Why are so many people interested in buying directly from a South Korean cosmetics manufacturer? There are several reasons. First, the South Koreans are leaders in innovation in the field of cosmetics; from developing complex skin care formulas to creating innovative packaging ideas that become trends around the world. So, it’s no wonder that brands, wholesalers and retail stores throughout the world are very interested in purchasing their products directly. But while there may seem to be some logic behind this approach — cutting out the middleman and communicating directly with the factory, which should allow for lower prices — the reality is usually far removed from that expectation. Most international buyers contacting K-beauty factories directly have a difficult time getting results and achieving successful product launches. It’s not that the factories aren’t capable. It’s simply because the systems in place today were designed for large domestic customers and are generally not equipped to handle small to mid-size foreign buyers.
Many international buyers have contacted Korean OEM or ODM manufacturing facilities using email and have gotten no responses. Some international buyers have even received a sample that did not resemble the original product they requested. If you are one of those international buyers, don’t worry. We’ll go through the specific problems associated with trying to purchase directly from a K-beauty factory and explain how you can avoid many of those issues by working with a qualified sourcing partner.
The Hidden Obstacles That Keep International Buyers Away from Korean Beauty Manufacturers
There are six hidden barriers to entry between you and Korean beauty manufacturers. Those six obstacles include:
1. Most Factories Don’t Have a Dedicated International Sales Department
Most of the cosmetics manufacturers in Korea are small to medium sized businesses. As such, they do not have a formal international sales department. All of their internal processes, including communications and documents, are conducted exclusively in Korean. Only larger OEM / ODM based manufacturers that are producing for well-established global brands, and operate at maximum capacity, have designated international sales departments. Even then, due to their existing commitments with their other customers, they are unlikely to prioritize new orders of less than 10,000 units.
The largest Korean-based cosmetic manufacturers currently serve as contract manufacturers for well-established global brands. New international buyers representing smaller brands simply do not appear on their radar.
2. You’re Not A Valuable Client From The Manufacturer’s Point Of View
From the manufacturer’s point of view, their sales team receives dozens of inquiries daily from small international buyers. Every single one of those inquiries requires extensive back and forth communication regarding the products offered, educating the potential buyer on their products, and hand holding them through the product development process. All of this work is done for an order size that could potentially range from 500 to 1,000 units. Compare that to a single domestic client who orders 100,000 units of a given SKU (stock keeping unit), uses an existing formula, and clearly communicates their requirements. The profit margins available on the sale of 100,000 units versus the profit margins on an initial order of 500 units make it very easy for the sales person to determine which customer represents a greater opportunity. When you consider that the sales person responsible for meeting quarterly sales goals will spend weeks building a relationship with a low volume buyer from another country simply does not represent good use of their time.
3. The Minimum Order Quantities Required Are Typically Unnegotiable
Another common misconception held by many first time buyers is that the minimum order quantity required by a Korean cosmetics manufacturer can be negotiated downward. While this may be true under certain circumstances, it is extremely rare. The reason for this is simple — a Korean cosmetics manufacturer must produce a minimum of 3,000 units of each formulation to warrant starting up the necessary equipment. In addition to the equipment usage considerations mentioned above, raw materials must also be purchased in sufficient quantities to meet the requirements for production. Additionally, the manufacturer must conduct appropriate quality testing and validation of all manufactured goods prior to shipment.
Therefore, if a buyer wants to purchase only 300 or 500 units of a particular product formulation — they leave the manufacturer with two options — either produce the order at a loss or deny the order altogether. Under normal circumstances, the manufacturer will elect to deny the order. On occasion, however, the manufacturer may agree to produce fewer than 3,000 units — but will increase the price per unit accordingly in order to recoup losses incurred on the reduced volume order.
It’s worth noting that it’s not just formulating products that present minimum order quantity requirements. All packaging items used in conjunction with each product — bottles, pumps, caps, cartons — also require a minimum number of units be ordered from various third party suppliers. The coordination of the various packaging item deliveries with raw material shipments and production timelines presents significant logistical challenges to international buyers attempting to launch products on their own. In many cases, international buyers find themselves unable to deliver packaging components in sufficient quantities — resulting in delayed production timelines or compromised packaging designs.
4. You Require Extensive Knowledge That Will Be Provided At No Charge
Large brands bring R&D teams to the cosmetics manufacturing plant; they’ve formulated products, tested active ingredients and created product briefing. The factory’s role is to verify feasibility, create sample and build-up.
If you’re a new or developing brand, you’ll require consultation regarding formulation trends, active ingredient procurement, regulations and packaging compatibility as well as texture development. These levels of consultation involve meeting with experienced cosmetic chemist(s); however, factories cannot afford to do this for low-volume customers due to their primary expertise being in producing products, rather than providing services to brands.
5. Language and Communication Creates Continuous Friction
Although a factory may assign an English-speaking point-of-contact, the communications gap extends beyond language barriers. Cosmetic technical terms used by the industry, regional regulatory differences and cultural business practices create communications friction. Misunderstandings occur via email. Lost specifications occur from lack of translation. Domestic clients’ feedback cycles typically take one-day turnaround. International clients’ feedback cycles extend to several weeks. Most Korean cosmetics manufacturers are unable to justify hiring bilingual employees to manage a few small international clients. Thus, international clients receive slow responses, vague information and increasing frustration.
