Private label has indeed become a hot topic recently. Various industry conferences are now featuring forums on private label. From supermarkets, discount stores, membership clubs, convenience stores to instant retail, various forms of "self-operated/direct sourcing/exclusive supply/co-branded/customized" are accelerating the shift towards private label (PB). In particular, leading retailers are treating private label as a core strategy. For example, Yonghui has publicly stated its goal to make private label account for 40% of total sales within the next 3 to 5 years, and disclosed that private label sales currently contribute roughly 5% to 15% across different regional stores. Auchan is also accelerating its private label matrix, including "Chao Sheng" and "Runfa Zhenxuan," with nearly 500 SKUs across the two series as of the end of September 2025. However, the reality is that while many are discussing it, few have truly succeeded. Recently, I spoke with friends in the manufacturing sector. Many retailers approach them to produce private label products, but most of these products don't sell well. "They haven't figured out their target audience; they just copy what competitors sell well, and the results are predictable." "Private label tests not whether you can find a factory or imitate a similar product, but whether you can run a closed loop: from consumer insight to product definition, from quality standards to shelf performance, and then to data review and continuous iteration." Private label truly tests a retailer's market insight capability. What exactly is private label? Before discussing private label, we must clarify three questions: Who initiates it? Why do it? How is it done? Without understanding these three questions, your actions of "selecting factories, creating SKUs, and designing packaging" are likely to become mere participation without results. First, who initiates it? It is not initiated by brand owners or distributors, but by retailers. Because retailers stand at the end of the shelf, closest to consumers, they are more aware of consumers' real needs. Therefore, the starting point of private label is not the factory, but the retailer redefining its role in the industry chain, moving from "selling others' products" to "managing its own products." Second, why do it? Retailers do private label essentially to gain product dominance and pricing power, thereby improving profit and operational controllability. Product dominance means retailers iterate their product structure based on consumer needs, not just listing products from whichever brand pays the most. Pricing power means retailers are no longer fully constrained by external brands' pricing and promotion rhythms, but can define the price band themselves, establishing a stable profit structure on the shelf. Many think the core of private label is "higher gross margin," but that's only half right. More importantly, it gives retailers a more stable operating leverage: controllable gross margin structure, price band, promotion rhythm, and ultimately controllable cash flow and business results. Third, how is it done? It's important to emphasize that the core of private label is not creating a hit product, but building a system. A single product is just the result; the system is the capability. What is a system? Starting from consumer tasks, define who buys, in what scenario, and for what task; determine the category entry point, price band, specifications, flavors, and differentiated selling points; then solidify quality standards, cost structure, and delivery capabilities into replicable rules; finally, through data review of shelf performance, continuously iterate products and structure. Private label is a product management system based on consumer needs. Is private label a short-term trend or a long-term result? The current rise in private label is driven by at least three forces. The first force is from the channel side. In recent years, most retailers' financial reports have been poor. Living space is compressed, and profit margins are squeezed even more. Retailers clearly know that relying solely on selling branded products on shelves will see their gross margin structure eroded by fee wars, promotion wars, and price transparency. Private label becomes a tool for retailers to make profits controllable. Gross margin structure, price bands, shelf placement, and promotion rhythms are all back in their hands. Looking at the actions of leading retailers, this is not a simple trial. Yonghui plans to push private label to 40% of total sales in 3-5 years and plans to launch 60 new private label products in 2025. Hema, Meituan Happy Monkey, JD Discount Supermarket, and other internet-genre offline stores have even higher private label ratios. The second force is from the supply side. Upstream overcapacity is severe, and price competition is fiercer. "Making private label for retailers" has shifted from small-scale cooperation to a main choice for more and more factories. Many leading brand owners are also opening up capacity for retail private label. A friend from a brand told me they now take many orders from retailers like Hema and Aldi, which have become a core source of incremental growth. This directly lowers the entry barrier for private label. Now even some county-level supermarket chains have launched private label, but they are essentially OEM products. The third force is the reference system. On one hand, retailers