In 2023, a major trend was the rise of white-label products. In the past era of consumer frenzy, many brands created their own myths. We ourselves were shaped by brands: as children, wearing Adidas or Nike always drew envious glances from classmates; as we grew up, using Apple phones and drinking Starbucks made people feel trendy; after starting work, it seemed that wearing Chanel or carrying LV was necessary to show status. In recent years, many people have begun to disenchant with foreign brands and support cheap, good-quality domestic products. Later, everyone realized that brand logos are just external displays; what matters more is who you are. On one hand, people become followers of a brand because they identify with its philosophy, using the brand to showcase their style and taste. On the other hand, compared to brands, people value quality and cost-effectiveness more, and are willing to buy even if it's not a brand. Thus, white-label products have ushered in their best era.
The Onslaught of White-Label Products
In 2023, white-label products created many sales miracles. Pinduoduo's growth momentum was astonishing, and it was supported by numerous low-profile white-label products. White-label products on Douyin were also not to be underestimated. In March last year, a beauty white-label brand named "Haijieya" broke through on Douyin, with monthly sales of 1 billion yuan, outperforming first-tier brands like L'Oreal, Proya, and Estée Lauder by multiples. During the Double 11 period, an obscure brand VC achieved over 100 million yuan in total sales and over 2 million units sold, securing the top spot in Douyin's cosmetics GMV. After Taotian tilted its algorithm toward price competitiveness, a large number of white-label products appeared in the store popularity rankings based on cumulative buyers. Among them, the snack industry belt merchant "Bibizan" ranked third in the food popularity list, only behind Three Squirrels and McDonald's.
Offline, discount and value-for-money store formats were also growing against the trend. Miniso, with its strong white-label supply chain system, reversed its decline during the pandemic, forming a beautiful V-shape from the bottom, with a year-to-date increase of 176.4%. In the third quarter of last year, it recorded revenue of 3.79 billion yuan and net profit of 640 million yuan, setting a new record. Discount stores like Hi-Tech Go, HotMaxx, and Snacks Are Busy also expanded aggressively, with nearly half of their products being white-label, achieving gross margins of 30%-40%, and taking on the profit-making tasks of the stores. Currently, top livestream rooms like East Buy, Xiao Yang Ge, and Friends are all striving to build their own brands, and the essence of private labels is quality white-label products.
"White-label" does not mean counterfeit or shoddy; it typically refers to unbranded products produced by small and medium manufacturers, or products with low brand awareness among consumers. It's no longer new that many brands are OEM. Social media guides to same-source factories for big brands have narrowed the information gap between consumers and the supply chain, making it transparent which are OEM and which are original. Smart consumers have started ordering from factories on 1688, unwilling to pay the "IQ tax" to brands. In September 2022, 1688 launched "1688 Strict Selection," bringing together factories that OEM for big brands and high-cost-performance products from well-known factories, achieving over 70% year-on-year growth. 1688 was also listed by Alibaba as one of the group's first batch of strategic innovative businesses.
To explain the rise of white-label products, the economic slowdown is the most obvious factor, but more hidden are China's strong manufacturing advantages, the efforts of channel players, and changes in consumer psychology.
The Foundation of Manufacturing
The development of white-label products first benefits from China's manufacturing advantages. According to the UN Industrial Development Organization database, China's manufacturing share of the world's total rose from about 20% to nearly 30% over the past decade. China has industrial belts across the country, with over 100 industrial clusters, most concentrated in Zhejiang, Jiangsu, Guangdong, and Shandong, covering categories such as apparel accessories, small appliances, home furnishings, beauty and hair care, bags, watches, toys, pets, ceramics, and jewelry. For example, Jinhua is the world's capital of small commodities; Shunde is China's home appliance capital; Guangzhou and Hangzhou are women's clothing belts; Ningbo, Quanzhou, and Shishi are men's clothing belts; 50% of the country's home textile products come from Nantong, Jiangsu, and over 60% of denim clothing comes from Xintang, Guangzhou. Many of these products have quality similar to branded goods, but without sufficient funds for marketing or hiring livestreamers, they lack opportunities to be presented to consumers and fail to accumulate user awareness, so they can only do OEM or contract manufacturing. The rise of platforms like Pinduoduo and 1688 has given these industrial belt factories' white-label products a direct sales opportunity, and they are favored by many budget-conscious consumers. These merchants naturally have cost and efficiency advantages in the supply chain, and without high marketing, distribution, or operating costs, they can squeeze out some brand premium and become affordable alternatives.
