Wednesday, November 30, 2016

When Price Gouging Probably Isn't


This happened on a forum for cosmetics-makers recently. The subject of discussion was a luxury, pricey face serum made by a small cosmetics company.

There were quite a few opinions being offered, and the discussion got a little heated.

One participant (let's call her Sally) was utterly appalled and angrily accused the company of price gouging.


I looked the term up – just to be absolutely sure.

Price gouging: when a seller deliberately hikes a price to a much higher level than is reasonable. Price gouging is considered unfair and unethical.

I returned to the discussion.

Sally continued: "I read the ingredients list. None of those ingredients are all that expensive. Their price is totally ridiculous! I could easily copy that product and sell it at a much lower price."

Some offered possible reasons for the price

  • Packaging/shipping costs: maybe this small company couldn't buy 10.000 units of cosmetics containers and had to pay a higher price per piece because they had to order smaller amounts
  • Location: maybe this company's shop was located in an exclusive, high-rent area 
  • Business size: maybe this company was not big enough to order ingredients in large enough quantities to get an optimal price

Others agreed with Sally's price gouging standpoint.

Let's Have a Look

As the discussion continued, I popped over to the site featuring the face serum in question and studied the ingredients list.

All good ingredients – and almost every one available in several different qualities (read: at different price levels).

I could see how Sally could reach the conclusion she reached.

I clicked around the site to get an idea of the company behind the product. It didn't take very long to gain a bit of insight as to their philosophy.

Sally had missed a very important point.

There are some things that can't be gleaned from reading an ingredients list – like the quality of the raw material, which processing methods were employed or where the raw material is sourced.

Example: Lavender essential oil is produced all over the world and can cost anywhere from a pittance to a pretty penny. Regardless of its quality, source or production process, it is still labelled Lavendula Angustifolia. 

My thoughts went to my own months of research and development – batch after batch of infused herbs in different mediums with consequent weeks of testing until the right combination is finally achieved – none of which would show up on an ingredients list.

Ever.

It would merely read as a list of INCI names.

Wrong + Wrong Does Not Equal Right

Sally's viewpoint (and reaction) is unfortunately not all that uncommon. And even though I don't agree with it, I think I can understand it.

But there is one thing Sally said that I simply cannot wrap my brain around. It kept echoing in my mind for days after the discussion ended:

"I could easily copy that product and sell it at a much lower price."

Really, Sally?

The fact that you even think it – let alone mention it – suggests to me that you would actually consider doing it.

And this is the part I

just.

don't.

get.

Can you please explain to me Sally, how stealing someone else's hard work and product development, copying it and selling it at a lower price is not unethical, unfair, and even more appalling than what you unfairly accused the face serum company of?

Even if they had been price gouging, 2 wrongs will never make a right.


Do Tell

Have you ever had your work stolen and copied? How did you feel about it and what did you do?

30 comments:

Annette Almocado Official said...

Yes I've had my work copied" (stolen) -ND marketed and the person did very well. It hurt like hell but what can you do?
When people don't see the hard work (time, resources) you've put into something , and only want to quickly slap a sexy label and sell it a s 'cheaper than yours' ?

Lise M Andersen said...

Oh Annette how sad for you! I know how very hard you work on your products and I am shattered to hear this. The only consulation I can think of is: maybe karma will do its thing for this person.

Kimberley Jane said...

I can completely see your point, though I doubt that she was seriously suggesting copying the formula and reselling it. I think she was merely trying to illustrate that the product could be manufactured at a lower cost, rather than suggesting that we should do that. As a home crafter, I often think this of many of the big brands and their luxury products. Maybe their ingredients are of a greater quality, but a lot of brands who claim that are merely saying that as a form of marketing and their ingredients are often not of the greatest quality. There is no certification or analytical body out there that grades ingredients, beyond that of organic versus non-organic certification (and it can be debated whether organic is in fact better). So how are we meant to know whether that $200 serum is really the purest in ingredients? I don't think we can take all brands at face value. My two cents anyway! A great article Lise and well argued.

Lise M Andersen said...

Thank you Kimberley Jane - I hear what you are saying about false marketing claims, but what prompted me to write this article was the fact that 'Sally' was accusing another equally small company of price gouging. I find Sallys' whole attitude incredibly distasteful.

Irene said...

I agree that Sally probably wasn't actually planning on doing what she said however there are a lot of people who do exactly that. I usually tell them just because they can charge less doesn't mean they should. Why intentionally drive down prices?

I haven't had people copy my formulas but I've had people copy my bath bomb designs on more than one occasion and it's quite disheartening. I pride myself on creating unique designs and my business is relatively new and doesn't bring in much money yet so when people browse my products then intentionally set out to replicate them it's incredibly discouraging.

