The aggressive rise of private labels in recent years is an unstoppable industry trend. For brand owners aiming for growth, understanding the logic behind retailers' private label development is an unavoidable topic. Retailers with scale advantages are almost all venturing into private label development. Product brands deliver good products through keen consumer insight and innovation. Private labels, on the other hand, deliver good products through cost-effectiveness, based on observed data performance of product brands. Anyone who has built a brand knows that creating a hit product is extremely difficult, involving a great deal of luck, and the success rate is not high. But retailers use data to speak, emulating products that have already been validated. This approach greatly increases the probability of success. For brand owners, this is not just envy, but also anxiety: how to break the deadlock when shelf certainty is being seized by private labels? Private labels: Retailers use highly logical standards to emulate product brands Before answering this question, let me first explain the development approach of retailer private labels. After all, only by understanding retailers can we find solutions. Retail is a business of limited shelf space. Shelf positions are limited, and to pursue higher output, retailers must find more effective ways to sell goods. Of course, by testing and comparing different product data, they can screen out best-selling products. But what next? How to dig out higher output from products that are already selling well? (Output here could be sales revenue or gross profit.) When existing products no longer suffice, they go into product development. Enhancing output is the inevitable mission of private labels. But a single tree does not make a forest. Private labels are never just a single product or category, but a systematic project. Because a retail store has at least 500-600 SKUs, or at most 5,000-6,000 SKUs, the success of a single private label won't make much difference. Retailers need a large number of outstanding private labels. That is why private label development must follow a very standardized process, replicable across any category or product. Standardized process for private label development This process can be summarized as:

  1. Monitor product performance on shelves (even competitors' shelves) to confirm whether a product is worth developing as a private label;

  2. Assess whether the category has strong product brands that occupy consumer mindshare, or whether consumer needs are unmet by product brands, to evaluate the success rate of product development (avoid categories like cola and potato chips, where private labels are almost unnecessary);

  3. Break down the cost structure to see if there is room for price reduction, to create products at a cheaper price while offering consumers the same or even better quality;

  4. Allocate resources to test private label performance, deciding whether to abandon or intensify efforts to replace product brands. Use data-driven methods to define products, use cost-effectiveness advantages to shape products, and use resource allocation to test products. This is the strict standard for retailers in private label development, and it is the key to truly elevating retail business to the next level. Brand owners' countermeasures: Break through private labels with inimitable differentiation Since the key to private labels lies in mining product opportunities through data and then breaking through with cost-effectiveness, the real solution for brand owners is to avoid falling into a price comparison with private labels. Avoiding price comparison means that products are no longer competing on the same dimension, but rather using differentiation to create a clear perceived difference between brand products and private labels. If they are not the same type of product, they cannot be compared on the same price standard. Historical experience shows there are mainly two ways: 1. Verticalize the category, so retailers won't see it as a good opportunity to capture data; 2. Innovate products, making it hard for retailers to keep up with product development. Let's take Lay's and Costco as examples. Lay's has provided an excellent textbook demonstration in its long-term competition with Costco's private label Kirkland. Take potato chips and oatmeal as examples. When Kirkland first emulated Lay's products, it was warmly welcomed by consumers because its prices were 20-30% cheaper than similar products with guaranteed quality. A large number of customers shifted their purchases to Kirkland, enjoying the same quality at lower prices, which put Lay's in a very passive position for a while. Costco's Kirkland private label potato chips and oatmeal Targeting Lay's potato chips and Quaker oatmeal But in the following years, as they became familiar with the rules of the game, PepsiCo began to focus on its strong product innovation capabilities. Through a series of product differentiations, it quickly escaped the passive situation of price comparison. For example, in 2014, PepsiCo's Quaker Oats launched Quaker Real Medleys (premium oatmeal cups with chia seeds and goji berries), making consumers recognize that this was no longer just ordinary oatmeal, directly striking at Kirkland. In 2015, Lay's launched "Stacy's Pita Chips" (positioned as non-fried healthy snacks), and in 2016, it customized "low-salt Lay's potato chips" (30% less salt) for Costco, precisely targeting consumers who want snacks but have health concerns, avoiding price competition with Kirkland's traditional chips. Through such a series of actions, PepsiCo maintained its best-selling performance on Costco's shelves and continued to create products that consumers recognize as good, despite the competitive pressure from private labels. Final Thoughts Admittedly, retailers venturing into private label development puts enormous pressure on brand owners. In fact, this behavior is also accelerating the elimination of products that are merely "labels" rather than true brands. But historical experience tells us that even with such developed private labels in Western markets, brand giants continue to innovate and grow. The market cannot do without brands. It's just that brand owners need to familiarize themselves with the rules of the private label game, find their own ecological niche, and continue to innovate. Around these issues, on June 4-5, 2026, we will hold the China Private Label Industry Chain Conference in Hangzhou. We will not only discuss how retailers develop private labels, but also cover the exploration and implementation of various cooperation models such as co-branded exclusive supply, channel-exclusive supply, and channel customization between brand owners and retailers. Head decision-makers from leading retailers such as Dingdong Maicai, China Resources Vanguard, Metro, Fudi Membership Store, FamilyMart, Yonghui, Pupu, Xiaoxiang, Tianhong, Jianfu, Fresh Legend, JD.com, and Qian Dama, as well as leading brands such as Want Want, Hsu Fu Chi, Tsingtao Brewery, Junlebao, Liby, and Shanghai Jahwa, along with core operators from OEM manufacturing and raw material supply chains, will gather at the same venue for supply-demand matching and direct negotiations.