In recent years, private labels have become increasingly popular. Walmart launched "Wo Ji Xian," RT-Mart introduced "Chao Sheng" and "Run Fa Zhen Xuan," and Yonghui announced plans to develop 500 private label products over five years. Hema and Dingdong Maicai are no exceptions, with private labels already accounting for a high proportion of their offerings. From a data perspective, this trend is not hard to understand. According to Worldpanel consumer index data, in the first three quarters of 2025, over 48% of urban households in China purchased private label products, up 10 percentage points from the same period last year. So we see that both national retailers and regional retailers, even some county-level supermarkets, are all developing private labels. But the vast majority of retailers are still just following the trend without a clear strategy. The underlying logic of private labels is "trust endorsement." Let's first clarify a fundamental issue. Private labels are certainly brands, but they are not the same as traditional consumer brands. Traditional brands rely on the recognition, reputation, and mindshare that companies have built up over the long term. For example, when consumers buy Nongfu Spring, they trust the brand recognition that Nongfu Spring has established over decades. The logic of private labels is different. Often, consumers have no inherent awareness of the product itself; what really matters is the trust they have in the retailer. In other words, a private label is essentially the retailer using its own reputation to vouch for a product that consumers are not familiar with. When a consumer buys a bottle of "Wo Ji Xian" mineral water, they are not primarily trusting the "Wo Ji Xian" name itself, but rather Walmart. Consumers are willing to buy Pangdonglai's DL series not just because a particular product has a great formula, but because they trust Pangdonglai. So the essence of private labels is that the retailer is telling consumers: "I vouch for this product with my name; it's fine, you can buy it with confidence." This is like one person vouching for another. The key is not how the person being vouched for is, but whether the guarantor's own credibility is solid enough. If a business owner introduces someone to you and says they are reliable, you might believe it. If someone else says the same thing, you would likely hesitate. Private labels follow the same logic. Most retailers are not qualified to provide "endorsement." This is where the problem lies. Today, when many retailers talk about private labels, their first reaction is higher gross margins, stronger differentiation, and reduced dependence on brand manufacturers. These are all correct, but they are results, not prerequisites. The prerequisite is whether you have strong enough brand credibility in the minds of consumers. Worldpanel consumer index data shows that private labels account for only 2% of overall FMCG sales. This indicates that trial rates are rising, but there is still a long way to go before forming a deep and stable consumer mindset. Consumers being willing to try private labels does not mean they truly regard the retailer itself as a strong brand endorsement. In reality, most retailers do not possess this capability. For many small and medium-sized retailers, consumers cannot even name their private labels. This problem is especially pronounced for many traditional supermarkets. If a retailer's own brand positioning is unclear, its business operations are unstable, and its store experience lacks consistency, then the name attached to its products will not naturally provide consumers with a sense of security like mature consumer brands do. Especially in recent years, many retailers have been closing stores. A company that is struggling to survive itself, turning around to tell consumers that its private labels are great—would consumers believe it? It's like someone who still owes a mortgage and has overdue credit card payments coming to you and saying, "I'll guarantee your loan." You would just want to stay away. This may sound harsh, but it's the truth. The core of private labels is "brand." Now let's talk about the positive side. Are there retailers that do private labels well? Of course, there are. All these retail companies share a common trait: they first made themselves into a brand before they were qualified to endorse products.

