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Private Label Lessons From the Recession

By: Lisa Doyle
Posted: June 1, 2012, from the June 2012 issue of GCI Magazine.

As the slow climb out of the economic downturn that’s characterized the past few years begins, it’s with cautious optimism that consumers—and brands, as a result—are spending as abundantly on beauty as before. Those who were impacted the most by the recession are likely to continue to scale back financially, but those impacted the least are reducing their spend, as well. In fact, according to a 2011 report from Mintel, 64% of U.S. women surveyed in the $100,000–150,000 income bracket plan to continue buying private label color cosmetics, and, interestingly enough, just under 50% of their counterparts in the $50,000–74,000 and $75,000–99,000 brackets also report planning to do so. Why? According to more than half of those surveyed, it’s because private label products offer the best value for the money.

The result is business has boomed for private labels providing affordable beauty options. Not only that, private label suppliers have also partnered with brands to develop effective marketing strategies, attractive packaging and many of the same ingredients found in the more expensive brands that consumers are used to buying. By providing beauty products comparable to many national and global brands, along with top-notch customer service and turnkey solutions to their customers, private label suppliers are looking to grow market share through budget-friendly options.

Formulating to a Price Point

One key advantage of a private label supplier is the flexibility in its offerings. Many of them can tailor a product specifically to a customer’s needs, depending on how much money the customer wants to put into it—and get out of it.

“I have a customer I make a shampoo for that’s selling it for $45 at retail, and he does fantastically with it; and we also make a similar shampoo that sells for $4.95,” says Paul Lieber, CEO and founder of Royal Labs Natural Cosmetics, a private label manufacturer based in South Carolina. “It’s not like you can buy a cheaper or lower-quality version of the ingredients; the difference is you put less of the raw materials in the formula, so that the level of them in the formula goes down. Therefore, the product in the grocery store is cheaper because the quantity of raw materials is maybe 40% less than in the spa product, just so we can meet the price point.”