What does OEM and ODM mean in cosmetics?

Written by Ahyeon Song

Index

1. Description of OEM in cosmetics
2. Description of ODM in cosmetics
3. Similarities and differences between OEM and ODM in cosmetics
4. Benefits of manufacturing Korea OEM cosmetics
5. Benefits of manufacturing Korea ODM cosmetics
6. Conclusion

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1. OEM : Original Equipment Manufacturing

OEM refers to producing goods under a custom brand name as requested by the ordering company. 

The Korean cosmetic OEM market operates by manufacturing finished products according to the specifications of the ordering company and delivering them with the requested brand name. It produces parts or products under a private label so that the ordering company can market them as desired. Even when large corporations outsource production to subcontractors, they utilize the OEM method.

In summary, Korean cosmetic OEM companies assist in the manufacturing of skincare or makeup products to launch private label cosmetic brands.

By collaborating with these companies, you can create your own brand line and attach your own label.

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I will explain cushion foundation as a representative example of cosmetics manufactured through OEM.

IOPE, part of Amore Pacific, Korea's largest cosmetics company, launched the world's first cushion foundation. The first cushion foundation, IOPE's Air Cushion (launched in 2008), was an instant success in Korea, followed by Hera, another brand owned by Amorepacific, and many other Korean cosmetics brands.

At a time when cushion foundation has become a commonplace item in Korea, and even mid-priced products have excellent quality, global luxury brand YSL Beauty recognised the value of cushion foundation and commissioned a Korean cosmetics manufacturer to launch a cushion foundation. Since then, many global brands have developed and manufactured cushion foundations at Korean private label cosmetics manufacturers, which can be seen as a representative example of Korean cosmetics OEM manufacturing. Global cosmetics brands have their own private label formulations through Korean OEM cosmetics manufacturers and sell them under their own names.

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2. ODM : Original Development Manufacturing

In ODM, the orderer develops and produces the product. In other words, the manufacturer not only produces but also conducts research and development directly.

ODM is utilized when a company has secured unique technological capabilities. In the cosmetics industry, ODM companies may develop functional cosmetics, complete patent registration, and then propose production and sales to marketing companies. Many globally renowned cosmetic brands are often produced by Korean cosmetic manufacturers. This is because many leading Korean cosmetic ODM companies have established numerous contracts with global cosmetic companies.

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So, what are the similarities and differences between OEM processes and ODM processes when manufacturing cosmetics?

3-1. Commonalities
between Korean cosmetic OEM manufacturing and ODM: 

1. Both attach the ordering company's brand name to the products. 
2. They do not handle distribution and sales directly; these tasks are managed by the companies that commission the cosmetic production. 
3. As Korean cosmetic OEM and ODM manufacturers have grown, it has become easier for small and medium-sized enterprises to enter the cosmetics industry. 
4. Companies can launch cosmetics without having their own production facilities by partnering with Korean cosmetic OEM and ODM manufacturers. 
5. The increase in the number of mid-range cosmetic brands in Korea is related to the growth in scale and number of Korean cosmetic OEM and ODM manufacturers.

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3-2. Differences
between Korean cosmetic OEM manufacturing and ODM: 

1. The key difference lies in whether the company directly develops the product or not. 
2. Korea's leading cosmetic ODM manufacturers are already saturated; they do not enter into contracts with companies unless they have prior collaboration experience or are large cosmetic companies. Therefore, for small brands just starting out, it is recommended to contact Korean cosmetic OEM companies that have long-term experience working with Korea's leading cosmetic manufacturers.

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4. Benefits of manufacturing Korea OEM cosmetics

1. You can create private label cosmetics the way you want.
2. High sales effects can be expected through various promotions
3. This is useful if you do not have expertise in cosmetics manufacturing or production.
4. Initial investment costs are reduced.

Disadvantage

1. There are not many cosmetics manufacturers capable of small quantity OEM manufacturing.
2. burden of inventory

To summarize, collaborating with the Korean OEM cosmetics manufacturer has the advantages of strengthening brand identity, facilitating quality control, achieving differentiation points, and protecting intellectual property rights!

5. Benefits of manufacturing Korean ODM cosmetics

1. Cosmetics that are already certain to be produced can be produced without worrying about manufacturing facilities.
2. You can focus only on distribution or brand management

Disadvantage

1. There are cases where the same product is sold by different brands.

To summarize, the advantages of working with a Korean ODM cosmetics manufacturer are reduced cost and time, the company's expertise can be utilized, and mass production is possible by securing an existing production line!

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Conclusion

The MOQ of many talented cosmetics manufacturers is a bit high, so it may be burdensome to inquire about manufacturing private label cosmetics. However, although Crescent Seoul collaborates with Korea's top OEM cosmetics manufacturers, we can manufacture and produce according to their minimum MOQ, so we can prevent leftover inventory as much as possible, which is one of the disadvantages of cosmetics OEM manufacturing.

We hope this information about OEM and ODM in cosmetic manufacturing was helpful to you! If you would like to collaborate with Korea's top cosmetic OEM manufacturer, please contact Crescent Seoul at any time!

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