In 2025, some say the era of private labels has arrived. Indeed, from last year to this year, more retailers have begun trying private labels, and more brands have started attempting to serve retail enterprises. However, unfortunately, based on current market feedback, very few companies have achieved systematic success. Research shows that most failures manifest in the following ways:
Attempting without sufficient scale and lacking upstream supply chain integration capabilities;
Lacking systematic understanding of private labels, naively believing that copying competitors' products will lead to success;
Low talent density in retail, with no organizational reform; PL is handled part-time by procurement/buyers, and the MD (Merchandise Manager) system is weak;
Weak infrastructure and logistics systems, with obvious shortcomings in cold chain and multi-temperature zones;
Domestic PL often starts with low prices; after blind attempts, if consumer trust is gained, it can easily enter a negative cycle.
Establishing a Systematic Private Label System Of course, first we must enhance our understanding of private labels. A good retail private label product, though presented to consumers as just a product, is actually the construction of a systematic framework for the enterprise. This system needs to be designed based on the retail business model. It includes: what consumers you face, brand positioning, pricing strategy, logistics systems, upstream supply chain collaboration methods, product development business processes, organizational models, etc. As we often say today, Hema, Sam's Club, and ALDI have great products, but their so-called "good products" are not the same concept. Because business models differ, the requirements for product development systems also differ. There are at least three types of private label product development for retail enterprises:
Convenience store system product development (represented by 7-Eleven)
Supermarket system product development (represented by AEON, Target, etc.)
Hard discount system product development (represented by ALDI) Let's call them:
Parallel product development model (Team MD)
Sequential product development model (Stage Gate or Innovation Funnel)
Buyer-driven model Below, we will break down these three models.
Parallel Product Development Model: 7-Eleven's Team MD Model Normally, traditional FMCG companies use a sequential product development model (Stage Gate), which involves first conducting global regional consumer insights, extracting brand opportunities and category gaps, then developing concepts. Finally, commercial evaluation, development to testing, and launch, with multiple gates and step-by-step handoffs. So what is the parallel product development model (Team MD)? From an organizational perspective, under the Team MD model, retailers establish cross-functional product development teams internally, coordinated by the category manager from the MD department. In Japan, 7-Eleven typically has each category manager responsible for both NB product procurement and PB product planning and development for that category. This organization gives category managers a holistic view of category operations, allowing them to balance existing branded products and private label products to be developed. Team MD typically includes MD, R&D personnel, supplier representatives, and operations, design, and other relevant roles, all working together as a roundtable team. Unlike traditional sequential handoffs between departments, Team MD emphasizes parallel participation of all functions, shortening communication chains. Under this structure, retailers, manufacturers, and even partner well-known restaurant brands become part of a joint team, achieving a win-win-win for retailers, manufacturers, and partner stores. (Source: 7-Eleven) Therefore, their new product development process is not linear and step-by-step, but rather all links in the industry chain start working simultaneously. When a product idea is confirmed, 7-Eleven quickly gathers R&D, raw material supply, processing and production, packaging design, logistics and distribution, and other related partners at one table, simultaneously carrying out product sampling, packaging design, production process adjustments, etc. This parallel collaboration greatly compresses the development cycle, enabling 7-Eleven to launch about 200 new products weekly, with annual new product listings reaching up to 5,200, and about 70% of store products being replaced and updated each year. This pace means the development process rolls on a weekly basis. The 7-Eleven team follows a 52-week MD, planning the product themes and innovation points for each week a year in advance, and continuously adjusts using PDCA. For example, in the 52-week MD formulated at the beginning of the year, they might assume that March and April are earnings season, with an increase in overtime workers. Based on this scenario, they plan fresh food new products, and after a week on the shelves, they verify the hypothesis with actual sales data and adjust next steps. 7-Eleven's typical approach is to test market reactions with limited seasonal or regional new products. If they sell well, they expand distribution; if the response is mediocre, they promptly delist and adjust. Meanwhile, the weekly PDCA cycle provides data feedback to the team, allowing hypotheses to be verified and corrected in a timely manner. So, the essence of 7-Eleven's product development is a system of high-frequency iteration and meticulous management. This system can support multi-party collaboration, with an extremely short cycle from concept to sample, allowing rapid small-batch market testing. Team MD also reduces R&D risk through deep supply chain cooperation. Because manufacturers participate early in product development, they can anticipate and solve technical problems in production, and adjust formulas or processes based on factory capabilities, thereby reducing the probability of development failure. Today, this 7-Eleven system is not only practiced by 7-Eleven; Lawson and FamilyMart in Japan are also referencing it, but 1-to-1 replication is quite difficult. The parallel product development model is very suitable for retail formats with rapidly changing demand and high turnover rates, typically convenience stores and fresh food/ready-to-eat retail formats. The biggest advantage of this model is agile innovation. Product managers can quickly capture market trends and launch hit products. Through multi-party collaboration, they produce high-quality differentiated products, forming unique channel competitiveness, as exemplified by Japanese convenience stores. However, the problem is that it requires extremely high comprehensive capabilities from the enterprise. As I mentioned, even Lawson and FamilyMart find it difficult to replicate 1-to-1 compared to 7-Eleven in Japan. This is because it requires strong supply chain management and integration capabilities, and the large number of new product iterations also tests the insight and execution capabilities of the product planning team. Without sufficient scale and data support, blindly launching new products frequently may lead to inventory backlog and supply chain pressure. Small and medium-sized retailers basically cannot fully replicate it, but it is valuable for large community retail enterprises.
