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Why Should My Business Consider Private Label Skin Care Products

By Leroy Evans,2014-05-13 04:02
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Why Should My Business Consider Private Label Skin Care Products

    Skin Care Technologies

    Ottmar Stubler

    Featured in Les Nouvelles Esthetiques, May 2000 Issue

Why Should My Business Consider Private Label

     Skin Care Products?

    The Answer:

     Greater Profitability, Total Customer Loyalty & No Competition !

    by

    Ottmar Stubler

In the mid-1980’s when I owned my first skin care salon there were only a few

    professional brand name products available as compared with today. I retailed a brand

    name product line that was sold exclusively in health food stores. I decided on that line

    because the buzzwords in the industry were: “all natural, no animal testing, fragrance free”.

    My wholesale cost for a typical moisturizer was $5.00. The standard mark up was $10.

    Our salon however charged $12 because we were in a high rent location.

Everything went well for three years then the nightmare began. We were the largest

    retailers in the West Coast for this particular line. Business was booming so we decided

    to take out a loan and expand. We had six employees working full time. Then, the bottom

    fell out from under us. Clients were not reordering products and sales were declining

    weekly. I began to panic. I pulled each client’s chart and went into the treatment rooms

    with the estheticians to try and ascertain the problem. The dialogue went somewhat as

    follows, “Mary, it’s been three months since you purchased a cleanser and four months

    since you purchased a moisturizer, please don’t tell me you’re using soap and Ponds

    cream again.” “Oh no Ottmar, I have been shopping at the health food store for groceries

    and noticed that they also sold your products, and guess what, it’s $2.00 cheaper. Don’t

    worry, I’m still using your products but I’m purchasing them there, it’s more convenient

    for me.” It was not just Mary with these comments; it was dozens of regular monthly

    clients who told me the same thing. So here I was with a huge loan, employees to support

    and declining sales.

I telephoned my product supplier and told him that I would have to find another product

    line to retail. He replied, “But you’re the largest retailer on the West Coast”, I said, “Was

    the largest retailer on the West Coast.” “What can I do to keep your business?” he

    inquired, I said, “you need to produce a private label package, expand the line and sell it only to salons.”

Two years later, his private label line was formulated and from that day forward our salon

    only retailed our own label products. I never again wanted my clients to venture off and

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purchase my products from another location. I had to re-educate my clientele as to why

    we decided on our own private label, but that was not difficult.

There is a plethora of professional skin care products available for retail. Look in any

    aesthetic trade journal and you will find at least 50 companies vying for your attention and

    business. You most likely retail at least two various brands yourself. For the past 24

    months, I have visited over 150 salons and found this to be the case. Salons usually retail

    the most popular products such as: Murad, M.D. Formulations, Dermalogica, Catherine

    Atzen, Jan Marini, Peter Thomas Roth, Pevonia, Sothys, Yonka, etc. These are just a few

    of any number of decent and effectual product producers among the competition in this

    vastly lucrative field.

     The “business of cosmetics” is the second largest money producing industry in the

    United States, secondary only to computers. With the tremendous amount of revenue that

    the cosmetic industry is pulling in, it makes only business sense that we position ourselves

    strategically so as to maximize our profits and minimize the competition factor. How can

    we achieve this? By seriously considering retailing private label cosmetics inconjunction

    with name brand products.

     I have discovered one common denominator among esthetician’s and that is the

    habit of casting loyalty behind specific product lines which they have come to believe in.

    The idea is that they have discovered a line which produces results. So, for example, if 10

    esthetician’s believe in Murad, 10 believe in Catherine Atzen, 10 believe in M.D.

    Formulations, etc., etc. What does this mean? We all want to offer our clients the “best”

    and think we have found it. But doesn’t everyone want the same for our clients? And if

    we don’t use and sell the same product line are our clients being denied the benefits, are

    they being cheated? What if the product line goes out of business and no longer exists?

    What then happens to our retail business?

     You have worked hard to establish your practice, you have struggled maintaining

    your clientele, you have invested monetarily as well as emotionally and now is the time to

    “Safeguard & Protect” your investment. Let’s begin with a few definitions to illustrate the

    benefits of private label.

    Brand-Name Products - these are products which the consumer recognizes through an intense marketing campaign. They are Lancome, Estee Lauder, Murad just to name a few.

    These are companies which have large amounts of money allotted for advertising and

    promotions. In 1999, a full page color ad, one insertion, running in Allure, Vogue,

    Vanity Fair and Cosmopolitan was around $50,000. If you could afford to commit to 12

    issues the price-break was $45,000 per page. Most of the cosmetic companies ran 2-3

    pages in a single issue and advertised in at least six major publications. So let’s do some

    calculations.

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    Assuming, Lancome advertised three full page color ads, committed to 12 issues

    per year and advertised in six publications. Their cost for advertising for one year would

    be:

3 full page color ads (3 x $45,000) = $135,000 per issue

    x 12 months = $1,620,000

    x 6 magazines = $9,720,000 per year.

    *This does not include television, radio and celebrity endorsements.

     With this exorbitant cost of advertising it’s no wonder that a consumer pays $85 for a 1 ounce jar of moisturizer. The actual ingredients, jar and packaging costs

    approximately $5.00. That’s a profit margin of $80 per jar!

     In the esthetics industry brand name cosmetic companies may offer you education,

    sales support, market recognition, national advertising, brochures, printed bags, counter

    signs and sometimes free samples. Keep in mind, none of these things are free. These

    costs are all built into the product and packaging, which you as the retailer must pay more

    for.

Mark-up

     Every brand name line which I have investigated has basically the identical 100% mark-up pricing structure. Therefore, if you pay $16 for an 8oz. cleanser the suggested

    retail price is $32. Let’s say you sell $50,000 of skin care products in your business and you had a wholesale cost of $25,000. You then earned $25,000 in gross profit on those

    sales. But what if you only paid $8.50 for a comparable 8 oz. Private label cleanser

    and retailed the product for $32? READ ON........................................

Private Label -

You sold $50,000 of skin care products in your business but your wholesale cost was 25%.

    You now earned $37,500 in gross profits. That’s an increase of $12,500 versus a brand

    name product. And that’s the bottom line. You didn’t work any harder but you worked

    smarter. So now reward yourself with that cruise to Alaska or the Bahamas you’ve

    always wanted to take.

I strongly recommend that salon owners and independent estheticians offer a combination

    of private label and name brands. Private label isn’t meant to replace your existing skin

    treatment program. Rather, private label specialties fill important niches that perhaps are

    missing in your present line; opportunities for new treatments, new levels of performance

    and new avenues of retail income. Since customers are all different in their tastes and

    preferences it is advisable to provide alternates to a single product line approach to

    retailing.

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