Lise M Andersen said...

Hi Irene - Oh gosh it must hurt seeing someone copying your designs! I totally agree that it is counterproductive driving prices down. We small artisan crafters need to market ourselves NOT on price, but on uniqueness and quality. There is no way a small crafter can compete on price with companies who mass produce – it is not even worth attempting.

Abby said...

I have had the sAme done to me. A young lady from my. Ountry contacted me about allowing her to sell my product. She did this for a year. I didn't hear her for sometime and when I tried to contact her she would always say she is waiting for an answer from God. I guess he spoke to her and told her stealing was good. She copied or tried to copy my product based on the ingredients on the container. I was hurt but I know karma catches up

Lise M Andersen said...

Oh Abby I am sorry to hear this! It saddens me that this happens to people. I hope karma indeed does catch up!

Pepper7 said...

Maybe it's pride, or stubbornness but I could never bring myself to copy another's work. I want my products to be uniquely me. I'm in awe and admire so many talented people's creations, but to knowingly sell a copy of some else's hard work is wrong. This business is hard. There's a ton of research and time that goes into developing a product, not to mention packaging, and marketing. We, as small companies do not have the product turn over that larger companies have, so higher prices are reasonable and should be expected. That said, I know of people that have admitted to taking a bottle of Argan oil, repackaging it and selling it for three times the amount. That is also something I could never bring myself to do. Just because you can sell it for that price, doesn't mean you should. I feel like I would be violating an unspoken agreement I have with my customers, to give them a well crafted product at a fair and reasonable price.
Margi

Lise M Andersen said...

Hi Margi - Thank you for sharing this. The world needs more like you!

Dominika said...

I think that Sally probably 1) doesn't run her own skincare brand and 2) has no idea how expensive or time consuming it is to do so. It's easy to take a look at a product label and say I could make that myself as a formulator when you have litres of oils and ingredients sitting around you, but as we all know, the common consumer can't and won't. That's why we buy beauty products, often overpriced ones. I applaud the brand for at least charging and placing value on their artisan product - many small batch natural skincare brands don't charge enough and that's why they don't make it. Not only that, but it's incredibly expensive to launch, market and grow a beauty brand in the current climate. With so many brands launching every day, how does one make an impact? Through marketing, media, packaging and press. Maybe someone should tell Sally that those things are not free or cheap. The big brands make huge margins on their products, why can't we?

Lise M Andersen said...

Great input Dominika! This is so true - thank you for your comment.

Dominika said...

No worries! I just think we should all be supporting each other, uniting to take on the big boys, not bashing each others prices or formulations.

Lise M Andersen said...

Dominika - you and I are of the same mind!

Kim O said...

I remember that thread with "Sally" as I was on it too. Initially, I thought the price of the serum was ridiculously high but as the conversation went on I was able to see it from the makers perspective. The ingredient list doesn't tell the whole story behind the product and it was a good lesson to learn. Thanks for the great blog post.

Valaura said...

This is a great perspective to look at Lisa. As a fairly new business, it is extremely expensive and time consuming to do all the research and testing/developing of a new product. As a small business owner, I try to buy in larger quantities but I didnt start out that way, and what I consider larger quantities may still be small to some other manufacturer. I think that while Sally feels that the price is too high.... all that time, knowledge & effort just doesnt show(like everyone has said) in the ingredient list. As for her statement, that she could just make it...well then "Sally" give it a go... and I PROMISE that once she does her own research, purchasing and developing....and all of the TIME(that must be included in the pricing structure-if done correctly...and I don't know about any of you guys, but I feel like my time is one of the most precious ingredients I put into my products and I price fairly, but accordingly).... Im sure she will find that product won't look so expensive anymore. Now, I know there is a lot of price gouging in our industry that exists and I think its VERY WRONG, just as WRONG as it is to copy and distribute someone elses hard work(think back to elementary, middle, and high school....and tell me when it was ever considered ok to cheat off someone elses work), but unfortunately not everyone operates with the same code of ethics. All we can do as artisans, is stand up for our products but price fairly and accurately...it doesnt HELP anyone to price something so low as to not make a profit....so what if Sally might "make it cheaper" there will always be someone who can and possibly even does.. but as an individual small business owner who wants to stay in business(and even grow, including having to hire employees)...my creed is be FAIR to your customers, be FAIR with the quality of ingredients you use, be FAIR to OTHER ARTISANS (we should be a community that SUPPORTS each other, not tries to tear down), and above all...be FAIR to YOURSELF(your time and skills are valuable).

