---
title: "How Can Supermarkets Crack the Homogenization Problem in Private Label?"
description: "From the perspective of modern commercial retail, the development of private labels in China's retail industry has spanned about 30 years. During this period, private labels have grown from nothing to something, and the issue of homogenization has become increasingly prominent, drawing widespread attention from retailers. The industry's development pattern has always been that leading benchmark products are imitated by peers, while all parties continue to break through and innovate in the process of benchmarking, competing and cooperating with each other, ultimately driving the entire industry forward. Innovation is the driving force of industry development and the core weapon to escape homogenized competition."
author: "汤洋"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2026-06-08"
categories: "Brand Marketing, Management & Methods, Retail Formats"
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citation: "汤洋. “How Can Supermarkets Crack the Homogenization Problem in Private Label?.” New Distribution, 2026-06-08. https://xinjignxiao.com/en/articles/how-can-supermarkets-crack-the-homogenization-problem-in-private-label-7de0709b/"
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---

# How Can Supermarkets Crack the Homogenization Problem in Private Label?

> From the perspective of modern commercial retail, the development of private labels in China's retail industry has spanned about 30 years. During this period, private labels have grown from nothing to something, and the issue of homogenization has become increasingly prominent, drawing widespread attention from retailers. The industry's development pattern has always been that leading benchmark products are imitated by peers, while all parties continue to break through and innovate in the process of benchmarking, competing and cooperating with each other, ultimately driving the entire industry forward. Innovation is the driving force of industry development and the core weapon to escape homogenized competition.

From the perspective of modern commercial retail, the development of private labels in China's retail industry has spanned about 30 years. During this period, private labels have grown from nothing to something, and the issue of homogenization has become increasingly prominent, drawing widespread attention from retailers.

The industry's development pattern has always been that leading benchmark products are imitated by peers, while all parties continue to break through and innovate in the process of benchmarking, competing and cooperating with each other, ultimately driving the entire industry forward. It can be said that innovation is the driving force of industry development and the core weapon to escape homogenized competition.

So how can private labels use innovation to escape homogenized competition? This article will elaborate on innovation methods for retail private labels from three levels: strategy, management, and product.

**Innovation in Private Label Strategy**

Private label strategy is the fundamental guiding principle for a company's private label operations. In 2022, in the "Private Label 20 People Talk" section of the "China Private Label Development Research Report (2022-2023)", I expressed the view that private label development requires firm strategic determination:

"Many retail companies see what their peers are developing and just copy it; whatever product is popular, they develop it."

"When developing private labels, retail companies must first consider what role private labels should play in their business operations, and consider their own human resources situation. To put it bluntly, you need to calculate how many people you will invest in private label development and operations, what the annual output of private labels is, and how much capital you need to invest. These all need to be calculated and considered clearly. After considering these, you can match goals and personnel, and then determine the categories and SKUs to develop."

"Of course, the category strategy for private labels should also be determined within the overall category management strategy. For retail companies, more private label products are not necessarily better; what is suitable is best. In actual operation, special attention should be paid to SKU efficiency. The development of private label products is not a haphazard, sprawling development. The overall private label strategy, category selection strategy, and SKU strategy are all crucial."

Private labels cannot go with the flow or be done just for the sake of doing. A scientific strategy determines long-term business results, and innovation in private label strategy will fundamentally escape private label homogenization.

The main role of private label strategy lies in top-level design, mainly including organizational strategy (solving the people issue), brand strategy (solving the brand issue), category strategy (solving the category issue), and financial and profit model (solving ROI). Here are three examples of strategic innovation:

**1. Organizational Strategy Innovation**

Retail companies' private label organizations take various forms, such as procurement/buyer responsibility, private label specialists, independent private label departments, and independent private label companies, to match different corporate strategies. Innovation in private label organizational strategy is crucial to private label business results and is the highest priority strategy for retail companies.

At the beginning of 2025, Yonghui Superstores formally established a wholly-owned subsidiary—Zhejiang Huilian Supply Chain Co., Ltd. This is a core supply chain engine specifically set up to accelerate the pace of private label development during the critical period of Yonghui's comprehensive promotion of "Pangdonglai-style" quality retail transformation and its move towards deep self-operation and high-quality transformation.

