In recent years, a phrase has become increasingly common in the retail sector: "Private label is not a choice, but a mandatory question." I first heard this from the founder of a chain retail company. Later, I heard it countless times in various settings. Those who said it included bosses with twenty years of experience, second-generation successors who had just taken over, and category heads at top supermarkets. Almost everyone treated it as a consensus that no longer needed discussion. But I have always felt there is a problem with this statement. It's not that private label is unimportant, but the phrase "mandatory question" turns something that is based on the enterprise's stage and highly dependent on supply chain management, product capability, and organizational strength into something that all retailers must do now. This simplification is more dangerous than not doing private label at all.
Treating the results of a few as your starting point
There is something I find thought-provoking. Ask anyone who is doing or preparing to do private label, and almost no one will say, "I just want to put my label on it." Almost everyone will say: this requires product development capability, supply chain management, organizational coordination, and long-term investment. They all speak very clearly. But when it comes to actually doing it, they still go back to the same path—find a factory, change the packaging, cut costs, and put it on the shelf. This is not to say these people are lying, but that there is a gap between knowing and doing that is much deeper than imagined. Where exactly is this gap? Doing private label is not "adding another brand of your own," but "taking on a segment of supply responsibility that did not originally belong to you." In the past, the core work of retailers was product selection, display, promotion, and sell-through management; brand owners were responsible for the other segment: defining products, organizing production, controlling quality, and coordinating capacity. There was a game between the two, but the boundaries were generally clear. Once private label is launched, this boundary begins to move forward. You are not just selling something; you also decide why it exists, what specifications it has, what price band, who to OEM, how to control quality, how to control costs, how to handle slow sales, and how to replenish when it sells fast. This supply responsibility is heavy in several easily underestimated areas. First is product definition. Private label cannot be established just by being cheap. Why would consumers switch from the brands they are used to? If the answer is just "a little cheaper," this advantage is very fragile. A product that can truly stand firm must have more specific reasons: better fit for the scenario, more reasonable specifications, more transparent cost-performance, or a clear improvement in some experience dimension. Second is sales expectations. Without stable sales expectations, factories will not cooperate seriously. Many retailers think that having stores and channels gives them the confidence to do private label. But the number of stores does not equal channel control. The key is not how many stores you have, but whether the product strategy of these stores is unified and whether sell-through is stable. Third is the continuity of the supply chain. Finding a factory is just the beginning; there are a series of things behind it: quality control, delivery time, minimum order quantity, packaging material coordination, consistency across batches, replenishment rhythm, and slow-moving inventory handling. Each link is not complicated on its own, but when stacked together, it becomes a heavy operational burden. Fourth is whether the organization can handle it. This is easily treated as just another project for the purchasing department or another set of SKUs for the product department. But it must be cross-functional—purchasing, product, operations, supply chain, stores, quality control, and finance will all be involved. If there is no supporting system, the most common result is: the front end wants to push forward, but the back end cannot catch up; purchasing wants to cut costs, stores find it troublesome, operations cannot see efficiency, and finally the product does not take off, but the complexity increases first. The name is yours, but the stability is not. The gross margin on paper looks higher, but if sales are slow, turnover is low, and inventory is stuck, that margin is quickly eaten up by write-offs and capital occupation. Private label does not become an asset; it becomes an extra burden. This situation is very common. Do not be carried away by the so-called "mandatory question." Think about why you believe you can handle this supply responsibility now.
Sam's logic is different from what you think
Every time private label is discussed, Sam's Club, Costco, and Aldi are unavoidable names. It is a fact that their private labels are strong. But I think many people draw a wrong conclusion from this fact—since they can do it, private label is the common direction for the retail industry, and everyone should follow. This is only half right. Sam's Member's Mark and Costco's Kirkland have reached their current scale and quality because of a heavy set of prerequisites: a stable membership system, highly concentrated procurement scale, extremely mature product screening capabilities, and supply chain management capabilities accumulated over many years. When these are stacked together, private label is not just a product action, but a naturally established component of the entire operating system. Aldi is also the same. Many people see its high proportion of private label products and think it is "making money from private label." A more accurate statement is that its entire business model was originally built around high efficiency, minimal SKUs, and controllable supply. Private label is not something added later; it is an endogenous part of this model. It is not because they have private label that they became strong. It is because they were already strong enough that private label could be deepened. Many people have reversed this order. But there is a question worth answering seriously: How did that capability come about? Sam's did not have this capability at the beginning. How did it build it? My judgment is that capability is not a prerequisite, but a process. Sam's early private label was not what it is today. It started with relatively simple categories and, through repeated collaboration with suppliers, gradually accumulated product definition capability, quality control capability, and supply chain management capability. This accumulation really happened and took time and cost. This process has no shortcuts and cannot be replaced by the action of "deciding to do private label." It requires channel scale, financial endurance, sustained organizational investment, and the patience to go slower. If these conditions are not met, trying to skip the process and directly output results will likely only produce superficial work.
Private label is not the answer, but the result
So back to the initial statement: Is private label really a mandatory question? My view is that for a few enterprises, it may be a strategic priority at a certain stage, but for most enterprises, it is not a standard answer that can be directly applied. Roughly divided into three categories. The first category is those that should not rush into it now. The scale is insufficient, product capability is not established, and the organization cannot handle it. If these enterprises force it, they are likely to increase complexity rather than build capability. The second category is those that can start with a shallower level. Exclusive models, customized models, and co-developed models—these methods are not as heavy, but they can train product definition and supply coordination capabilities. First get the product right, then talk about the brand; this is a more realistic path. The third category is those that can truly make it a strategy. They can define products, coordinate manufacturing, control quality, stabilize turnover, and bear the complexity behind it. For them, private label is not a project, but a natural thing to do. When talking about private label, it is easy to talk about who is doing it and who is not. But what is more worth looking at is another thing: who just added a brand, and who really added a set of organizational supply capabilities. This is the real watershed in this round. This is also the starting point of our Private Label Industry Chain Conference. June 4-5, Hangzhou. It is not to talk about trends, not to tell everyone that this question must be answered—but to bring together the people who are truly doing things in this supply chain: what retailers are thinking, what suppliers are experiencing, and how brand owners are responding. Companies that have gone deep will share the real paths they have taken, cases that failed are worth dissecting, and the changes happening between upstream and downstream need to be judged together. No matter where you are in this chain, as long as you are thinking about this issue, you are welcome to come. Scan the QR code to learn more about the conference