Private Label Roll Out Costs

Developing your own product line is similar to starting any kind of business. You must have a good understanding of your customer, the market, what separates you from the competition and the niche you intend to target. Let’s pretend you are moving forward with a line for kids.

Artwork

The bottle and cap have been picked, the product is approved and the logo design finished. Luckily the artist was efficient because you were specific about the concept.
These days you can go online and like “crowd sourcing”, find websites where you can hire a variety of artists from around the world. You can review their work and styles, submit concepts and they would develop a layout and quote for services at a reasonable price. You don’t have to limit yourself to one artist.

Let’s say the artist did the logo, stylized letters and did layout efficiently.

$75.00 x 3hrs = $225.00

You are going to ‘roll out’ 3 different 8oz products for kids called GIGGLES, starting with a bubble bath, shower gel and a lotion. The fragrance is the same for all 3 items and for the fun of it…let’s use Tutti Frutti.

Printing

The logo is exactly the same for all 3 products and you are using 3 colors in total. A simple wrap around label will be picked. Two colors are for the logo, the third color will differentiate the actual product with a colored name. Now you have Tutti Frutti Bubble Bath, Tutti Frutti Shower Gel, Tutti Frutti Lotion, each with a similar logo, but the product name is colored differently to separate their appearance.

Using a digital printing house, you can use unlimited colors. These days you can run smaller quantities, making it easy to get professional results without being stuck to the design or font. In the past you had to order printing plates…any changes would require you to order new plates. Today, any mistakes or design alterations can be done on the next run. Let’s say you are confident in the image and layout and willing print them. Cost for this runs around $.35 each (approximately).

500 pieces x 3 products at $.35 each=$525.00

Product

Your 3 products have a similar label style and using a stock bottle and disc top cap from our inventory, each will be filled in an 8 ounce size.

500-8oz. Tutti Frutti Bubble Bath @$3.52 = $1760.00
500-8oz. Tutti Frutti Shower Gel @$3.64 = $1820.00
500-8oz. Tutti Frutti Lotion @$3.73 = $1865.00

Cost of 3 bottled products at 500 pieces each is $5445.00

Expense Summary

Art Work     $225.00
Labels        $525.00
Product      $5445.00

Total = $6195

So you have spent $6195.00 to make your new items. Quite expensive.
Don’t despair...much of these costs are for purchasing inventory and start-up costs. However, the business now has product and at a fairly reasonable cost compared to a retail outlet or a franchise.

However, if these costs are a big eye opener, let’s look to simplify things. Offer one item less, taking nearly $2000 off the bill. You could still assess which items would sell best, and just get the one or two items filled and you order in bulk to fill the other one yourself. You still order all 3 label types and apply that one yourself. Remember to order 500 bottles and caps separately.

Return on Investment (ROI)

Like any business venture, there are certain costs to get started. You need to know your return on investment as a benchmark for working out expenses, overhead, salaries and profit. Not all of these costs can be realized at once. You can get label and product costs down substantially by ordering more units and spreading the cost. This would take more working capital.

So let’s assume you went with our original Tutti Frutti line using 3 products. The total cost is $6195.00 averaging around $4.13 each. You have to figure your time, overhead and hidden costs...plus find a profit. So let’s say you settle on an $8.00 wholesale price with a suggested retail price of $16.00. On a wholesale level at $8.00 ($12,000.00 revenue) would give you a $5805.00 margin…not including overhead or labor expenses…you could net $2000.00 profit.

If you could get retail dollars…even discounting it to $14.00. That is an additional $6.00 margin on top of the wholesale price, which represents $9000.00 more. Sales would be slower, requiring more “legwork” but margins higher. That’s a $21,000.00 total return with a $6195.00 investment.