When entry barriers are nearly zero, competitive policies push the entire industry toward a common point. This is a branding issue, not a formula issue.
The short answer: differentiation disappears when entry barriers are nearly zero and the entire industry uses the same set of visual signals. The solution does not lie in product formulas but in layers of meaning and distinctive assets that cannot be replicated overnight.
The Vietnamese cosmetics industry imports over $1.3 billion in raw materials and finished products each year, an increase of about 17% compared to the previous year (customs data 2023, cited by the Euromonitor market report). More importantly, the same OEM factory can provide identical formulations for dozens of different brands. Filters, active ingredient concentrations, skin feel, and even fragrances can all be standardized according to a catalog. Buyers just need to choose the bottle, label it, and run ads.
What is the result? Customers walk into a store or open an e-commerce page and see fifty serum bottles with minimalist designs, white or cream colors, thin fonts, and the same three words: "brightening," "moisturizing," "anti-aging." No one is wrong. They all look the same. And when everything looks the same, the buyer's brain defaults to choosing based on price or the nearest ad.
This is no one's fault. It is a natural result of a market with low barriers to entry and high short-term sales pressure. When each newcomer observes the best-selling products to emulate, visual and linguistic signals converge on a common point. Researcher Byron Sharp calls this category convention pressure, which pulls all brands into the same identity space because no one dares to be different first.
This trap has two self-reinforcing feedback loops. The first loop: new brands lack the budget to build long-term identities, so they choose safe designs that look like their successful competitors. The second loop: as competition intensifies, they lower prices to attract orders. These two loops combine to create a crowded domestic cosmetics industry with increasingly thin profit margins, relying entirely on advertising costs to generate sales.
A brand is the perception in the hearts of customers about your product, service, or organization. It is not what you say about it, but what they say to each other.
Marty Neumeier, The Brand Gap
Previously, positioning as "natural ingredients" or "clean beauty" created real differentiation. Today, that phrase appears on nearly every bottle. Customers, especially in the educated segment, have learned to read INCI ingredients (International Nomenclature of Cosmetic Ingredients) and compare directly. When free lookup tools allow anyone to verify that two bottles contain the same active ingredients at the same concentrations, the advantage of "good ingredients" becomes a baseline, not a differentiator.
The counterfeit cosmetics case in Bac Giang with over 100,000 orders detected (report to authorities, 2024) reflects another aspect of the crisis: when brand identity is weak, counterfeit products can exist for a long time without being detected, as customers lack the basis to distinguish between real and fake.
Cocoon is the most noteworthy Vietnamese example in this context. The brand does not just say "Vietnamese ingredients" in a generic slogan. They tie each product to a specific location and journey: coconut oil from Ben Tre, macadamia butter from Dak Lak, coffee from Dak Lak. This story of sourcing creates a linguistic asset that no OEM can sell to another brand, as it requires a real relationship with suppliers, field imagery, and a commitment to a transparent supply chain.
Researcher Jenni Romaniuk measures the strength of distinctive brand assets along two dimensions: fame and uniqueness. A white bottle with thin font has low fame and nearly zero uniqueness because it shares those signals with dozens of competitors. In contrast, a story of sourcing with a unique name, specific colors, and consistent visual characters will accumulate both dimensions over time.
Based on the above logic, there are three intervention points that cosmetics brands can start with, in order from foundational to surface:
According to a survey by Ipsos of American consumers, 72% say packaging influences their purchasing decisions. In an e-commerce environment, the product bottle must convince viewers through a smartphone screen, often at thumbnail size. Packaging designed for physical shelves often fails on screens, and vice versa.
The issue is not just about being beautiful or ugly. The issue is whether that packaging can convey the right signal within the first 50 milliseconds, the time frame in which visual impressions form according to research by Lindgaard and colleagues published in the journal Behaviour and Information Technology in 2006. A bottle that looks exactly like ten others next to it does not get those 50 milliseconds, as the buyer's brain does not stop to process.
This is why brand design in the cosmetics industry is not just an aesthetic problem. It is an economic issue: customer acquisition costs (CAC) soar when no one remembers who you are, and profit margins shrink when price is the only remaining competitive tool.
McKinsey, The Business Value of Design, 2018. Kantar BrandZ, Most Meaningful Brands, around 2020. Byron Sharp, How Brands Grow, Oxford University Press, 2010. Marty Neumeier, The Brand Gap, New Riders, 2003. Jenni Romaniuk, Building Distinctive Brand Assets, Oxford University Press, 2018. Ipsos, Packaging and Purchase Decisions, survey of American consumers. Nielsen, Innovation Report, CPG data (consumer packaged goods). McKinsey, The State of Fashion: Beauty, 2024.
When the current product does not meet industry quality standards, it is necessary to prioritize product improvement first. However, in the current cosmetics market, the barriers to entry regarding formulations are very low because OEM production, which means manufacturing to order for other brands, has become widespread. This means that good ingredients are a necessary condition but no longer a differentiating advantage, and the brand becomes the deciding factor for customers in choosing whom to buy from.
These are factors that take a long time to develop: a color that has been owned through many years of consistent presence, a distinctive language style, or a unique illustrative image associated with the brand. Competitors can copy product ingredients or pricing within a few months, but they cannot replicate the accumulated history of a distinctive asset that has become ingrained in customers' memories.
It's much harder now because the market is saturated with those claims. When most new brands claim to be natural, chemical-free, or friendly to sensitive skin, those words lose their distinctiveness. Positioning based on nature can still be effective if accompanied by specific evidence of ingredient sourcing or production processes, but simply writing it on the packaging without substantial backing is no longer enough to create differentiation.