Pepper7 said...

Thanks Lisa, that's very sweet of you to say. I feel the same about you. You are one of the incredibly talented people that I'm in awe of :)
Margi

Jen B said...

Hi Guys,
an interesting thread to read for sure. One thing has stuck out for me though- when developing recipes in this industry surely it can be hard to avoid being labelled as 'copying' as so many of the products all have the same ingredients?
I am developing my own line here in Australia but if a competitor then copied what I was doing it really wouldn't bother me. Emulation is the highest form of flattery and businesses that just get on with what they're doing are the ones that get ahead.
This is one of THE most competitive industries after all and when you release the idea of competition you can focus on your goals.
Cheers
Jen

Anonymous said...

I had a friend needing help with salve for someone suffering from eczema so I made the salve and when it helped they asked if they could make their own. I shared my basic recipe and now they are selling it. I really was not in to selling at the time but, it would be nice if they had given me some kind of recognition or even asked if I minded them using my recipe. I have to look at it as water under the bridge and just be more careful in the future. No more sharing recipes. 😊
JNC

Shirin Samiljan said...

If your brand is crafty, homespun, kitchen counter chemistry, burlap and mason jars, then your customer would be horrified by a $40 serum.

If your brand is luxurious, scientific, modern, glass and chrome, your customer would be horrified by a product packaged with a raffia tie-tag and a burlap printed label.

Neither approach is wrong, and neither customer is wrong. I actually don't think that Sally can recreate the expensive serum because part of that product is the *experience* the customer has while opening the bottle, relaxing into the application of the product on her face, secure in the knowledge that a major brand who hires formulators with advanced degrees has put together the perfect combination of ingredients for this customer's skin.

It's not about price. It's about brand.

K Salon Organic Beauty said...

Lise, great post! I've spent so much time/money developing my hair care line, so I can definitely relate here. On that note, I've been researching companies who sell on Amazon and are being accused of copying formulas and selling them cheaper. Just to get a better sense of what's going on I even ordered one of the products, which I suspected was also falsely advertising (based on the reviews not fitting the description of the product) - a conditioner that is supposedly made of 100% pure, organic butters and oils. Once I received the product it was clearly not what it said it was. It was obviously a water based product and also didn't list all the ingredients (there was no preservative system listed nor a fragrance source, despite the most horrendous artificial fragrance smell). It's actually made me leary about selling on a platform like Amazon, since stealing formulas is becoming so common. Maybe you have some experience/wise words on that? Anywho, all that to say this is a tough business at times and there are people out there just trying to make a buck, instead of putting their heart and soul into crafting a unique and special product (like what we small guys do). :-)

Lise M Andersen said...

@Kim O - Thank you for your kind words!

@Valaura - You are, of course, correct. It is indeed most often a long and sometime arduous process to get any formula to perfection - even if you are reverse formulating something.

@Pepper7 - blowing air kisses!

@JenB - Emulation is definitely a different thing and I agree it is a form of flattery.

@JNC - I am so sorry to hear you had to experience this. It hurts much more when it is someone you though was close. My only thought here is: I hope karma visits this person!

@Sirin Samiljan - You make some excellent points, and I agree that sally would probably not be able to recreate this face serum - which is why I chose to illustrate this post as I did.

@K Salon Organic Beauty - Your comment is very interesting! I have the same doubts about Amazon for the very reasons you mention. It would be great to have a source where one could be assured of the level of quality and ethics of the producer.

Marie Rayma said...

I've definitely had my work stolen and sold, though obviously my situation is a bit different as I publish recipes. I've found entire recipes (complete with photos!) wholesale lifted from my website and re-framed as if the thief had created it themselves. I've also found entire Etsy shops full of products I developed with no credit, no mention, nothing. That ticks me off, and is also rather concerning as a great deal of my recipes are in no way suitable for sale (especially earlier ones). If somebody needs my recipes (especially my old, bad recipes!) to run their business... yikes. They have no idea what they are doing, and that's seriously concerning.

Lise M Andersen said...

Oh wow Marie that's really disconcerting! You are giving so much away - to not even get credit for your work is truly the worst! Did you contact the theif and confront them with it? That would be totally fair and completely understandable to ask a person copying your work so blatently to explain themselves. I can only hope karma visits this unethical person with a vengeance.

Gwen said...

Actually, price gouging doesn't fit this situation at all or at least not in the way I've ever understood the term. Is there a shortage? No. Is there a high demand right now? No, not in the way that people need bottled water after a natural disaster.

That serum is a luxury product and can be priced at whatever their market and customer demographics will bear. It's all about their "ideal customer" and if they are comfortable with the price, more power to them.

