Sorry didnt see this earlier Smiddy but you did the right thing. Looks like what is called a "hotspot" -an area of skin irritation that becomes infected. Once the infection is established in the outer layers of skin on a thick furred dog, it spreads like wildfire due to the humidity against the skin. if you get these early you can clip the hair away from the wound and well back from the edges - they always go further back than you think- and apply iodine a couple of times a day like Boaraxa said. If it is too well established you need antibiotic tablets, occasionally steroids too if they are really sore or itchy.
See this heaps in breeds that have a thick undercoat (labs a shepherds represent) also if they have underlying itchy skin, humid days in summer, a collar pinch or scratching at collar is also a common trigger.
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