cost advantage

reduce fixed investment：oem production does not require self-built factory buildings, purchasing equipment and forming r&d teams, which can save up to 60% of fixed costs. for example, the initial investment of self-built factories is usually more than 5 million yuan, while oem production only requires processing fees.

large-scale procurement：oem further reduces the production cost of a single piece by purchasing raw materials and packaging materials in batches. for example, a mask brand passes OEM the mode reduces the cost of a single box from 15 yuan to 8 yuan.

technical resources and efficiency

shorten the development cycle：ODM the model allows brands to directly use the r&d results of oem factories to shorten the product development cycle to 3-6 months, while independent r&d usually takes more than one year.

flexibility and market response

small batch trial production：the flexible production line of the oem factory supports small batch trial production, helping brands verify market potential through "trial and error". for example, a new brand produced 30,000 new products through oem production and trial sales, successfully creating a hot product and adding orders after adding them.

quick iteration：the oem model supports brands to keep up with market trends and quickly launch new products. for example, a brand passes ODM the model launches new products every quarter to seize the market opportunity.

reduce operational risks

regulatory compliance support：oems are familiar with cosmetics registration and quality inspection procedures, which can help brands reduce compliance risks. for example, a certain oem factory assists the brand in completing domestic non-special filing, shortening the launch time to 1 month.

inventory management optimization：oem production supports "on-demand production" to reduce the risk of inventory backlog.

2. disadvantages of oem production

product homogeneity risk

the same formula：multiple brands use formulas from the same generation of factories, resulting in high product similarity. for example, in 2022, the "hyaluronic acid essence" of an oem factory was adopted by more than 10 brands, making it difficult for consumers to distinguish.

lack of uniqueness：under the oem model, it is difficult for brands to form technical barriers, and long-term reliance on oems may weaken their competitiveness.

difficulty in quality control

rely on oem quality inspection：if the quality control of the oem factory is not strict, it may cause quality problems. for example, a brand has caused product allergies due to batches of raw materials in oem, which has seriously damaged its brand image.

low transparency in quality control：it is difficult for the brand to participate in the production process throughout the process, and its control over product quality is limited.

brand premium is limited

profit space compression：oem factories charge processing fees, and the brand side has relatively small profit margins. for example, the retail price of facial masks produced by a certain brand through oem is 20 yuan, while the cost is about 8 yuan, and the gross profit margin is lower than that of independent production.

high-end positioning is difficult：the oem model is difficult to support the image of high-end brands, and consumers have a low acceptance of premiums for "oem" products.

long-term development risks

technology dependency：long-term dependence on foundries may lead to the deterioration of brand r&d capabilities and make it difficult to form core competitiveness.

supply chain risk：the production capacity and price fluctuations of oem factories may affect brand operations. for example, a brand's profits have shrunk significantly due to the price increase of oem factories.

3. advantages and disadvantages of independent production

advantages

technical barriers：independent research and development of formulas and production processes can form technical barriers and enhance brand competitiveness. for example, a brand has successfully seized the market segment by independently developing "anti-glycemic" ingredients.

quality control：only by the brand can participate in the production process throughout the process to ensure the stability of product quality.

brand premium：independent production supports the image of high-end brands, and consumers have a higher acceptance of premiums for "self-developed and self-produced" products.

disadvantages

high investment and long cycle：build a self-built factory requires huge investment and the r&d cycle is relatively long. for example, a brand’s own factory investment exceeds 10 million yuan, and the r&d cycle is as long as 1.5 years.

high operational risks：issues such as inventory backlog and equipment maintenance may increase operational risks.

4. choice suggestions: the one that suits is the best

startup brand:it is recommended to choose oem production to enter the market quickly with low cost and high efficiency.

mature brands:we can gradually transform to independent production and build long-term competitiveness through technological research and development and quality improvement.

high-end brands:priority is given to independent production to support brand premium and high-end positioning.

conclusion

the production of cosmetics brands and independent production have their own advantages and disadvantages. the brand needs to choose a suitable model based on its own development stage, resource endowment and market positioning. regardless of the model chosen, the core goal is to provide consumers with high-quality products and achieve sustainable development amid fierce competition.