6. Painful Time Delays Between Sample Development Cycles and Quality Control Issues
Sample development is a process that repeats itself. A domestic Korean customer receives sample within days, responds immediately with feedback, revises the sample and completes another iteration within a week. However, international clients must wait for customs clearance and address different time zones associated with receiving and sending samples. Each cycle takes approximately three weeks. If there are three revisions prior to completing a product, it could take six months or longer to finalize the first product. Additionally, once large-scale production commences, quality control become difficult to monitor since the manufacturer does not have anyone monitoring each shipment.
Going direct doesn’t save money — it shifts costs into wasted time, failed samples, and products that never make it to market.
Kbeautyproduction Solves All Four Challenges As Follows:
An In-Depth Consultation Prior to Production Begins
During our initial consultation we want to learn everything about your brand’s vision, target market, product concept and budget. With this information, we create a detailed product briefing for the manufacturer. Unlike many other agencies that require back-and-forth communication prior to production beginning, our consultation will eliminate this step. As soon as the consulting has begun, the manufacturers will receive complete specifications which enable them to begin producing.
In addition to providing consultations for cosmetic formulations, we act as a liaison for our clients who may lack experience with formulating cosmetics. Whether you have a vague idea of your product or a specific ingredient list, we help facilitate the understanding of the product formulation. We also provide guidance on trends within the cosmetic industry such as: current trend ingredients; viable textures; packaging options; and regulatory requirements.
Our Extensive Network of Over 1000 Tested Korean Cosmetic Manufacturers
For several years, Kbeautyproduction evaluated Korean cosmetic manufacturers across every product category (skincare, makeup, hair care, body care etc.). Each manufacturer was rated on quality standards, price, area of specialty, production volume and reliability. Therefore, once you choose to work with us, we will pair your project with the best qualified manufactures for your needs and ask for samples from multiple manufacturers at the same time.
As with large international corporations, we also perform a competitive bidding process. Several manufacturers will formulate your requested products using your provided specification sheet. After receiving samples from each manufacturer, we will review your samples and provide recommendations for the best product(s) based upon quality of formulation, texture, stability, price and delivery timeline. You will then receive the optimal solution for your needs.
Local On-Site Factory Management & QA
Once your desired formula has been selected and approved by you, we will take full responsibility for managing your production. We manage timelines for all raw materials needed for production including but limited to: packaging vendors and the manufacturing facility. Local representatives from Kbeautyproduction will inspect your products during production (not after shipping). They will ensure that every aspect of your final product meets your expectations whether it be: filling levels, labeling placement, color consistency or sealing integrity. Once the inspection is complete and satisfactory, your products are ready to ship.
Export Paperwork Completion & Compliant Requirements
Trading international cosmetics requires a tremendous amount of paperwork and regulations; from CPNP registration for European Union countries to FDA compliance for US customers. All required export documents will be prepared by Kbeautyproduction ensuring that your products pass customs quickly and easily while meeting all applicable local regulations. This alone will save you countless hours researching and communicating with exporting authorities in Korea.
Transparent Communication at Every Stage
You will receive updates regarding the status of your projects from Kbeautyproduction at each step along the way. You will be notified of each milestone achieved and the associated costs incurred to date. Additionally, you will be kept apprised of all major decisions made throughout the duration of the project. You will always know the exact position of your project and what lies ahead. No secrets here!
Pricing Structure Based Upon Ongoing Business Relationship Development
The majority of sourcing agencies/trading companies generate revenue by adding a premium to the factory’s wholesale price. Many times, these premiums are not disclosed to the customer. At Kbeautyproduction we operate under different terms. A service fee is charged for all services rendered by Kbeautyproduction i.e.: consulting, finding a suitable factory, managing sampling and overseeing the manufacturing process domestically and internationally as well as exporting. However, unlike the majority of sourcing agencies/trading companies we charge our customers a completely transparent service fee. The customer will see the actual wholesale price of their manufactured goods directly from the factory.
So why does this benefit our customers? Well, it benefits our customers greatly when they decide to order additional quantities. Your service fees are paid off by the savings realized from ordering larger quantities at a reduced price per unit. For those customers who order quantities of 5000+ units or more, our fees essentially pay for themselves allowing you to sell your products competitively and maintain a healthy margin on your sales.
We pass on the actual wholesale cost to you. No hidden markups allow you to remain competitive on price while maintaining adequate margins for continued growth.
Our pricing model also prevents an unfair practice among some sourcing agencies/trading companies. When a sourcing agency/trading company earns a profit from increased factory costs there is little reason for them to find the lowest possible cost for their customer. When a sourcing agency/trading company charges its customer a service fee based upon the actual wholesale cost of the factory, their interest is aligned with that of their customer — the lower the cost of manufacture, the greater value added to their customer.
By sharing the true cost of manufacture, you can accurately project your financial performance from day one. You will know your total landed cost, estimate reasonable retail margins and establish your pricing strategy confidently knowing what you need to achieve success — instead of learning later in development that your unit economics were incorrect due to excessive hidden markup reducing your margin.