Sequential Product Development Model: Stage Gate Development Model Generally, large retail enterprises more often adopt a Stage Gate phased development architecture similar to brand companies. That is, from concept, preliminary research, positioning development, product R&D and testing, product launch, to post-launch evaluation. It goes through a funnel-shaped model. From an organizational dimension, retail enterprises set up dedicated private label development teams, including personnel from product management, marketing, consumer research, product design and development, quality management, procurement, supply chain, etc., with clear division of labor and decision-making levels. Typically, one person serves as the overall head of the private label product line (e.g., brand manager, product line manager), coordinating collaboration across functions. Then different functional members perform their respective duties. The marketing and consumer insights team is responsible for preliminary research and concept development; the design and R&D team is responsible for product formulas and packaging design; the procurement and supply chain team is responsible for selecting manufacturers and developing supply plans; and the sales operations team provides store feedback. Cross-functional project teams communicate regularly during the product development cycle, but tend to advance by stages, with each stage led by the dominant functional department to complete milestone deliverables. At the same time, the company establishes a private label committee to oversee development projects. This committee is composed of senior executives from major functions (such as procurement director, marketing director, category director, etc.), and reviews and makes decisions on projects at key stage gates. This organizational structure ensures that a dedicated team is fully responsible for private label strategy and product direction, while obtaining professional support from various departments through a matrix team, and controlling risks through stage reviews. For example, at Target in the United States, the company's private label management team, which belongs to the marketing or merchandise department, coordinates the strategy and execution of multiple private labels, and coordinates design, procurement, marketing, and other personnel to participate by stage in new product development. The Stage Gate model is more suitable for the private label strategies of general large comprehensive retail enterprises. When retailers have many categories, large store scales, and pursue brand image, Stage Gate can provide relatively safe process specifications. Relatively speaking, once a product or product line is selected for development, there is a certain scale effect. However, this model is best started with general large-volume single products to fully utilize economies of scale and gain advantages in cost and supply. Of course, the biggest problem with this model is that after the decision-making chain becomes longer, the flexibility of innovation and the sensitivity to market capture decrease, or rather, it does not leverage the natural advantage of retail enterprises being close to consumers.
Buyer-Driven Model: Hard Discount Private Label Development Model The hard discount private label development model is different from general retail enterprises and convenience stores. I call it the buyer-driven model. Hard discount private label development is centered on the buyer team. Unlike the multi-layered organization of large retailers, in the ALDI model, each category is fully managed by one buyer or a small buyer team. This person or team is both the procurement manager and the product development manager. The buyer needs a very deep understanding of the category they manage and has the authority to decide whether to introduce or develop a private label product. We know that ALDI has very few SKUs per category and basically one product per brand—most subcategories offer only one private label product, with exclusive cooperation with one supplier, and generally no parallel competition among multiple brands. This product structure greatly shortens the decision-making chain. The buyer is the product manager for that category's private label products and can make many decisions without cross-departmental approval. The buyer team is also equipped with support roles such as quality management and packaging design, but the total headcount is not large, emphasizing multi-skilled individuals. A buyer handles multiple responsibilities including product selection, supplier negotiation, product pricing, and packaging oversight, driving projects with high autonomy. This is a very flat organizational structure. In buyer-driven enterprises, the buyer's eye is the core competitiveness. Excellent buyers are familiar with consumer behavior, skilled at picking the most suitable product from a complex market to private label, and obtaining exclusive supply through direct negotiation with suppliers. Organizationally, there is no large R&D department or cumbersome committees; instead, there is high trust and empowerment for frontline buyers. Additionally, global hard discounters generally adopt a small headquarters, large block structure, with a few regional procurement centers in each country responsible for the products of their stores, avoiding layers of reporting. In summary, the buyer-driven model is characterized by streamlined efficiency, with decisions concentrated in the hands of buyers, and each category operating as a small team for rapid execution. The hard discount product development approach generally involves buyers first identifying opportunity points in categories based on market observation and sales data. For example, a national brand sells well and has high gross margin, suitable for launching a parity product, or discovering new consumer needs that the market currently lacks low-price products to meet. After determining the direction, the buyer directly contacts potential suppliers to obtain samples and quotes. Typically, suppliers already have similar product formulas, and the buyer only needs to choose the best one and make slight modifications to finalize the private label product plan. The entire process generally does not involve lengthy concept refinement or cross-departmental meetings; development and procurement proceed almost simultaneously. Of course, we know that warehouse discount formats like Sam's Club are also broadly discount formats, so they also adopt the buyer-driven model. However, their buyers do not have as much authority as ALDI's. Although buyer-led, they still need to collaborate with supply chain, quality control, and marketing teams for benchmarking and sampling. Therefore, the buyer-driven model is most suitable for retail formats pursuing a total cost leadership strategy.
