Being a beauty editor I am surrounded by a lot of brands and formulas so know when brands are selling the same products but at different prices. It's called private labeling and I briefly mentioned it in my last post where I used small boutique cosmetics brand ELES Minerals Makeup as an example of when private labeling can go extremely wrong when it is exploited by poor business sense and ethics.
This blog is all about the reasons why companies use private labeling. Private label companies are manufacturers who provide retailers with ready made formulas and packaging. So your favourite Australian perfume or makeup isn't made in your favourite brand's factory somewhere out in the desert in Australia.
Surprised? ... don't be. The rise of private labeling in Australia is not a new phenomenon.
While the rise of private labels is a topical subject around the world, and currently hotly debated in the cosmetic industry in Australia, the notion of private labels is not new. In Europe and America, private labels have been around since the 19th century. In the UK, St Michael has been the Marks & Spencer retail chain’s own brand for more than a century. Kumar and Steenkamp (2007) consider that the impetus for the recent surge in private labels began in earnest in the 1970s when retailers started to significantly consolidate and to develop national chains. Up until this point, manufacturers had firmly held the balance of bargaining and negotiating power in the market between retailers and manufacturers.
Since the 1970s, the balance of power has most certainly swung in favour of more commonly known brands such as MAC, Smashbox & Napoleon (who boldly claims that his formulas were conceived by him!) to name the obvious. These companies all have a significant part of their business concentrated in private labels because it's the cheapest and fastest way to get product out to a demanding market and for markets like Australia kept in the dark on a well known and standard industry practice... they become targets for the not so ethical companies wanting to get rich more quickly than they deserve.
Private labels are growing strongly around the globe and are expected to continue to do so. The range of cosmetic products covered does not seem to be limited, enveloping all kinds of formulas, latest shade trends, stylish packaging. And more brands are openly basing their business model around sourcing their products from private labeling companies - meaning that all those expensive brands charging higher than the international RRP will either have to lower their prices to stay in the market or fall by the wayside.
So it's good news for customers.... unfortunately bad news for bigger brands who have been happily riding the gravy train on private labeling for decades.