Today, "white-label" has shed its derogatory label, and industrial belt merchants with strong product resources have become the targets of major platforms vying for their favor. To cater to the consumption downgrade trend and build low-price capabilities, e-commerce platforms have increased their support for industrial belts this year. For example, before Double 11 last year, Taobao launched "Taobao Star Origin," planning to select cost-effective good products from 20 industrial belts in the next year to help consumers buy with confidence. Douyin also released "Douyin Industrial Belt Service Provider Benefits," allowing industrial belt merchants to use Douyin's rich influencer and talent resources for product promotion and increased exposure. Pinduoduo, through its "Hundred Industries Plan," recruited industrial belt merchants to join and start store livestreams, providing tens of millions of free traffic support. With the expansion of its cross-border platform Temu, Pinduoduo will also rely on these quality industrial belt merchants to explore overseas markets. Consumer favor and e-commerce platform support have freed many white-label manufacturers from the fate of only OEM for brands, allowing them to stand in the market with more dignity and communicate directly with consumers.
Furthermore, the rise of white-label products is inseparable from the awakening of channel players.
The Awakening of Channel Players
In the past era of pursuing growth, distributors and retailers quickly expanded with the help of brand power, and as long as there was money to be made, there was profit. In the era of stock competition, brand competition intensified. To pursue high growth rates, manufacturers set annual sales targets for distributors that almost squeezed them to the limit. In the 1990s, distributors only needed capital and delivery capability; around 2000, they were required to have teams, visit brand manufacturers, and secure downstream orders; around 2010, they needed to distribute, maintain downstream relationships, and promote; now, to survive, distributors must also plan, select products, cross categories, and expand new customers. Brand products were already hard to sell, and being squeezed made distributors unhappy. When distributors sell brand products, they are just value transferors. Brand value creation is done by the brand owner, and distributors are just the sales venue. So the brand premium does not lie in the channel but mainly with the brand owner. To pursue profit growth, distributors can only enhance their premium capability.
The reality is that whoever cultivates consumer awareness enjoys the premium. If distributors and retailers can successfully promote white-label products, the premium goes to them. Selling white-label products at a premium is not easy; it's a reversal that only occurs when the domestic economy reaches a more mature stage.
Previously, brands were a guarantee of quality. When the market was chaotic, brands could provide endorsement for product quality. But when the market matures, constrained by legal systems, competitive barriers, and key customer procurement, many low-quality products and enterprises have been naturally filtered out or eliminated. In a more mature market, white-label quality is equally reliable. The return policies and product review systems of e-commerce have also reinforced the impression that white-label products are reliable. In the past, marketing was brand-driven and channel-driven. The rise of white-label products means achieving channel brand-driven marketing, that is, building channel brands, leveraging channel players' advantages in occupying terminals (retailers) and platforms (traffic), doing both brand awareness and delivery. It's a typical trinity of awareness, transaction, and relationship.
The rise of white-label products means distributors need to reposition themselves. White-label is not just adding individual SKUs but reshaping their operational capabilities.
When distributors sell white-label products, they must do a series of work such as demand insight, product design, brand marketing, and product delivery, essentially taking on the responsibilities of a brand owner. Traditionally, building brand awareness mainly involved reaching consumers through mass media, with long-term heavy investment, repetition, and more repetition to make the brand widely known. Now, distributors' ability to sell white-label products mainly relies on three points: high customer trust, a low-price image, and the ability to communicate deeply with customers.
Trust is the prerequisite for transactions. Under the "people find goods" logic of physical supermarkets and traditional shelf e-commerce, white-label manufacturers are limited by capital and manpower, have limited channel expansion capabilities, and find it difficult to reach end consumers. Moreover, because consumers have low brand awareness and lack trust in products, they prefer familiar branded products under the same conditions. White-label products develop with difficulty. However, channels like community group buying and livestream e-commerce follow the "goods find people" recommendation-based sales logic, allowing white-label products to reach consumers at extremely low cost, and distributors are also the people closest to customers. Consumers' trust in group leaders or streamers replaces the role of "brand awareness," and coupled with good quality and low prices, white-label products have opportunities to shine. "Absolute sales volume is absolute brand," a concept from McKinsey.
As mentioned earlier, Douyin brands like VC and Haijieya have sales exceeding many first-tier brands. On the community e-commerce platform Quantum Food, the local Zhengzhou yogurt brand Niufeng Houdao can sell 24,000 bottles at a time, surpassing some first- and second-tier brands. So it's not accurate to broadly call non-first- and second-tier brands white-label; white-label can also be brands established within a channel's own system, with certain awareness and reputation in specific channels and markets. In fact, channel brands are not new. Whenever a new e-commerce platform rises, it brings a wave of traffic dividends, and those who seize the opportunity become new brands capable of competing with traditional giants, such as cosmetics brand Huaxizi, ice cream brand Zhong Xue Gao, and milk brand Adopt a Cow. Although channel brands can rise quickly, they are also easily trapped in one channel and find it hard to break out, just like the Taobao brands, fast brands, and WeChat business brands of the past.
