost later. It’s important to thoroughly research each manufacturer before trying the product. For example, if you’re interested in CBD products, first make sure it is even a possibility with the manufacturer.

With that being said, Contract Manufacturing is much more creative for the business as opposed to Private Labeling. Depending on what products you’re looking at, you could come up with shade ranges, product names, ingredients, packaging ideas, collection themes, logo designs, and more.

Once you’ve chosen a manufacturer and have gone through the process of developing your products, keep in mind that the order minimum is going to be much larger than the Private Label minimum. Contract Manufacturing is intended for companies that are expecting higher volume orders than that of Private Label customers. Forecasting demand should be considered before deciding between the two. This also means that shipping will take longer since the orders are bigger, so keep this in mind when it comes to restocking your product(s).

Pros

• Involvement – very involved in decision making
• Branding – skilled designer works on branding
• Brand Uniqueness – brand is more unique to your business
• Competitive Advantage – higher chance that your competitors won’t have similar products

Cons

• Cost – larger & riskier investment
• Profit – lower margins depending on performance
• Speed – time to market is more limited
• Order Minimum – medium to high
• Restocking – time to ship is longer
• Dependency – manufacturer changes are your changes

Your Brand. Your Way.

Private Label allows you to focus on branding and selling your beauty products with turnkey processes that involve easy sampling, low minimum orders, and fast shipping. Private Label covers all product development and manufacturing, so that you can enjoy low risk, branding control, and low startup costs with high profit margins.

MARQ Labs specializes in the complete range of wet goods manufacturing. The team of industry-leading chemists, product specialists, QA officers, designers, and marketers work directly with you to turn your vision into reality. The facility is capable of producing small batch manufacturing or higher volume batches for a wide range of wet good forms.