Recently, Discount Ox was publicly reported by its Xi'an franchisee. The report involves food safety issues with private brand products. The news spread quickly in the retail industry. Many are discussing Discount Ox's crisis management and the conflict of interest between franchisees and headquarters. But few ask the more fundamental question: Why did a retailer's private brand end up in this situation? This is not just Discount Ox's problem; it is a spreading industry crisis called the 'lowest-price mentality.' If you are doing private brands or considering doing them, this article is worth reading carefully. Because what happened to Discount Ox today could happen to any retailer tomorrow without any surprise. The Lowest-Price Principle Is Spreading Like a Plague Across Every Industry The 'lowest-price bid wins' or 'lowest-price principle' is not an invention of the retail industry. But it has spread like a plague to almost every industry that requires procurement decisions. In 2022, a large beer company launched a tender for production line equipment, adopting the lowest-price bid principle. The result: equipment precision did not meet standards, the production line could not pass acceptance for a long time, and official production was delayed repeatedly. The initial price difference was long swallowed by shutdown losses. The same beer company also used the lowest-price principle in its distribution business tender. The logistics companies that won with destructive low prices began to breach contracts on a large scale due to actual losses, cargo damage complaints exploded, customer replenishment frequently broke the chain, and reputation collapsed directly. In the retail private brand field, the food safety issue reported by Discount Ox's franchisee is just the latest manifestation of the consequences of this low-price logic. It is not the first time, nor will it be the last. The cost of the lowest-price principle always only appears after procurement. When it appears, it is often too late to recover. These three cases span different industries and scenarios, but they make the same mistake. To understand how this mistake came about, we need to first understand: where did the lowest-price principle come from? How Did the Lowest-Price Principle Emerge and Amplify? The lowest-price principle did not grow spontaneously from the business world; it has a very specific institutional origin—government procurement. Government procurement spends public funds, and procurement officials need to prove to the public that the money was not misused, no power rent-seeking, no interest transfer. The most direct way to prove this is through transparent procedures and awarding to the lowest bidder—beyond reproach. This is an institutional design to combat corruption with rules. It has its internal logic: under the premise that procurement items are highly standardized and quality differences can be ignored, the lowest price is indeed a reasonable choice. Buying a batch of office paper with identical specifications, the lowest price is justified. But after this logic was transplanted into the commercial procurement field, the applicable boundary quietly disappeared, while the 'lowest price' standard was fully retained. Buying a complex production line, signing a long-term logistics service contract, developing a private brand product—these scenarios are completely different from buying a batch of office paper with identical specifications. Quality differences cannot be ignored, service capability differences directly determine results, and factory management level and quality control system each directly link to the final consumer experience. The origin of the lowest-price principle was to prove procedural legitimacy. After entering the commercial field, it became proof of effective cost control. This is a fundamental transformation, but most people have not realized it. This erroneous logic is currently amplified by three factors. First: Overcapacity creates a low-price illusion. Today, many factories are willing to take orders at low prices to grab business, strengthening the illusion of 'no lowest, only lower' in the short term, making buyers mistakenly believe that price and quality can be obtained simultaneously. Second: Procurement KPI assessment creates misaligned incentives. Procurement managers are often assessed on cost reduction percentage, so getting the lowest price benefits them personally. But the cost of quality accidents is borne by the company and brand, with a time lag—when problems occur, the decision-makers may have already changed positions. Personal incentives and long-term corporate interests are misaligned in this mechanism. Third: The rise of low-price retail transmits pressure upstream indefinitely. Hard discount, bulk snack, flash warehouse—these business formats' core competitiveness is lower prices. To achieve this competitiveness, pressure must be transmitted upstream—retailers pressure suppliers, suppliers pressure factories, factories pressure raw materials and processes. Every link in the chain pushes cost pressure to the source until quality collapses. Once a retailer has a food safety issue, it is likely a visible outbreak after pressure accumulation along the entire chain. Price Is Not the Total Cost; TCO Is The biggest mistake of the lowest-price principle is misunderstanding cost, equating purchase price entirely with cost. Purchase price is the number you pay, visible, quantifiable, comparable, and can be written into cost reduction reports. Price itself is a cost, but it is only a part, not the whole. Cost is the total price you truly bear—including purchase price and everything that appears after procurement. The gap between the two is an iceberg systematically ignored by the lowest-price mentality. Above the water is the unit purchase price; below the water are six real costs that are almost never accounted for: Quality loss cost—defect rate, return rate, after-sales handling, each is a real expense, just not appearing in the procurement column. Delivery risk cost—low-price suppliers often have unstable capacity; losses from one delay can be several times the procurement price difference. Management cost—low-quality suppliers require more intensive quality control intervention and more frequent error correction, management costs are much higher than high-quality suppliers, but this cost is recorded in management expenses, not attributed to procurement decisions. Switching cost—if a supplier has problems and needs to be changed, re-sampling, certification, production line磨合, costs are extremely high, and time window losses are harder to quantify. Brand loss cost—this is the most fatal hidden cost for private brands. A quality accident, how many consumers are lost, how much reputation is damaged, almost impossible to measure precisely in money, but it truly exists and is often the largest of all costs. Trust rebuilding cost—once brand trust collapses, the time and resources needed to rebuild may be dozens or hundreds of times the procurement price difference saved initially. In supply chain management, there is a mature framework widely adopted by top global enterprises—TCO, Total Cost of Ownership. The core of TCO is one sentence: evaluating a procurement decision should not only look at the price you pay, but the total cost you truly bear. China's retail industry has only just transitioned from the shelf rental model, and TCO concepts and frameworks are still extremely scarce in Chinese retail cognition. Most retailers' procurement logic stops at the water surface of