How Much to Buy?
Bulk Buy or Low/No Minimums?
Many private label cosmetics manufacturers have set minimums. You may need to purchase your stock in bulk quantities of 20, 100, 500 or more.
The benefit to this is that the more you buy, the cheaper the price. Purchasing in bulk at low costs has the potential for high margins. If the wholesale price for a lipstick is $3.00 and you price it at the suggested retail price of let's say $10.00, that's a whopping 233% mark up and $7 profit for you. Of course you will have to deduct any type of costs you incurred for running your business - marketing materials, shipping costs, graphic design costs. Nevertheless, the potential to make a solid return on your investment is there.
The drawback is that you may end up getting stuck with a shade or product that no one likes - stale inventory that you can't sell. But there are precautions you can take. Research is the most important first step. If you do your homework thoroughly and choose to work with a manufacturer whose products you are passionate about, it will be much easier to sell that inventory. Prepare a strong marketing strategy and get creative. Offer promotions on Twitter, contests on Facebook, send out regular Emails to push the products - anything to create buzz around your product. If you do that, you can't lose.
There are many private label cosmetics manufacturers that have low minimums or even no minimums. You can order as much or as little as you need, when you need it.
The benefits are obvious - you can purchase whatever you like, in whatever quantities you like. If you buy one lipstick shade that doesn't sell, it's not that big of an investment than if you had purchased 500 of that same unpopular colour. There is less risk involved with a company that let's you purchase with low or no minimums.
The drawback is that the price per unit is usually a bit higher. That same lipstick that cost $3.00 if you purchased 500 now costs $7.00 if you only purchase one. That's only a 42% mark up if you price it at $10.00 - and only $3.00 in profit for you. Of course, depending on your market you can price that lipstick at a much higher cost to try to make a larger profit. If you choose to target an upscale market and position your product as a luxury item, you can charge anywhere from $16-$40 for that lipstick. With the right marketing strategy, the potential for high earnings is definitely there.
Buying in Bulk and Low/No Minimums both have pros and cons. What works best for you? If you have a large retail store with locations throughout the country, obviously the Bulk Buy manufacturer would seem to be the best choice. And if you're just starting out with a small online kiosk, the Low/No Minimum company would be the ideal choice. But there are no rules - you must decide what works best for you. Each business is unique and you must prepare yourself in advance before deciding which private label cosmetics company will meet your cosmetic business needs.