OEM stands for Original Equipment Manufacturer and the term describes a web of relationships among hardware vendors, component makers and channel partners such as resellers and distributors.
Many cosmetic and health supplement companies, especially startups see an OEM partner relationship a way to grow their business and expand their markets. However, just like any relationship, sometimes it works well and others not realising their goals.
Here is a guide on the Pros and Cons of Cosmetic OEM, and what you should consider before making a deal.
1. Cost-Effective Products
You will benefit from the cost as the supplier will be creating bulk amounts of goods to sell. This will lead to a higher profit margin, especially if your private label product will be competing with branded products, which usually cost more.
2. High-Quality Products
Often you will receive high quality products because the cosmetic manufacturer will test according to their strict testing standards.
You will benefit from the technology that OEMs provide, especially if you are just starting up, and don’t have the expertise or technology to create cosmetics or dietary supplements. Additionally, it saves you a lot of time and money spent on testing.
4. Intellectual Property
When you use an Original Equipment Manufacturer, you keep all trademarks and intellectual property rights associated with your design and products. Just make sure you register your private label before start selling.
5. Professional Service
An OEM company usually provides an efficient and professional service. Why? Because B2B companies can be more demanding than B2C customers. So to keep the customer, offering a good service, a high quality product and a great support is a must.
Since you are the creator, you control the prices and production of the products. You can modify the cosmetic or dietary supplement depending on the needs and requirements of buyers.
7. Brand Name
Because you are creating your own private label product, your brand name can become valuable over time and bring along good profits.
Even though there are more advantages than disadvantages, you should consider the following before making a deal with an OEM cosmetic manufacturer.
1. Lower Price
Many private labelled products can be sold at a lower price, in comparison to branded products. This could be a problem, especially in the initial state, in which you are spending lots of money on private labelling, leaving a lower profit margin.
2. Hard to Find an OEM Cosmetic Manufacturer
As most OEM Cosmetic Manufacturers only deal with companies that have high demand, it can be hard if you can’t sell enough products. However, there are also OEM manufacturers that offer higher flexibility, such as Ori Bionature
3. Intellectual Property Rights
You will have to register all your designs and components, to prevent other companies from stealing your creation. This could take a lot of time if you have no idea how to go about it. Talk to your OEM Cosmetic Manufacturer if you need further advice.
4. Additional Costs
Creating your own logo and packaging for your private label product can incur some additional costs.
When you establish a business relationship with an OEM cosmetic manufacturer, the most important thing is to understand your company and the market you are targeting.
It is a good idea to create a Partner Requirement document, so you can tell the manufacturer what your company wants. Also explain to the manufacturer your idea, your product, who it competes with and how is it differentiated.
If you can establish good communication with your OEM manufacturer from the beginning, your chances of success can be greatly increased.
As you can see as with any other business, finding a good OEM cosmetic manufacturer can be challenging, but once you find a good company to work with the possibilities are endless.
The key here is patience. Additionally, the process will depend on your budget and experience selling products.
The better you are at selling and marketing your products, the higher your chances you can become successful in this business.