  1. Costco and Kirkland: Using 30 years to become synonymous with "quality assurance." According to 2025 financial data, Costco's private label Kirkland generated over $90 billion in sales, accounting for nearly one-third of the company's total revenue. Kirkland's products range from toilet paper and nuts to golf balls and motor oil, spanning a wide range of categories, yet consumers still buy them. Why? Because consumers trust not a specific product, but Costco's decades-long commitment to quality. From the beginning, Costco set an iron rule for Kirkland: any product bearing the "Kirkland" name must meet or exceed the quality of the market-leading brand in that category, but its price must be at least 15-20% cheaper. Note that this is not a "low-price alternative" positioning; it's a value proposition of getting something as good or better for less money. The membership model further locks in the trust relationship. Paying a few hundred dollars in annual membership fees is essentially paying for Costco's product selection capability. Once trust is established, Kirkland builds a quality reputation in key daily necessities categories (like toilet paper), and consumer trust automatically spills over to other categories. Whether it's motor oil or golf balls, as long as it carries the Kirkland brand, consumers tend to believe in its quality. This is the correct way to leverage trust endorsement: you first become an unquestionable brand, and then your endorsement carries weight.
  2. Pangdonglai and DL: Using extreme trust accumulation to make private labels a hit. In Xuchang, a fourth-tier city, Pangdonglai's private label sales account for 30% of total sales, with over 100 SKUs, total sales of 1.1 billion yuan, and four single products exceeding 100 million yuan in sales. The DL mooncake is so popular it's hard to get, and DL craft beer sold 14,000 units within two days of hitting the shelves. Consumers are even willing to drive seven hours to Xuchang just to visit Pangdonglai. How did Pangdonglai achieve this? Not because its private labels have a secret formula, but because it spent 29 years turning the name "Pangdonglai" into a synonym for quality and integrity in the minds of Xuchang residents. Transparent pricing, with purchase prices and gross margins marked on price tags; extreme after-sales service, where a belt that breaks after a year of use can be directly replaced. When a retailer reaches this level, consumer trust is no longer rational judgment but emotional dependence.
  3. ALDI and Trader Joe's: Using the "less is more" philosophy to turn the entire store into a brand. ALDI's private label share is as high as 80%, and Trader Joe's reaches 70%. They are not just placing some private labels in the store; they are turning the entire store into a massive private label. Consumers walking into these stores are not choosing brands; they are trusting ALDI and Trader Joe's. What is the prerequisite for this model? It is that these retailers have spent decades building a clear, consistent, and irreplaceable brand perception in consumers' minds. ALDI is "high quality, low price," and Trader Joe's is "fun and trustworthy." The clearer the brand perception, the stronger the endorsement capability. What is the biggest mistake Chinese retailers make with private labels? One word: impatience. They copy Sam's Club's mochi bread, imitate Pangdonglai's juice, and mimic Aldi's shelf displays. The boss gives an order, and the subordinates start white-labeling frantically. This eventually evolves into a standard process: create a dedicated section, promote bestsellers, pile up SKUs, find OEM manufacturers, upgrade packaging, and set up in-store displays. The problem is not whether your private label products are good, but whether your retailer brand power is sufficient. For a supermarket without a clear positioning in consumers' minds, what goes through a consumer's mind when they see a private label laundry detergent? "I've never heard of this brand; I don't know if it's any good. I'll just buy Blue Moon." You drop the price to 60% of Blue Moon? The consumer's thought becomes: "It's so cheap; could there be a problem?" Your brand power is insufficient to convince consumers to abandon a known safe option. More dangerously, if the quality of private labels is not up to par, not only will consumers not buy, but it will also backfire on the retailer's own brand. If you sell a bad-tasting private label juice, consumers won't say "this juice is bad"; they will say "this supermarket is no good." So, the biggest challenge for private labels often lies not in the supply chain, but in consumer mindset. You are not competing with a single SKU; you are competing with the decades of recognition that mature brands have built. What you should really do is not make private labels, but first make yourself a retail brand. Many retailers have this backwards. They think private labels are a means: by making private labels, they can increase gross margins, create differentiation, and build competitive barriers. But the truth is that private labels are a result, not a cause. It is only after you have strong enough brand power and deep consumer trust that private labels can succeed, not the other way around. Just like the logic of endorsement: it's not that you become credible by endorsing, but that because you are credible, your endorsement is effective. So what should retailers really do first? First, let consumers know who you are. Costco is "a membership warehouse store with high quality and low prices," Pangdonglai is "a synonym for quality and sincerity," and ALDI is "a hard discount store with curated good products." If your consumers cannot articulate the difference between you and the supermarket next door, then you do not yet have the prerequisite for private labels. Second, let consumers experience your "reliability." Trust is not spoken; it is built. Pangdonglai marks gross margins on price tags—this is not a marketing tactic; it is repeatedly sending a signal to consumers: "I have nothing to hide from you." Costco's no-questions-asked return policy is the same. You need to let consumers accumulate a little trust in every interaction with you. There is no shortcut to this accumulation. Quality control for private labels should be stricter than for external brands, not looser. This is the most common mistake many retailers make. Since your name is on the product, a quality failure means your reputation goes bankrupt.

Final Thoughts

In 2026, private labels are destined to become even hotter. More retailers will join the competition, more SKUs will be developed, and more dedicated sections will be placed in the most prominent positions at store entrances. But after this wave, there will inevitably be a brutal reshuffling. Those retailers with insufficient brand power, weak trust foundations, and who rely on copying and white-labeling will see their products languish in warehouses, gross margins decline instead of rise, and ultimately damage the reputation of their store signs. On the other hand, those retailers that first make themselves into brands and earn genuine consumer trust will see their private labels grow stronger and eventually become true competitive barriers. Returning to the metaphor at the beginning of this article: a private label is the retailer vouching for an unknown product. You must first ask yourself: does anyone believe in your endorsement? If you cannot even articulate why consumers should trust you, then don't rush into private labels. First, make yourself a trustworthy brand. That is the correct order. But how do you "become a brand"? There is no shortcut, but there are references. Those retailers that have already made themselves into brands and successfully launched private labels—their paths, pitfalls, and methods are worth listening to more than any theory. On June 4-5, 2026, in Hangzhou, we will hold a China Private Label Industry Chain Conference—with top retail decision-makers from Dingdong Maicai, Metro, FamilyMart, and Tmall Supermarket sharing their strategic choices and proven methodologies for private labels. In the supply-demand matching session, retailers, factories, and brand owners will gather to break information asymmetry, find the right partners, and do the right things together!