As retail competition intensifies and channels fragment, traditional supermarkets—a brick-and-mortar format that once enjoyed a golden era—now bear the dual burden of ensuring local residents' livelihoods while grappling with declining foot traffic, shrinking margins, and pressure from brand owners' pricing power. How to navigate the cycle through product strength, supply chain depth, and private brand development has become a focal point for the industry.

The Evolution of Supermarket Formats and the Necessity of Private Brands

We have just passed the 2026 Spring Festival, which marks the Year of the Horse (Bingwu year, colloquially the 'Red Horse Year'). During the holiday period, boosted by national consumption policies and an extended break, offline retail experienced a brief recovery, with a 'strong start' at the door. But looking back, as the festive spirit fades, overall consumer confidence remains weak, with markets showing clear category divergence and a shift toward quality consumption. Post-holiday, most retailers face a reality: warehouses and stores are piled with excess inventory. The common response is conventional discounts and markdowns to spur sales and foot traffic. Yet results are underwhelming, and margins continue to erode. Frankly, traditional retailers—especially state-owned enterprises—are having a tougher time than brand owners and distributors. Under survival pressure, 'private brands' have become the industry's most touted icebreaker, tasked with serving as a 'moat' and 'firewall,' and seen as the only breakthrough for retailers to secure new profits and traffic. Looking back at format evolution, 1990–2015 was the golden age of hypermarkets. Giants like Carrefour, Walmart, and Yonghui operated 10,000-square-meter stores on a 'land-grab' logic, profiting from bulk purchasing and slotting fees. But since 2016, formats have been slimming and diverging sharply, with membership clubs and hard discounters entering forcefully. I believe no format is inherently good or bad; the difference lies in logic: membership clubs compete on 'bulk packaging + strong experience,' while hard discounters win with 'minimal SKUs + efficient supply chains.' This fundamental shift from 'operating stores' to 'operating products' is the core rationale for our push into private brands. The future of retail is undoubtedly 'small and refined.' Digitalization will run through the entire supply chain, with smart product selection, AI-driven replenishment, and cashier-less checkout as trends. In this process, the share of private brands (PB) will keep rising. Currently, leading retailers have PB shares of 30%–40%, with Aldi reaching as high as 90%. But most regional retailers in China are still hovering between 3% and 5%. I believe that in the next three to five years, a PB share of 10%–20% will be the baseline average. The necessity of developing private brands can be summarized in three points: First, to increase gross margins and escape the trap of unprofitability. Traditional supermarkets have margins of 15%–20%, while PB products can achieve 30%–50%. Second, to break free from homogenization. If every supermarket sells the same goods, why should customers come to you? PB is the weapon for differentiated competition. Third, and most importantly, to retake 'pricing power.' In the past, first-tier brands squeezed margins and demanded price maintenance. With PB, we set our own specifications and prices, free from external control. Our goal is to transform from a 'shelf middleman' earning price differences into a 'retail entity' with products, brands, and profits.

Core Conditions and Elements for Developing Private Brands

Many companies see others succeeding with PB and want to follow suit. But I believe PB cannot be done blindly; it requires several core elements. I've emphasized these in previous articles.

  1. Brand Awareness and 'Top Leader Project' In retail, owners and executives must dedicate time and energy to building competitiveness. Brand strategy comes first. Private brands are not just products; they represent the company's credibility. This awareness must flow from the top down, with management aligning thoughts. Many companies fail at PB due to internal conflicts: buyers and operations each have their own perspectives. Without top-down will, it won't succeed.
  2. Organizational Structure and Resource Allocation Companies must allocate the best talent and resources to the private brand department, including funding, review mechanisms, and KPI assessments. We need to reduce internal obstacles. The hardest part is coordination. Treat the PB department as a strategic unit, not just a procurement branch.
  3. Reshaping Buyer Capabilities: 'Three Passions and One Expertise' I've summarized buyer qualities for my team as 'Three Passions and One Expertise.'
  • Passion for life: Only by loving life can you discover its beauty. Without a positive attitude, you won't find good products or create them.
  • Passion for the job: Genuinely enjoy the industry, not just treat it as a means to make a living.
  • Proactive learning enthusiasm: With abundant information sources today, buyers must actively learn.
  • Professional knowledge: Buyers differ greatly from traditional purchasers. Purchasers seek payment terms and rebates from suppliers, but buyers must understand products. If you handle low-temperature goods, you need to know the technology; if cosmetics, you must understand ingredients. Only by being an expert in your field can you be a true PB buyer.
  1. Enhancing Supply Chain and Product Strength In the past, retailers had leverage through scale, but now with so many consumption channels, brand owners' moats are collapsing. Developing private brands is the shortest, most effective way for retailers to improve supply chain and product strength. We must integrate quality source factories and use big single-product hits to drive traffic and overall margins.