Actually, making white-label products is not the goal; solving profit problems through white-label is the real goal. When white-label can bring more profit to channel players than brands, the rise of white-label becomes a trend. The rise of white-label means the transfer of commercial profits from brand owners to channel players, an inevitable trend in the development of the consumer market.
Consumers Are Hard to Please
More importantly, rational consumers dominate the fate of white-label products. Today, consumers place more importance on product cost-effectiveness and have a clearer standard for measuring product value. Besides comparing quality, they often value the user experience and whether it brings convenience. The appeal of brands themselves has declined, and big-brand alternatives have become a new trend. The ideal alternative for consumers is not to subtract from product quality but to comprehensively consider user experience, create the most cost-effective product, and sell it in the most direct way to reach consumers. Consumers have ample space to carefully calculate, and they will more meticulously weigh whether an item is worth it, which categories are cheaper on which platform with what mechanism, which categories can be bought cheaply, and which need to be bought expensive. Consumer psychology has undergone new changes: people are more vigilant about the future, the expectation of a certain bright future has been broken, and they tend to seize the present; at the same time, people are seeking meaning, summarizing life from a metaphysical perspective, and coexisting with uncertainty. If consumers cannot see a brand's professional accumulation and heritage, or the meaning behind the brand, it's hard to convince themselves to buy, and they will think the brand is harvesting them.
The brand landscape has thus undergone major adjustments. In mass categories that emphasize use value, consumers are unwilling to pay for high marketing costs, inefficient supply chains, and costs from unnecessary innovations. This objectively benefits merchants who can reduce intermediate costs and provide high-cost-performance products. Japan gave birth to brands like Uniqlo and Muji during this stage.
Are Brands Declining?
The rise of white-label products does not mean the decline of brands. It just means brands need to change their approach of heavy marketing to increase visibility and establish new communication mechanisms with consumers.
When consumption enters an era of comprehensive discounts, first, all brands need to squeeze out premiums or inefficient bubbles to adapt to the increasingly competitive consumption environment. But this doesn't mean high-end brands have no space; they just need to provide clearer reasons to convince consumers why they are worth the price. The baseline is product quality; raw material ingredients, scientific research professionalism, and cost structure all face stricter scrutiny from consumers. The added value is providing emotional and social value that users are willing to pay for. In this process, brands that lack cost-effectiveness, have no reason for high pricing, lack supply chain and brand accumulation, and have unstable sales and cash flow will be naturally eliminated by channels, consumers, and peers.
From the customer's perspective, brand marketing has entered an era of customer capitalism. What is customer capitalism? In 1964, at the defense of his macroeconomics doctoral dissertation at MIT, Professor Paul Samuelson asked a young man named Philip Kotler: "How do you view Marx's theory of value creation?" Kotler answered: "I agree with Marx's view that capital and labor create value. But value is determined by the customer at the moment they decide to pay after careful consideration." Kotler passed the defense that day. Twenty years later, he became the "father of modern marketing." It can be said that a company's value is mainly determined by customer purchases; customers are the main value contributors. All business operations should center on customers, striving to cultivate loyal, high-quality customers and turn them into advocates. This is customer capitalism. Truly valuable enterprises are those with long customer transaction times, high average order values, high purchase frequency, and high recommendation rates. Customers are so important, but retaining them is increasingly difficult. So meeting only their usage needs is far from enough; they must also be made happy and given meaning in life.
Marketing expert Jin Huanmin once said: "A brand either sells more or sells more expensively." This divides brand capabilities into two types: grass-planting power and appeal power.
Brands focused on grass-planting power constantly try to give consumers the most cost-effective products, so they cultivate "smart consumers." Brands focused on appeal power think in terms of creating "I aspire," striving to be the most right, and seeking to have a voice. All brands with appeal power essentially sell meaning, not products. They constantly create a sense of aspiration and cultivate "obsessed consumers." Such consumers not only don't get bargains but also contribute to the brand. Brands remain the most important moat for competition, but there are new standards for winning: Are they worthy of customer trust? Do they output value with attitude? Do they help customers cultivate interests? Do they help customers build interpersonal relationships? Do they help customers construct meaning?
If a brand's products remain at the stage of use value, they will face stronger impact from white-label products.