In the meeting room, the atmosphere had dropped to freezing point for the third time. The procurement director pushed a display adjustment plan to the center of the table. "This prime shelf space took us three years to maintain. The original brand gives us millions in annual support. Why should your private label SKU take up two facings?" The private label lead didn't back down. "Why? Because this SKU has a gross margin 14 points higher than the brand product in the same spot after three months, because company strategy requires private label to lead this category, and because the boss decided at the start of the year that private label should have 'dedicated displays.'" The vice president chairing the meeting was caught in the middle, torn between both sides—both were right, and both had KPIs to meet. The meeting ended without a conclusion, only agreeing to discuss again later. The result of that later discussion was that the private label SKU couldn't get that display spot, and after three months, sales missed expectations and it was delisted. Meanwhile, the brand product's sales suffered because procurement squeezed negotiations, and the supplier reduced fee support, leading to a lose-lose outcome overall. Such meetings are replayed in almost every retail company doing private label business. The only difference is the subject of the argument—today it's display space, tomorrow it's price bands, the day after it's new product launch timing; and the people change—this round it's Procurement Director A and Private Label Lead B, next round it's C and D. But the script is always the same. When faced with such problems, many company leaders' first reaction is that these two teams have coordination issues. So they change people, transfer roles, do team-building, or hire consulting firms to talk about 'collaborative culture.' A year later, the conflict returns with a different face. Because this was never a people problem. It's not people fighting; it's structure fighting. You can change ten procurement directors and twenty private label leads, but as long as the structure stays the same, they'll still fight.
Three Conflict Scenarios in Retail Private Label
Before explaining why it's a structural issue, I want to paint a clear picture of the real conflicts. Many leaders only see 'two departments arguing again,' but they don't see what they're arguing about. The first conflict: Display space battles. This is the most frequent and most intense. Every display adjustment, new product launch, or promotion period can trigger a 'display space defense war.' Procurement's logic: I've maintained this space for years, and I've negotiated fees, displays, and promotional resources with the brand. If you put private label here, I lose my bargaining chip. Private label's logic: This product is a strategic category for the company with clear margin structure. If I can't even get display space, how can I hit my sales targets? Both have valid points. The problem is that prime display space is limited—there are only a few facings at the best visual position on a three-tier shelf. Who gets them directly determines the sales curve. This is a zero-sum game, not a matter of who works harder. The second conflict: Price band collisions. In a regional supermarket, in the bottled water category, procurement introduced a national brand's 550ml purified water priced at 1.0 yuan; private label also developed a 550ml purified water priced at 0.6 yuan. The two products are the same size, same category, same display section, only differing in brand and price by 0.4 yuan. The result: consumers stood in front of the shelf for five seconds, and the vast majority chose the cheaper one. Private label sales rose, but it dragged down the national brand's sales. What happened next is typical: the national brand's supplier approached procurement and demanded, 'Are you making a private label version of our product?' Procurement, pressured by the supplier on rebate negotiations, turned to the private label lead: 'Can you change the size or price band?' The private label lead retorted, 'If I change it, how do I hit my targets?' Another example with soda crackers: private label launched a 400g family pack at 7.5 yuan; procurement simultaneously introduced a brand's 400g family pack at 12 yuan. The two products sat side by side on the same shelf. Consumers saw the near-half price difference, so the brand product naturally didn't sell; but private label didn't explode either, because consumers wondered: why so cheap? Is the quality bad? The result: both sold poorly, wasting shelf space. The third conflict: Development cycles vs. product introduction pace. Private label product development, from project initiation to launch, typically takes over 3 months—category research, concept testing, supplier sampling, small-batch validation, quality control processes, and packaging design and strategy. But procurement's product introduction pace follows monthly reports. If there's a category sales gap last month, new products must be introduced this month. The two paces are mismatched from the start. While private label products are still in sampling, procurement sees category decline and introduces a brand product to fill the gap. By the time private label products are ready for launch, they find the niche demand already occupied by the brand product procurement introduced. Private label development is wasted. Conversely, the private label team complains, 'Can't you wait? We're almost ready.' Procurement says, 'I can't wait; category sales are numbers.' This pace conflict is the most subtle but most damaging to private label—it erodes the development team's confidence. Developers privately say, 'No matter how good the product, it's just cleaning up procurement's mess.'