the iceberg, comparing unit purchase prices, writing the saved price difference into cost reduction reports, thinking this is professional and responsible. The iceberg below the water—they do not see it. Or, do not want to see it. Lowest-Price Factory Selection Will Only Eliminate Your Best Suppliers Now, we can return to the title: why will most private brands die from the lowest-price mentality? The answer lies in a severely underestimated mechanism. Lowest-price factory selection is a reverse screening mechanism—it screens out the best suppliers and leaves the worst. Factories willing to take orders at the lowest price are only of two types. One is factories with severe overcapacity, urgent need for cash flow, and short-term rescue. It takes orders to survive, not to make good products, nor to build long-term cooperation with you. Once it recovers, or finds better customers, it will leave without hesitation. The other is factories that plan to cut corners on raw materials, processes, and inspection from the start. Low price is its business model, not a concession, but a calculated account. Factories with true quality capability, long-termism, and continuous investment in R&D and quality control have cost structures that make it impossible to accept the lowest price—and they do not need to, because there will always be customers willing to pay a reasonable price to cooperate with them. The lowest-price mechanism screens out all such factories. This is not selection; it is reverse elimination. What is more terrifying is still to come. Ask ourselves: how many retailers truly realize this problem? Very few. Most retailers are still in a certainty of 'I am saving money.' They may vaguely feel that continuous price pressure will eventually cause supply chain problems. But as long as the problem has not erupted, this feeling is suppressed by a more urgent reality—if we do not reduce prices now, costs will be a problem today. Supply chain problems in the future are a matter of the future; problems now are a matter of the present. Weighing the two harms, most decision-makers choose to sacrifice the future to protect the present. This is not ignorance; it is short-sightedness; not a mistake, but an active choice of a way of life without strategic height. But private brands are precisely an area that cannot afford short-sightedness. One accident is enough to destroy all consumer trust. Between retailers and consumers, there are two most important trust interfaces: one is the store, the other is the private brand. Stores can build perception through decoration, display, and service, with room for remedy. Private brands rely on the moment consumers put the product in their mouths or use it on their bodies—that is the most direct, undeniable experience moment, with no second chance. What kind of factory did Discount Ox use, what products did it produce, and ultimately it got a public report from a franchisee. The spread of this incident not only harms Discount Ox as a company, but plants a seed of doubt in consumers' minds across the industry: can hard discount private brands be trusted? Lowest-price factory selection seems to save money. In reality, they are betting their brand trust on a 'low price' gamble. This is a losing bet, just a matter of sooner or later. What Cost Mentality Should Private Brands Adopt? The core is one sentence: A good supplier is not the one with the lowest price, but the one with the lowest total cost. The gap between the two is the watershed for private brand success or failure. Switching procurement standards from price-optimal to total cost of ownership-optimal means that when evaluating suppliers, at least the following dimensions should be considered simultaneously: Quality stability—not just looking at samples sent, but consistency in mass production. Good samples are basic skills; batch stability is real ability. Delivery reliability—not just contract promises, but historical performance records. Suppliers who deliver on their word are worth a bit more. Factory management level—whether there is a systematic quality control system, not relying on people watching, but on processes and standards. Long-term cooperation willingness—whether the supplier is willing to customize for you, iterate for you, stand by your side when you have problems, rather than shirking responsibility. R&D iteration capability—private brands need continuous evolution; does the supplier have the ability to grow with you, not just be an executor? This is not asking retailers to give up cost control. On the contrary, it is a higher-dimensional cost control—extending the cost calculation cycle from a single procurement to the entire lifecycle of the cooperation relationship. Let's look at a few excellent students. ALDI's private brand share in China exceeds 90%, and Sam's Club's private brand Member's Mark has become the active first choice for many consumers. Of course, even Member's Mark has faced huge challenges in the past two years, frequently complained about by customers. The reason they can be much better than most retailers' private brands is not because they found the cheapest factories, but quite the opposite—they have extremely high qualification thresholds for partner factories, extremely strict factory audit processes, quality control requirements far exceeding industry average, and are willing to pay reasonable premiums for high-quality factories. They calculate the full-cycle account: a stable and reliable supplier saves management costs, quality losses, and brand risks in the long run, far exceeding the small price difference in procurement. They are willing to spend more on suppliers because they know: where this money is spent is more important than where it is saved. Private brands are the most important strategic investment for retailers on the product side. And investment always talks about returns, not cost minimization. The public report by Discount Ox's franchisee is just a warning signal. Most private brands today are still on the same dead-end path—selecting factories by lowest price, proving their professionalism by how much they reduce costs. In fact, they are accumulating the cost of that 'iceberg' bit by bit below the water. Until they hit the iceberg, they will know the cost is far greater than the 1% price saved by bargaining. All retailers should remember: private brand is your most important face. And this face must never be forged with the lowest price. If you want to do private brands, remember, remember: remove the words 'lowest price' from your factory selection criteria! Knowing what to do and actually finding people who can do it together are two different things. In front of every retailer is a series of more specific questions: Which factories truly have stable quality control systems, not just send a beautiful sample? How to judge whether a factory has the willingness to co-create with you long-term, not just to take an order? How to apply the TCO framework to actual factory selection actions, how to evaluate each dimension, who evaluates, and how to negotiate after evaluation? These questions need answers. June 4-5, 2026, Hangzhou | The First China Private Brand Industry Chain Conference—Dingdong Maicai, Metro, Tmall Supermarket and other leading retail decision-makers will personally explain factory selection logic and quality control systems; OEM factories will bring real capacity and R&D capabilities; the supply-demand matching session is not just handshakes, but finding long-term partners willing to calculate accounts clearly and uphold quality with you.