Zhejiang Huilian is exclusively responsible for the product development of Yonghui's private label "Quality Yonghui". The independent private label company structure grants complete product definition rights and supply chain autonomy, making product development more professional, efficient, and objectively independent. This is particularly crucial for the realization of Yonghui's new vision of "National Supermarket, Quality Yonghui".

**2. Category Strategy Innovation**

The category strategy of private labels determines which categories to develop, addressing the breadth and boundaries, and solving the problem of product selection and resource allocation; on the other hand, it determines the role of each category, addressing the depth and how each category cooperates within the product mix.

When a company's scale and resource capacity are limited, focusing on a single category for deep private label development is an important strategic innovation. Rather than blindly developing across a wide range, leading to uneven product quality due to insufficient manpower, it is better to focus on a single category for concentrated deep development, implementing exclusive private label operations, which can generate good business results.

Pangdonglai's tea business is a "textbook-level" case of focused category operation in China's retail industry in recent years. In 2024, Pangdonglai's tea sales were approximately 600 million yuan, and in 2025, tea sales surged to 1.063 billion yuan.

If Pangdonglai's tea sales are compared horizontally with the entire national tea industry (including all traditional tea companies, tea factories, and retail chains), the industry ranking is very impressive. In the revenue ranking of single-brand, single-channel tea companies, Pangdonglai can firmly rank in the top three nationally.

In terms of private labels, Pangdonglai's tea private label development is directly managed by the tea business team, which deeply participates in R&D, custom packaging, and selection of OEM factories. The private label "Jiamu Donglai" series of tea is estimated to account for about 40%-50% of sales.

**3. SKU Strategy Innovation**

Private label products are valued for quality, not quantity. In terms of SKU strategy, focusing on hero SKUs is a high-quality path to escape homogenized competition. Focusing on hero SKUs is not only suitable for large retail companies but also for smaller ones.

Many retail companies with annual sales of several hundred million yuan often have only about a dozen procurement staff. Given such sales volume and staffing, companies can adopt a focused SKU strategy, first concentrating on developing a few core SKUs.

If a company does not have dedicated private label development staff, it can arrange for each procurement manager or small procurement department to be responsible for developing one SKU.

**Innovation in Private Label Management**

Private labels need innovation empowerment throughout the entire process, from nothing to something, from few to many, from weak to strong. Innovation in private label strategy is the cornerstone, while innovation in private label management is the implementation path and practical method.

Private label management involves all aspects, from development concepts to organizational management, from supply chain management to refined operations, from quality control to brand marketing, etc. It is full-chain, all-around management of the business.

Here are three examples of management innovation:

**1. Innovation in Development Concepts**

Recently, I exchanged management insights with a factory entrepreneur, and he put it very well. He summarized: "Competition between enterprises, product equipment and processes can be imitated and replicated, but only the personnel atmosphere cannot be imitated."

The personnel atmosphere is the company's values. Competition between enterprises is a contest of values and the formulation of game rules. The competition of retail private labels is also a contest of values.

Values determine the private label development concept, and the development concept is the concrete implementation of values. Values are the corporate strategy, and the development concept is the management lever. In work, the development concept must be transformed into product quality standards, quality control standards, process standards, etc., and into a set of daily work process standards and management tools.

Only advanced development concepts can continuously polish high-quality products, and high-quality products can create good market value. Sam's Club's private label Member's Mark puts member value first, rewarding members with high quality at competitive prices.

Pangdonglai's private label development concept is: like, professional, promote social progress, and create beautiful value. The development standards are: benchmark world-class standards, autonomy, innovation, traceable quality, and environmental sustainability. The success of Sam's Club and Pangdonglai's private label systems is inseparable from the practice of development concepts.

**2. Innovation in Organizational Management**

Retail companies should establish a normalized innovation mechanism for private label organizational teams, which is the core method to escape private label homogenization. Every improvement in work is innovation, such as a small optimization of the tear-open opening on product packaging, a clean-label change in the ingredient list, or a slight adjustment in size specifications. **Everyone can innovate.**

**The inexhaustible wisdom of employees is the guarantee of innovation. Igniting and activating employees' innovative wisdom and enthusiasm is the most important task of the human resources department.**

In the current context of severe involution in private labels, where they tend to be mere "white-labeling" and "imitation", breaking down innovation into small improvements at every step and handing the main battlefield of innovation to frontline employees is the most down-to-earth solution to escape homogenization.