It's Not the People, It's the Structure
After seeing the three conflicts above, some might say: Isn't this just a communication or coordination issue? Can't more meetings and alignment solve it? To be responsible, I'd say: meetings can't solve this. Because the root isn't communication; it's structure. Specifically, there are three structural misalignments. The first misalignment: KPI structure misalignment—same metrics, two different games. In most retail KPI systems, procurement and private label nominally share the same metrics: sales, gross profit, gross margin, and inventory turnover. But these four metrics mean completely different things to the two departments. For procurement, sales come from supplier shipments, gross profit from fee negotiations, and inventory turnover is supported by supplier return policies. Every bit of their performance is external, earned by 'managing suppliers.' For private label, sales come from selling their own products, gross profit is squeezed from every step of the supply chain, and inventory turnover, if it goes wrong, means writing off losses themselves. Every bit of their performance is internal, earned by 'managing their own products.' The same KPI—one is 'external performance,' the other is 'internal performance.' When the company uses the same yardstick to measure both teams, procurement will always 'look' more efficient than private label. Because their costs (fees, returns, obsolescence risk) are mostly borne by suppliers, while private label's costs are all on the books. At year-end reviews, procurement's numbers look great, while private label's numbers 'still look like an investment phase.' The leader's subconscious after reading the report is 'private label needs more support'—and the support often means 'more display space, more promotional resources,' bringing us back to the first conflict. This isn't procurement being greedy or private label crying poor. It's that the yardstick was measuring the wrong thing from the start. The second misalignment: Resource allocation misalignment—display, promotion, and traffic are zero-sum. In retail, the truly scarce resource isn't capital; it's 'three positions': shelf display space, promotional feature positions, and store recommendation spots (plus a POG position for convenience stores). The total number of these positions is fixed. If you give one to A, you can't give it to B. This is a physical constraint, not an attitude problem. But most companies' resource allocation mechanisms default to 'whoever brings fees gets the space.' If a brand pays display fees, the display goes to the brand; if a brand pays promotion fees, the feature position goes to the brand. Private label has no 'external fees' to pay because it's the company's own product—paying from the left pocket to the right pocket is meaningless. The result: under a 'fee-driven' resource allocation mechanism, private label is naturally at a disadvantage. Even if company strategy requires 'private label priority,' when it comes to specific display adjustments in the meeting room, procurement holds up the supplier's fee report and says 'this space can't be moved,' and private label can only stare helplessly. This is why many companies 'value private label strategically but squeeze it operationally.' Strategy is written in documents; resource allocation is written in processes. If processes don't change, strategy is just paper. The third misalignment: Role boundary misalignment—who owns which category was never clarified. This misalignment is the most fatal and most common. In nearly a hundred retail companies surveyed, fewer than 5% have clearly defined which categories are private label-led, which are procurement-led, and which are open competition. In most companies, private label does a bit in every category, and procurement also introduces products in every category. On one shelf, private label chips, procurement-introduced brand chips, and third-party manufacturer chips are mixed together, and no one knows what they're responsible for or not. The result is a free-for-all due to blurred boundaries: every new product project requires re-fighting the 'can I do this?' battle; every category adjustment requires re-negotiating the 'who gets the display space?' judgment; every annual plan requires re-arguing the 'who gets resources?' allocation. The significance of role definition isn't just about product development; it's the first anchor to eliminate departmental conflicts. If roles aren't clear, boundaries can't be drawn; if boundaries aren't drawn, conflicts never stop. Xue Wenfa, Deputy General Manager of Guangdong Yinxue Group, columnist for New Distribution's private label section, senior private label expert, with 20 years of focus on injecting 'value differentiation genes' into brands. He has participated in Nongfu Spring's brand reshaping, led Zhujiang Beer's youth-oriented transformation, and built Meiyijia's own ecosystem. He is now responsible for OEM/ODM and product innovation, dedicated to category innovation and value differentiation system construction for private label, as well as private label training and coaching for retailers and manufacturers across the supply chain.