July 2008

Private Label — Is it an Option for your Salon?

By Janae Raphael

Top tips for creating your own private label brand:

  • Stay on top of trends. Read magazines. Pay attention to fashion and runway models’ hair and makeup.

  • Research ingredients. Which ones do you want to use and how will they benefit your customers?

  • Select a niche. What is your point of difference?

  • Profile your target customers and know everything about their likes, dislikes and buying behavior.

  • Have a plan. Review it with colleagues and with friends who understand the industry.

As an increasingly popular retail alternative, private label products provide a growth opportunity for salons and spas during tighter economic times.

Starting up a private label hair care, skincare or cosmetics line can increase profitability while nurturing and building customer relationships within a salon environment.

What is the private label business all about? Maybe you have seen the local drug store carrying their own brand of painkillers or toothpaste. In the professional beauty industry, private label products take on new meaning and new life. Through hiring of a private label manufacturing company, salons can choose from a menu of products to create a line of products with their business name and logo.

You may be curious, what are consumer’s perceptions of private label products? On average, 25 percent of products sold in the U.S. are sold via private label. Results from a nationwide study conducted by market research group Ipsos-MORI found that 70 percent of shoppers believe private label products to be equal to, if not better than, national brand counterparts. In addition, a full 40 percent identify themselves as frequent shoppers of private label brands.

The market is ripe for private label products. What does this opportunity mean for your salon or spa business?
Have you ever dreamt of owning your own product line? Here is some helpful information on how to make that dream a reality by incorporating a relevant strategy into your business goals.

Private label products have been proven to offer countless benefits for salons and spas as well as their customers. With salons popping up on every street corner, a product line exclusive to your salon can be a point of differentiation from competitors. While national brands are available at an infinite number of salons, beauty supply locations and even at a Target here and there, people can only purchase your salon’s exclusive private label brand from you. One major benefit of this is it addresses one of the professional beauty industry’s biggest challenges: diversion.

With diversion on the rise and myriad mergers occurring within the beauty industry, private label products give salons more control than ever before over the products they retail.

Private label brands can enhance the image of the salon and further strengthen its relationship with loyal customers. Clients that have a high opinion of their salon will know the salon’s branded products are manufactured to the salon’s same high quality standards. They will often consider private label products superior to national brands.

A higher profit margin through the elimination of middlemen offers an additional incentive for creating a private label brand. Those supplementary dollars in the pocket of the salon owner will enable the business to focus on training and business enhancement programs that support the stylists while encouraging the promotion of the new line.

“Creating a training program and implementing [enhancement programs] for staff is an integral part of introducing a private label line into a salon,” explained Sherri Overton, stylist and salon trainer for Hyatt Huntington Beach Salon. “The more time you put into education, the better equipped and more eager the stylists will be to talk about the new introduction.”

As well, there are many options to aid your success—ranging from a diversity of products to variations in budget and timelines. Private label manufacturing companies exist specifically for this purpose and are able to service salon owners through a process that allows as much or as little customization as one desires.

To get your feet wet in the private label business there are companies offering branded hair care, skincare or cosmetics with a commitment of as little as five dozen pieces per item. For packaging and formulas, some customization is available though options can be limited. This is the perfect way to test out private label with less of a commitment.

“Select a private label company with a dedication to superior customer service. You want to work with a company that will streamline the creative process and guide you through it, making it simple, efficient and fun to create your own private label brand,” said Debbie Chow, CEO and founder of Auraline Beauty, a private label cosmetics company.

For complete product customization, consider contract manufacturing. Many of the beauty industry’s most popular lines outsource the manufacturing of their products. With contract manufacturing, formula and packaging possibilities are endless. Create a new and original brand with innovative ingredients, fragrance of your choice and custom designed packaging. Minimums per product can be up to 10,000 units or 1,000 gallons. This private label option is only for the businessperson looking for long-term investment in their new private label brand.

To get started, select the products you would like to have private labeled and create a business plan. Set your goals and determine your budget up front. Be prepared to put six to 18 months into research and development of the line. Here is a summary breakdown of the private label creation process.

  1. Interview several private label companies to find the one that is right for you.

  2. Perform product testing to determine which products will best suit your salon clients’ needs. Test formulas yourself, or find trusted experts to assist.

  3. Select packaging based on functionality and desired look.

  4. Determine cost by verifying the number of products and production quantities you decided on based on your budget.

  5. Use your logo or company name to create the design on the package that will be special and unique to your salon.

  6. Production of your line begins.

“To embark on a private label business opportunity is to make a commitment to yourself and your business. If you decide to invest in private label, the most important first step is to create a plan,” said Susan McCarthy, senior director of marketing and new business development at Cosway Company, a contract manufacturing business. “Take the time to develop a line that you and your employees will be proud of and eager to sell. This will ultimately bring you the highest return on your investment.”

The future for private labels is bright. The Ipsos-MORI research found strong support for private labels among shoppers aged 16-34, a consumer group known for their willingness to sample new products, and one which is set to have a profound effect on salons and spas that adopt this business strategy.

Consider the private label options for your business. If you are able to make it part of your business plan, you may find it to be a lucrative source of new income.

Janae Raphael is the President/Founder of J.Jems Communications, a Public Relations agency specializing in the health and beauty industry. Raphael has developed results-oriented campaigns working with some of the most elite companies in the industry, including L'Oreal and PureOlogy. For more information email janae@jjems.biz.