like Sam's Club, Aldi, and Hema have basically proven the model in the domestic market. Cooperation models are becoming standardized, making it easier for small and medium retailers to imitate. On the other hand, private label penetration in Europe and the US is already very high. NielsenIQ's 2025 International Private Label Market Update report for PLMA surveyed 17 markets and found that retail brand share increased in 12 countries. Domestic retailers naturally become more determined and aggressive in treating private label as a strategy. But excellent reference systems can also create misconceptions. Many only learn the supply chain and price advantages, ignoring the underlying system capabilities. The heat of private label is not a short-term fad but an inevitable outcome of market development at a certain stage. However, while there will be short-term trend-following and OEM, the long term will eliminate players without system capabilities. OEM is not private label After this round of private label heat, some market chaos has emerged. Recently, on business trips to some counties, I saw small county-level chains also stocking "private label" products. Basically, they imitate products that leading retailers sell well, change the packaging, give it a name, find an OEM factory to put a label on, and put it on the shelf. But looking at the dates, the shelf life is long, and many are near expiry, indicating poor sales. Today, creating a "private label look" has become too easy. The supply side has more capacity, OEM cooperation is more mature, and packaging design is more standardized, allowing "OEM-style PB" to be quickly replicated with low entry barriers. People have developed an illusion that doing private label is just copying homework. Whatever private label products Sam's Club, Aldi, or Hema sell well, copy them. It might work in the short term. But the long-term results are only two: either you get into price wars and don't make money, or poor quality control leads to poor sales and damages your reputation. Simply putting a label on a product does not make it private label. The barrier to private label is not the supply chain, but the retailer's product strength and brand strength. True private label is never "copy whatever is hot in the market," but rather your brand itself is the hotspot, and consumers trust your products when they are made. In a closed loop, the underlying capabilities of private label are: insight, definition, delivery, and iteration. If any of these four links breaks, private label degenerates into OEM. The first barrier is insight. Without knowing who the product is for and why consumers buy it, you cannot get it right. Without consumer demand insight, product definition relies on experience and guesswork. If others sell well, you follow; if you think a category is missing, you add one. The result is often many products, but none hit the user scenario: wrong price band, wrong specifications, wrong flavors, or wrong selling points. The second barrier is definition. Many people's logic for private label is to make a few SKUs in each sub-category, which is precisely the most dangerous approach. Private label is not just about creating a product; it's about establishing your value anchor in a category. Are you going for extreme cost-effectiveness, or value-for-money, or differentiated experience? Are you targeting family stockpiling or instant scenarios? Do you use large packaging to gain unit cost advantage, or small sizes to boost trials and conversions... Without defining the product's value, the result is that you can't beat white-label products on price, can't beat leading brands on quality, and can't sell even with promotions. The third barrier is delivery. Quality control, standards, and project management capabilities lag behind. Quality standards, testing mechanisms, formula standards, supply stability, delivery guarantees, return and compensation mechanisms—these are all systematic tasks. Once standards are missing, the more you do, the more dangerous it becomes, and the risk multiplies. Because if a branded product has issues, the manufacturer bears most of the responsibility, but if a private label product has issues, the damage to the retailer's reputation is enormous. The fourth barrier is iteration. Post-launch review mechanisms are weak, making it difficult to continuously upgrade. Getting it right once may be luck; the challenge is to continuously launch good products. For private label, you need an internet mindset, iterating based on user data. After launch, look at sales velocity, repurchase rates, negative reviews, returns, and performance differences across stores and demographics, then decide to change formulas, specifications, packaging, price bands, or even adjust the entire category structure. Final Thoughts Doing private label is a long-term project, but it's definitely not something you can do well by following trends and imitating. That's why, at the 11th China FMCG Conference (CFC) in Chengdu, March 16-18, 2026, we have set up a special discussion forum [Challenges and Opportunities of Private Label], specifically inviting supply chain and service providers behind Hema and Aldi to break down the real methods, organizational mechanisms, and risk boundaries in the advancement of private label by leading retailers and industry partners, focusing on key implementation aspects. If you're interested, you're welcome to sign up!