R&D Logic: Upgrading from Price-Performance to Quality-Performance

On PB differentiation, I'd say: retail isn't that complicated. With severe product surplus and high overlap, in today's multi-channel world, private brands must create 'distinctiveness.'

  1. Priority Order: Quality-Performance First Most retail companies start PB development driven by cost, seeking cheap goods. But I must warn: China is a manufacturing powerhouse; there's always cheaper. If you stay cost-driven, you'll ultimately damage your reputation and brand. My personal priority for PB development is: Quality experience > Functional design > Cost price. We must distinguish 'price-performance' from 'quality-performance.' Price-performance prioritizes price, meaning good value; quality-performance prioritizes quality, meaning worth buying. Excellent PB products should be: moderate price, upper-mid quality, premium packaging, and top-tier storytelling.
  2. Differentiated Pricing Strategy How to set gross margin? Is it a shot in the dark? My operational experience: for high-frequency daily necessities (like rice, flour, oil), adopt a 'low-price strategy,' using high quality at low prices to win consumer mindshare. For products with mind-share premium, use a 'high-margin strategy.' For example, at Zhongshang Supermarket, we leverage the 'Zhongnan 1932' IP. Zhongnan Square was established in 1932, a generational memory for Wuhan locals. We've turned it into a mind-share product with reasonable prices, top quality, novel packaging, and storytelling that resonates with consumers.
  3. Concise Packaging and Promotion Products must have the ability to tell stories. Today's consumers are smart but impatient. You don't need to tout your product's merits; let the product speak for itself. For instance, we created two hit products. One is cooking oil; our slogan is a single line: 'Price lower than first-tier, quality higher than first-tier.' Consumers get it at a glance. Another is canned yellow peaches. First-tier brands may sell at higher prices with smaller portions. We benchmarked Sam's Club: Sam's sells 2.25kg for 36 yuan; we offer 1.25kg for 12.9 yuan, with promotions down to 9.9 yuan. We directly tell consumers our source and how clean the ingredient list is. This single product sold 100,000 cans in under a year. That's letting the product speak—direct and effective.
  4. Product Marketing: 'Do It Outside, Not Inside' Good products must be promoted. There's an industry saying: 'Products are sold outside, not inside.' You'll notice customers shop aisle shelves with purpose, but true incremental sales come from displays and end caps. So, private brand products must be showcased. I often say: 'Products are actors, stores are the stage, planning is the scriptwriter, and buyers are the directors.' Only when each plays their role—script written, stage set—can the actors (products) sell well.

Multi-Dimensional Analysis of Retail Essence and Future Competition

Finally, let's discuss the essence of retail. In this transformation, the core logic shifts from 'managing suppliers' to 'managing products,' and then to 'supply chain management.'

  1. Tailor Business Strategies Many retailers approach PB with three words: copy, copy, copy. But can you copy effectively? If you copy Sam's, is your customer base the same? I once had a procurement manager who spent time at Sam's taking thousands of photos. I told him he was foolish; instead of that wasted effort, he should study his customer profiles. Zhongshang Supermarket has standard supermarkets, hypermarkets, and campus stores, each with different target customers. Campus stores need portability and fashion; hypermarkets need family packs and daily necessities. You must understand consumers and give them a 'reason to shop at your store.' If customers can't find what they need, or find the same items everywhere, why would they come?
  2. Retail Core: Products and Customers We used to say 'more, fast, good, economical.' I think 'more' is no longer important. With overcapacity, consumers don't need choices. Why do people go to Aldi? Because it has pre-selected for you—just two or three SKUs per category, so you just buy. Thus, the future is 'fast, good, economical.' We're moving from a price-performance era of budgeting to an era of self-pleasing experiences and emotional value. Frugality will become the norm, with quality and price as the only metrics.
  3. Three Competitive Dimensions: Product Mix, Channels, and Brand
  • Product mix: Who has better structure, more accurate management, and faster turnover.
  • Channel strength: Retailers can no longer be 'passive sellers.' Promote online-offline integration. Set up micro-warehouses in large stores, and offer home delivery from small stores. Channels that bridge time and distance will be the future winners.
  • Brand strength: Corporate brand is the foundation. Using high-quality PB products to improve and reshape customer perception is the shortest, most effective path. The core of retail development must return to products, enhancing supply chain capabilities and product strength. What we need to do is not 'sell cheap goods,' but 'sell goods cheaply.' The difference lies in supply chain efficiency and buyer expertise. You must be strong yourself; a hundred tricks are no match for sincerity. Do everything sincerely, craft every product well, and reach customers with quality goods to achieve sustainable development.