The moat of private labels has never been a secret formula, but the accumulation of hundreds and thousands of small improvements made by all employees every day.

**3. Innovation in Supply Chain Management**

The operation of retail private labels is essentially the deepening management of the supply chain with the retail company at its core.

The supply chain is the entire process from the initial raw materials of a product, to the final product, and then to the consumer. It is like a chain linked by multiple enterprises and links.

In this chain, information, capital, and goods are constantly flowing. The traditional retail supply chain links include: raw material suppliers ➔ manufacturers/factories ➔ first-level wholesalers/general agents ➔ second-level/regional distributors ➔ retailers/stores ➔ consumers. Among these, each additional distribution link in the supply chain increases the product's additional cost by more than 30%.

**Private label products are products that are fully controlled by the retail company from design, raw materials, production, to distribution. The role of private label operations is for retail companies to continuously break through upstream links, reduce and optimize supply chain links, convert the added value of the original links into their own profits or pass it on to consumers, and enhance the company's market competitiveness.**

Private labels need continuous innovation in supply chain management. They can deeply bind production capacity through various forms such as exclusive factory production lines, exclusive partner factories, and self-built factories (such as Pangdonglai's central kitchen and Dingdong Maicai's Dingdong Guyu), using deterministic channel traffic to exchange for deterministic production capacity and pricing on the production side, continuously strengthening the competitiveness of private label products.

**Innovation in Private Label Products**

The carrier of private labels is the product, and product-level innovation is the top priority of private label innovation.

China's retail private label products are mainly concentrated in the fast-moving consumer goods (FMCG) field. FMCG products are characterized by short service life, fast consumption speed, low unit price, and high purchase frequency. In response to these characteristics, we have sorted out various innovation methods at the product level.

**1. Product Innovation Pyramid**

We divide private label product innovation into three levels, visually presented with a pyramid:

The first level, the base of the pyramid, is the foundation of product innovation—micro-innovation. Private label micro-innovations are the most numerous, lowest risk, and shortest cycle, and are the main force for daily iteration of private labels, such as slight flavor adjustments, packaging upgrades, and specification changes;

The second level, the body of the pyramid, is the upgrade of product innovation—leapfrog innovation. Leapfrog innovations are relatively fewer than micro-innovations and have some breakthroughs, such as cross-category integration, functional compounding, and scenario expansion;

The third level, the apex of the pyramid, is the highest level of product innovation—disruptive innovation. This type of innovation is extremely rare and high-risk, but once successful, it can reshape the market or consumption habits, such as creating entirely new categories or applying technological revolutions. Micro-innovation and leapfrog innovation are the main forms of private brand (PB) innovation, while disruptive innovation more often comes from traditional national brands (NB).

In March 2026, Yonghui Superstores' private label "Quality Yonghui" held its first annual meeting in Xuchang, bringing together core global suppliers to discuss the transformation and upgrading path of quality retail and the logic of building private label hero SKUs. At the meeting, Pang Xiaowei, Chairman of Huilian Supply Chain, gave a wonderful sharing session titled "Co-creating Great Hero SKUs". In his speech, he mentioned about product development:

"This year, we focus on basic hero SKUs. In the second stage, perhaps from next year to the year after, we will do some innovative SKUs. We understand that innovative SKUs still have elements of reference. For example, we hope to learn from the best-selling and consumer-favorite FMCG products in the Japanese, Korean, American, and European markets. From 2029 to 2030, we will enter the stage of original hero SKUs. Today, companies like Pangdonglai are moving in this direction. We must start from the basic product range, then move to innovation, and then to originality."

The clear three-step product development strategy of "Quality Yonghui" actually follows the underlying laws of product innovation.

**2. Product-Level Innovation Methods**

  * **Working Methods for Micro-Innovation**

Micro-innovation has the highest frequency of implementation and the best input-output ratio, and is also the core way to maintain the vitality of the private label product base. At the practical level, micro-innovation mainly revolves around three dimensions: product content, external packaging, and visual aesthetics.