Developing Systematic Product Development Capabilities At this point, we can understand that a good retail private label product is essentially a system. And the product development system is determined by the business format. 7-Eleven and ALDI's private label development are completely different logics because the two companies' operating logics and core consumer groups are vastly different. So, blind imitation is meaningless. Because if the consumers you face and your operating logic are not like 7-Eleven or ALDI, then it's pointless. If you don't have 7-Eleven's precise ordering system and three-temperature-zone transportation system, even if you imitate 7-Eleven's exact rice ball products, you will fail quickly. If you don't have ALDI's minimalist SKU, 90% private label centralized procurement, and lowest total cost advantages, even if you copy ALDI's hit products and packaging 1-to-1, you can only sell for a few days as a gimmick and will quickly be eliminated in price wars. The most important thing is that your product system matches your business system. For more topics on private labels, on August 20th in Shanghai, at the 5th China FMCG Retail Innovation Conference, New Distribution, together with leading brands and retailers in the industry, will hold an in-depth dialogue.
- Li Jingyao, Party Committee Member & Deputy General Manager of China Resources Vanguard (Holdings) Co., Ltd., will share on-site: Beyond Transactions: Building a Data-Driven Symbiotic Relationship between Supply and Retail
- Ding Jiachuan, Managing Director and Global Partner of Boston Consulting Group, will share on-site: 2025 Consumer Trends Insights and New Growth Opportunities
- Lin Yongqiang, Chairman of Guanpake, will share on-site: Big Brand Hard Discount: A New Paradigm for Reconstructing Retail Efficiency
- Zhang Huiying, National Sales Director of Oishi, will share on-site: Brand Growth in the Era of Retail Transformation: Oishi's Practice and Thinking
- Zeng Cheng, CEO of Manxiaobao, will share on-site: Product-Effect-Sales: Sustainable Growth from "Planting Grass" to "Planting Trees"
- Su Hong, COO of Every Day 2B and General Manager of Every Day's Bangbianli Platform, will share on-site: With Intensifying Competition, Can Supply-Retail Integration Become a Solution for Convenience Stores?
- Ren Wenqing, CEO of New Distribution, will share on-site: From Price War to Matching War: Understanding the Logic of Production-Supply-Marketing Changes Behind Retail Noise
- Zhou Xu, Vice President of Biyoute Commercial Group and Co-founder & General Manager of Zhenshimei Supply Chain Management Company, will share on-site: Serving 1000+ Supermarket Stores and Representing 800+ Brands, How Does Zhenshimei Co-create Growth with Brands?
- Xu Liyue, Head of Douyin E-commerce Instant Retail Food and Beverage Industry, will share on-site: The Instant Wave of FMCG: Retail Revolution from "Shelf" to "Fingertip"
- Zhang Zhiqiang, Founder of Yuanzhi Category Management and Co-author of "Category Management", will share on-site: Low Price is a Misunderstanding! How Can Supermarkets Use Category Management to Reshape Supply-Retail Relationships?
- Pan Jinju, Founding Partner of Kuannarrow Venture Capital, will share on-site: Trends in Supply-Retail System Transformation under the New Consumption Cycle
- Weng Bocheng, Founder and CEO of Maizima Food, will share on-site: Insight into New Demands, Creating Super Single Products with Tenfold Growth
- Song Gen, Head of Dewu Food, Health, and Pet Life, will share on-site: Seizing Future Consumption Opportunities: How Dewu Creates Million-selling Hot Products Loved by 500 Million Young People
- Xue Wenfa, Deputy General Manager of Guangdong Yinxue Group and Senior Private Label Expert, will share on-site: Breaking Through Homogeneous Competition: Building Brands is the Urgent Task for Retail On-site grand release: "China FMCG Production-Supply-Marketing Transformation White Paper (Industry Insights 2025)" - a comprehensive, multi-dimensional report on the changes of the times in China's FMCG industry, providing direction for supply-side coordination under major demand changes. Additionally, there will be a roundtable dialogue: "Retail Starts Doing Private Labels, What Should Brands Do?", inviting He Yunmin, former Deputy General Manager of Shanghai Lawson Convenience Store Co., Ltd.; Zhang Ning, Co-founder of HotMaxx; Wang Zhengqi, Chairman of Moxiaoxian; and Fang Xianli, Founding Director of the Private Label Production-Research Collaboration Platform, to focus on core current issues, with intense exchanges and on-site inspiration. ************🔺