As to copying, that's trickier. Are they really copying? They have the ingredients list, but not the specific amounts of X, Y, or Z and as you've mentioned, the quality of the ingredients matter.

I'd also add that to some consumers, like me, the sourcing matters as much as the quality. I don't care if Monkey Pee can turn back the clock on my skin twenty years, those monkeys better be treated well and paid a living wage before I go using their pee. (I joke with my example, but hope you get the idea)

There are things that I've made that are definitely inspired by other products, no idea begins in a vacuum. I'm not selling skincare at this point, but I have sold handsewn garments in the past. One of my best sellers was inspired by a pair of pants that the original brand was no longer making. I did mention that in some of the original posts about them, but they eventually took on a life of their own. I hadn't even literally copied the pattern in the first place. I had drafted my own pattern with an old school pencil and big sheets of drafting paper, then changed even those immensely over time, gone to organic or vintage fabrics, added pockets, customized them for individual customers, changed markets from Etsy to local, etc. Where do we draw the line?

Marie has a very valid and clear cut case of horrible and illegal copying. I don't question that for a moment.

I also don't question that all of us put a lot of blood, sweat, and tears, not to mention dollars into what we create, be it skin care or comfy lounge pants.

I do feel that there is a point where all creatives need to accept that in order to be able to put our ideas out there we have to accept some risk and be realistic enough to know that that risk is slight if we are doing everything we can to promote our own ideas and values while continuing to grow, both as people and as creators.

Lise M Andersen said...

HI Gwen - Thank you for this input. You are right in that it is hard to know where the line is drawn. Your pants design – as you describe it here – is indeed your own design. You were inspired by another brand and didn't blatently steal. There is a huge difference. Being inspired by and running with an idea: yes. Setting out to steal someone's work (whether you are actually able to do so or not): no.

My main objection to *Sally*s comments was her attitude. She jumped to conclusions and proceeded to act on it by dissing a colleague - unfairly! I find her whole mindset awfully disturbing. This kind of mindset does not encourage constructive discussion, inspiration, or anything positive for that matter. I believe we all can and should do better than that.

Gwen said...

Lise,

Sorry that I missed your very valid point about her mindset, I agree! Her contribution to the discussion is toxic.

How sad is it that I've gotten to the point where I accept that there are yahoos like her out there and tend to tune them out? I need to work on my complacency.

Lise M Andersen said...

Sometimes we have to look past the yahoos, and sometimes we have the energy to deal. My way of dealing in this instance was writing about it. Thanks for your input. :)

Tonya said...

I am new to your amazing site (Thank you Marie at Humblebee and me). I really agree with Gwen's comment and with your post. I think it comes down to honesty and responsibility for our actions. It also is a common mindset, in my opinion, of our society today. I have always worked with the public and there seems to be a concensus of "my opinion is fact so give me what I want" which is usually something for nothing. It seems that many times people base their opinions on something other than actual facts, research, and experience. Sally saw a product that it seems she liked, but felt was overpriced. She didnt do her research or try the product or seem educated in formulating skin care she just went straight to her rant/bad review. Ignorance is not bliss, its stupid and dangerous.
This is a topic I've thought about for years as I meet so many people in my work and watch and listen. I think character is what it comes down to. How teachable, contemplative, respectful, responsible, and humble a person is makes all the difference. I am preaching to the choir...
Could you replicate that same product for less...I don't know. The question I have is why, with such a short time on this earth and so much knowledge to gain, beauty to enjoy, and good to do in the world does anyone waste their time complaining about a private company's product prices.
We should value each other's hard work and be willing to pay for something of value monetary or otherwise not degrade it. I think this is the nerve that struck Lisa who legitimately has earned the right to sell her products for their true value and along comes Sally ignorantly judging a similar work based on, well nothing solid it sounds like.
Believe me I have met 10,000 "Sallys" in my career, and in the midst of their threats and rants and demands my mind wanders to the thought that I am truly grateful that I'm not related to this person because it would ruin Christmas! And then I try to concentrate very hard so my internal giggling doesnt accidently leave my lips ;)
I am going to whip up one of your body butter recipes today and be thankful to have met you, so to speak, and look forward to what I can learn from you and purchase an ebook. Chances are Sally's days aren't so full of good Karma lol.

Lise M Andersen said...

Thank you kindly Tonya - what an absolutely lovely comment, and many wise words indeed. These in particular, deserve a front and center spot I think:

Ignorance is not bliss, it is stupid and dangerous

If I were a needlepoint kind of person, I do believe I would be full on stitching up a pillow cover as we speak. Thank you again for sharing your thoughts.

:)