**1. Innovation in Product Content**

Product content is the actual material body used inside the product and is the core use value of the product. It is the primary object of innovation. It mainly includes:

> Raw material innovation, such as organic raw materials, imported raw materials, niche and scarce raw materials, local specialty raw materials, and intangible cultural heritage raw materials;
>
> Formula innovation, such as sugar reduction and salt reduction, no preservatives, high protein, low calorie, medicine-food homology, adaptation to Chinese flavors, improved imported formulas, and innovations in non-food efficacy, ingredients, texture, and fragrance;
>
> Process innovation, such as non-fried, low-temperature freshness locking, replication of traditional handmade techniques, patented technology, sustained-release locking technology, and plant extraction technology;
>
> Cost innovation, such as cost structure optimization, self-built quality control standards, direct sourcing from raw material origins, bulk ordering to compress logistics costs, and production cost optimization.

2. **External Packaging/Visual Aesthetics Innovation**

> Packaging material innovation, such as upgraded touch and texture, composite spliced materials, lightweight and thin, and retro natural materials;
>
> Specification and form innovation, such as small portions, individual portable packs, family bulk packs, custom portions, and cross-border forms (beverages + snacks, seasonings + ingredients);
>
> Functional packaging innovation, such as easy-tear, moisture-proof, sealed, microwaveable, environmentally friendly and degradable, and split designs;
>
> Visual aesthetics innovation, such as beautification of packaging shape and structure, color systems, patterns and graphics, and packaging information innovation.

Many private label developers blindly pursue novelty and uniqueness as marketing gimmicks, which is not a healthy way to innovate; innovation cannot be for the sake of innovation, cannot only focus on external form, but must also focus on internal quality; true innovation should be based on the real needs of customers, and more attention should be paid to whether the actual value provided to customers is truly improved.

Pangdonglai places more emphasis on micro-innovation in its private label development, making simple products better, focusing on product traceability, and strictly controlling product safety and quality.

In the bean sprout production area of Pangdonglai's central kitchen, the entire bean sprout production process uses only water and beans. The water undergoes seven filtration steps, and the beans are selected from non-GMO varieties. This almost stubborn insistence on quality makes Pangdonglai's bean sprouts cost three times the market price, yet they achieve impressive sales of 2 tons per day.

When other supermarkets' shelves are piled with industrially produced packaged foods, Pangdonglai's central kitchen is using seven-times-filtered pure water to cultivate bean sprouts and using old dough fermentation to hand-make steamed buns. **Pangdonglai's basket of bean sprouts and a steamer of buns—this persistence may be the innovation that China's retail private labels need most.**

  * **Working Methods for Leapfrog Innovation**

The core logic of micro-innovation is "better", optimizing within the existing value system. Leapfrog innovation often emphasizes "different", adding new value dimensions or opening up entirely new consumption scenarios. Leapfrog innovation allows customers to clearly perceive product changes, and customers only need to slightly adjust their consumption habits to adapt. Through leapfrog innovation in private labels, retail companies can create new demand and tap into new increments. Here are five sources of creativity for leapfrog innovation:

**1. Cross-Category and Cross-Border Integration**

Borrowing ingredients, technologies, forms, and usage methods from other categories to create entirely new products through mixing and matching.

> For example, cross-category technology grafting, introducing mature technologies from other industries into FMCG, such as using pharmaceutical "freeze-drying technology" for coffee (Three Squirrels brand, freeze-dried coffee), and using textile "one-way moisture wicking" technology for sanitary pads;
>
> For example, mixing liquor and coffee, Luckin Coffee launched the Sauce Latte combining Luckin Coffee and Moutai liquor. For example, borrowing successful models from other industries, introducing the surprise element of "blind boxes" into snacks (random flavor packs), etc.

**2. Scenario Reconstruction and Recreation**

Breaking inherent usage patterns, expanding into new time periods and new scenarios, and creating new demand. For example, migrating products from scenario A to scenario B. Migrating mouthwash from the home scenario (bottled) to the office scenario, making it into strip-shaped portable packs. Sort through consumers' full-day life, work, and entertainment scenarios, dig out blank product tracks, and achieve product innovation through scenario reconstruction.

**3. Deep Segmentation of Consumer Groups**

Not making products for everyone, but making "tailor-made" products for a specific group of people.

