OEM vs ODM Explained

What is the difference between oem vs odm
Which OEM vs ODM is easier to start for beginners

Have you been hearing the terms OEM and ODM more often these days?

In recent years, these words have become increasingly popular as more brands—especially startups and non-cosmetic companies—enter the beauty and skincare market. In the past, developing cosmetic products was mainly limited to established cosmetic manufacturers. Today, however, thanks to OEM and ODM manufacturing, creating your own cosmetic brand has become much more accessible.

In this article, we will explain the differences between OEM and ODM, as well as the advantages of each, so you can decide which option best suits your business needs.

OEM vs ODM

In this section, I will mainly explain the differences between the two.

Although the terms may look similar, their meanings and roles are quite different.

What are the differences

OEM is an abbreviation for Original Equipment Manufacturing.

In an OEM arrangement, the customer is responsible for the product concept, ingredient selection, planning, and packaging decisions, while the actual manufacturing and production are outsourced to a specialized manufacturer.

On the other hand, ODM stands for Original Design Manufacturing.

In an ODM model, the manufacturer takes the lead, proposing everything from formula development and product concept to design, planning, and packaging selection, allowing the brand to focus mainly on sales and marketing.

The main difference between OEM and ODM lies in who takes responsibility for product development.

If you already have a clear idea and only need a reliable partner to manufacture your products, an OEM approach may be the right choice.

Meanwhile, if you are still in the early stage of gathering information and refining your product concept, an ODM approach may be more suitable.

Pros and Cons of ODM

What Are the Benefits of ODM?

One of the main benefits of ODM is that you can start a cosmetic business even with little to no prior knowledge. The manufacturer supports you in deciding on formulas, and in some cases, you can simply use the manufacturer’s already developed and tested formulas, customize the packaging, and proceed to launch. Because there is no need to develop everything from scratch, the process can be completed quickly. In addition, ODM allows you to significantly reduce research and development investment, making it possible to start a business with a relatively small initial cost. This cost efficiency is highly attractive to many brands, especially those entering the cosmetic industry for the first time.

On the other hand, there are also some disadvantages that should be carefully considered. The main drawback of ODM is the lack of originality, as products can easily become similar to those of other brands, which may weaken brand identity. In many cases, the primary area of differentiation is limited to packaging, which can result in less distinctive products. Furthermore, because you rely on the manufacturer’s formulas and ideas, there is less technical know-how accumulated within your own company, which may affect long-term product development strategies.

Pros and Cons of OEM

Now Let’s Move on to OEM

OEM also comes with both advantages and disadvantages, depending on your brand’s goals and development stage.

One of the main advantages of OEM is the high level of originality and flexibility it offers. Because the brand takes the lead in product planning, you can develop formulas based on your own concept, select specific ingredients, and create products that truly reflect your brand identity. This approach allows for stronger differentiation in the market and helps build a clear and consistent brand image. In addition, by being deeply involved in the development process, your company can accumulate valuable product knowledge and technical know-how, which is beneficial for long-term growth and future product expansion.

On the other hand, OEM also have some challenges to consider. Compared to ODM, development time is longer, as everything must be created from scratch, including formula development, testing, and adjustments. This process usually requires a higher initial investment, as research and development costs cannot be avoided. OEM also requires more active involvement and decision-making from the brand side, which can be demanding for companies without sufficient experience or internal resources.

Based on the above, it is important to identify your top priority—whether it is budget, originality, speed to market, or long-term brand development.

How does each OEM and ODM works

In the next section, I will outline the general workflow for each approach. While the processes may appear similar, understanding these flows will help you better plan the overall timeline for your product launch.

How ODM works

In an ODM model, the process usually begins with formula selection. The manufacturer provides a catalog of ready-made skincare formulations that have already undergone ingredient testing, safety and stability evaluation, and compatibility checks. These formulas are often developed based on market trends and specific skincare functions such as brightening, soothing, hydrating, or anti-aging.

The brand then selects a formula that best aligns with its product concept and target audience.

Next comes packaging selection. In many cases, the manufacturer offers packaging options that are already confirmed to be compatible with the chosen formula, such as bottles, jars, or tubes. Because these combinations have been tested in advance, this step helps ensure a smooth and efficient production process.

Once the formula and packaging are decided, the final step is branding and label customization. The brand applies its own logo, product name, and design elements to the label or outer packaging. As a result, the finished product appears fully branded and ready for market, even though the formulation itself is not exclusive.

This streamlined workflow is one of the reasons ODM allows for faster launches and lower initial investment compared to OEM.

How OEM works

In an OEM model, the process starts with product planning and conceptualization. At this stage, the brand defines the product’s core identity, including the skin concerns it addresses, the target audience, the desired texture and sensory experience, and the claims the product aims to deliver, such as hydration, brightening, or anti-aging benefits. Clear planning at this stage is essential, as it sets the foundation for the entire development process.

Next comes research and development (R&D). Based on the brand’s requirements, the manufacturer’s R&D team works to create a formulation that meets both performance and safety standards. This involves selecting ingredients for their efficacy and safety, determining appropriate active concentrations, and ensuring stability, texture, and overall sensory quality. In many cases, brands work closely with the R&D team to incorporate signature ingredients or to achieve a specific texture or feel inspired by existing products, while still ensuring originality. This level of involvement is particularly common among brands that have conducted thorough market research and have clear marketing claims in mind.

Once an initial formula is developed, the project moves into sampling and revisions. The brand receives prototype samples for evaluation and provides feedback, which may result in multiple rounds of adjustments, such as fine-tuning viscosity, spreadability, or finish. This iterative process continues until the final formula is approved for mass production.

Finally, packaging customization takes place. One of the key strengths of OEM is the freedom to fully customize packaging, including the container type, materials, and finishes. This allows brands to select packaging that aligns with their brand identity, sustainability goals, and target price range, resulting in a cohesive and differentiated final product.

Which one is better for beginner

There is no universal approach when it comes to choosing between OEM and ODM. The right option depends on your strategic objectives, the resources you can commit, and the level of involvement you wish to have throughout the product development journey.

If you are looking for more flexibility

OEM is best suited for brands that seek complete creative authority and long-term ownership of their products. Under an OEM model, the brand initiates and defines the product concept, while the manufacturer translates those requirements into a finished product based on detailed specifications. This route is ideal for companies aiming to bring distinctive or innovative products to market and that are prepared to invest in research, development, and validation. Although the process requires greater time and financial commitment, it offers maximum differentiation and control.

If you are looking for a faster process

In contrast, ODM is an efficient solution for brands that prioritize speed, cost efficiency, and simplicity. By leveraging pre-developed formulations and existing designs, brands can minimize development complexity and concentrate on brand building and market entry. ODM is particularly effective for early-stage brands, limited-edition launches, or companies expanding into new regions or categories where rapid execution is essential.

Conclusion

Today, I shared an overview of both ODM and OEM, highlighting their key differences, benefits, and development flows. Each approach offers distinct advantages, and the right choice ultimately depends on your brand’s goals, available resources, timeline, and level of involvement in product development.

ODM provides a faster and more cost-effective way to enter the market, making it ideal for brands seeking speed, simplicity, and lower initial investment. OEM, on the other hand, offers greater flexibility, originality, and long-term value for brands that want full control over their products and a stronger brand identity. By understanding how ODM and OEM work, you can make more informed decisions and select the manufacturing model that best supports your business strategy and growth plans.