> Innovate according to people's physiological/age attributes, such as maternity skincare products, Gen Z cosmetics, silver-haired group instant cereal powder, and children's organic soy sauce;
>
> Innovate according to people's lifestyles, such as 0-sugar 0-calorie sparkling water, plant-based yogurt, and specific dietary views like health/vegetarian/weight loss;
>
> An effective method for innovation implementation is segmentation, not "making it smaller", but making it deeper, so that the target group feels the product is designed specifically for them.

**4. Functional Compounding and Superposition**

Integrating two or more originally independent functions into one product to create new use value.

> For example, combining the functions of laundry detergent and scent beads to develop a wash-care-fragrance integrated laundry detergent, solving the pain point of "clean but not fragrant";
>
> For example, electrolyte water combines the two major functions of basic thirst quenching and electrolyte replenishment, with a single beverage meeting the dual needs of daily hydration and replenishing salt and energy lost during exercise;
>
> For example, gummies with added probiotics, blending snack attributes with nutritional conditioning value. The key success factor for this type of innovation is that the compounded functions must not conflict with each other, and users can perceive multiple values at once.

**5. Deep Digging into Pain Points/Trends**

Product innovation does not start from internal office brainstorming, but from external user complaints and lifestyle changes. Pain points are the product track, and trends are the development direction.

Product innovation should delve into consumer complaints and inconveniences, including e-commerce review analysis, such as focusing on negative reviews of head competitors to find high-frequency words ("too sweet", "not long-lasting", "inconvenient to carry"); social media insights, such as searching on Xiaohongshu and Weibo for phrases like "want a...", "why isn't there...", referring to actual tests, reviews, and complaints, to capture unmet implicit needs. Product innovation should deeply dig into consumer trends, closely follow mainstream directions such as health, minimalism, laziness, national trend, and low carbon, and strive to capture future needs.

The above five sources of creativity are the core ideas for leapfrog innovation. In practice, compared to micro-innovation, leapfrog innovation requires more human, material, and time investment.

Sam's Club is particularly adept at leapfrog innovation in its private label development. In 2023, a product called "Black Truffle Ham Soda Cracker" landed on Sam's Club shelves.

This cracker caters to consumers' pursuit of health, with additional ingredients such as Yunnan black truffle, Spanish ham, Mexican chia seeds, and tricolor quinoa, and 2% imported butter.

This "Chinese-Western fusion" formula that also balances nutrition (dietary fiber, protein) achieves a dual upgrade in taste and health attributes.

With its unique flavor combination and extremely high cost-performance ratio, it quickly broke through circles, long topping Sam's snack list at No. 1, becoming a staple snack in urban white-collar office drawers, and triggering a wave of imitation in the retail industry.

  * **Working Methods for Disruptive Innovation**

Traditional product disruptive innovation means discovering a "fundamental, unspoken need", such as energy drink brands discovering the potential need that "people need to refresh but have no time to rest", creating a new category of energy drinks.

Disruptive innovation in private label products is often not purely product R&D innovation, but relies on the natural advantages of retail companies: first-hand consumption data, zero-distance user reach, and C2M reverse customization model, reconstructing the traditional business logic of the industry, breaking the original industry value formula, making traditional NB brands "unable to follow even if they want to, unable to learn even if they try", forming a competitive barrier that traditional NB brands cannot replicate or keep up with.

**1. Retail Companies Define New Species**

For disruptive innovation in private labels, retail companies no longer just imitate and optimize NB bestsellers, but need to deeply analyze omni-channel consumption data, gain insights into unmet consumer needs (these needs are often blank areas that NB brands have not discovered, do not want to do, cannot do well, or dare not do), rewrite product definitions, turn consumer needs into factory R&D and manufacturing indicators, let partner factories customize, and create new category species that no one else has.

**2. Deep Co-creation with Supply Chain Factories**

Retail companies need to abandon the simple OEM model and establish a symbiotic relationship of deep binding and joint R&D with core suppliers. On the one hand, retail companies can utilize the factory's technical reserves to achieve on-demand rapid product development; on the other hand, they can screen new products developed by factories, judge consumer needs, adjust, and quickly bring them to market.

**3. Extreme Value Reshaping**

Disruptive innovation in private label products should use the four methods of "Plus, Minus, Multiply, Divide" to reconstruct the industry value system and create product value that consumers cannot refuse.

**Plus**

Disruptive innovation requires extreme "plus", adding truly needed value to products (only adding functions and services that are key to improving the core customer experience).

Traditional NB brands, to maintain high profit margins, are conservative and restrained in the proportion of core high-quality ingredients; the extreme "plus" of private labels is to invest all the saved high marketing and channel premiums into the core parameters and raw materials that consumers care most about, multiplying the content of key ingredients, forming a quality advantage that the industry cannot keep up with.

**Minus**

Disruptive innovation requires extreme "minus", subtracting premium bubbles and redundant functions, reducing or even eliminating pain points that customers have to endure, and cutting all pseudo-value. The price of traditional NB brands includes a large amount of marketing expenses, middleman profits, and redundant designs to please everyone.

Private labels should cut these pseudo-needs, subtract IQ taxes and excessive packaging, subtract non-core redundant functions, subtract unreasonable costs, and subtract all unnecessary costs and routines.

**Multiply**

Disruptive innovation requires extreme "multiply". On the one hand, retail companies use massive user data multiplied by manufacturing-side R&D capabilities to produce a flywheel effect; on the other hand, relying on the retail ecosystem, they overlay membership benefits, offline services, scenario support, and other added value on single products to amplify the comprehensive value of products.

Retail companies directly empower upstream factories with real consumption behavior data, greatly shortening product R&D cycles, achieving precise product development, with R&D efficiency far higher than NB brands and trial-and-error costs far lower than NB brands.

Traditional NB brands only sell isolated products, and the service ends when the transaction is completed; private labels can rely on membership systems, offline stores, and omni-channel ecosystems to overlay exclusive rights and services on products, creating a comprehensive experience that NB brands cannot replicate.

**Divide**

Disruptive innovation requires extreme "divide", removing old standards, overturning industry default rules, overturning pricing routines, and overturning quality unspoken rules; removing old forms, splitting category structures and specification systems, and reconstructing new categories; removing old consumer groups and old scenarios, redefining target customer groups and consumption scenarios; removing old tracks, opening new tracks, and setting new rules. Division is about breaking old models and creating new categories.

Pangdonglai's private label DL Big Mooncake used division thinking to complete disruptive innovation:

> Removed the rule of mooncake festival limitation. Traditional mooncakes are only sold during Mid-Autumn Festival, but Pangdonglai made them into large pastries that can be eaten daily, breaking the fixed perception that mooncakes are only consumed during Mid-Autumn;
>
> Removed traditional small specifications. Industry mooncakes are typically 50-80g small sizes, but Pangdonglai made a 1kg super-large whole mooncake, completely overturning the form;
>
> Removed the brand premium and routine marketing of traditional mooncakes, using real ingredients and transparent pricing;
>
> This mooncake achieved annual sales exceeding 100 million yuan, with nationwide panic buying, turning mooncakes from festival gifts into daily hot snacks. Pangdonglai can be said to have defined the new category of "super-large mooncakes".

Through plus to add value, minus to remove redundancy, multiply to expand leverage, and divide to break rules, private labels achieve extreme value reshaping and true disruptive innovation.

In summary, **the core of disruptive innovation in private labels is not about developing astonishing new technologies, but about fully utilizing the advantages of being close to users, holding data, controlling channels, and low trial-and-error costs to redefine the value standard of "good products".**

**Final Thoughts**

**Innovation is about making the complex simple, the heavy light, raising low quality, lowering high costs, making the unattractive attractive, making the unreasonable reasonable, making the unhappy happy, and making the un-beautiful beautiful.**

Without innovation, private labels stagnate; with innovation, long-term growth is driven. Innovation is the lifeline of private labels. We hope private labels will innovate boldly and thrive!


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## Citation metadata

- Publisher: New Distribution
- Author: 汤洋
- Published: 2026-06-08
- Canonical: https://xinjignxiao.com/en/articles/how-can-supermarkets-crack-the-homogenization-problem-in-private-label-7de0709b/
- Original source: https://mp.weixin.qq.com/s/7qMpCaDtlIAGrb75OATOIw

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