---
title: "The Rise of White Labels: Awakening of Channel Partners in China's FMCG Sector"
description: "The rise of white labels signifies the emergence of channel brand power, a redefinition of manufacturer-channel relationships, and an awakening of channel partners' business consciousness. This trend is driven by both demand-side factors like consumer preference for value-for-money products and supply-side factors such as the shift of commercial profits from manufacturers to channels."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-02-15"
language: "en"
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# The Rise of White Labels: Awakening of Channel Partners in China's FMCG Sector

> The rise of white labels signifies the emergence of channel brand power, a redefinition of manufacturer-channel relationships, and an awakening of channel partners' business consciousness. This trend is driven by both demand-side factors like consumer preference for value-for-money products and supply-side factors such as the shift of commercial profits from manufacturers to channels.

**Introduction:** The rise of white labels is the rise of channel brands, a redefinition of manufacturer-channel relationships, and an awakening of channel partners' business consciousness.

**The White Label Phenomenon**

**It is an awakening of channel partners' business consciousness.** Brand premiumization and the rise of white labels are two major trends in the product domain. White labels are not manufacturer brands but channel (platform) brands. The academic term is private label; white label is a popular term. Unknown brands produced by small and medium manufacturers cannot be called white labels, nor can non-first- or second-tier brands. White labels can also be famous brands; they are simply private labels within a channel system. The difference between brands and white labels mainly lies in the entity operating the brand, not whether it is famous. White labels were a phenomenon-level trend in 2023. **The rise of white labels is not the rise of second- or third-tier brands, but the rise of channel brands, a redefinition of manufacturer-channel relationships, and an awakening of channel partners' business consciousness.** For a long time, channel partners have been making wedding dresses for brand owners. The rise of white labels means channel partners will operate their own brands. The rise of white labels is the reverse process of deep distribution. In the past, manufacturers extended into channels through deep distribution to control terminals. White labels are channel partners extending upstream to control the supply chain. **Manufacturers controlling terminals and channel partners controlling the supply chain represent a new game in manufacturer-channel relationships.**

**Who is making white labels?** Let's illustrate with examples:
1. Large platform companies are making white labels, such as Pinduoduo and Meituan.
2. Community group buying platforms are making white labels, especially local ones, through their own supply chains.
3. B2B platforms are making white labels.
4. MCN institutions are making white labels, such as East Buy's "Zhenxuan Self-operated."
5. Large supermarkets are making white labels, such as Pangdonglai's "self-purchased" items. These are the main players.
6. Large distributors (dealers) are making white labels.
7. White label alliances are making white labels, such as Ant Alliance.

In summary, the following types of institutions are making white labels:
1. Internet platform companies, such as community group buying platforms, B2B platforms, and MCN institutions.
2. Large retailers, the main force in Western white labels.
3. Distributors.
4. White label alliances.

Because white labels require a certain scale to achieve scale advantages, business giants can independently make white labels, as Western retailers do. Mid-tier and even long-tail enterprises can only make white labels by joining forces, leading to alliances of retailers, platforms (community group buying, B2C, etc.), and distributor platforms. It can be seen that those making white labels are channel or platform operators, or their alliances. This is what distinguishes white labels from brands.

**Why make white labels?** White labels are not generic brands, nor are they counterfeit or shoddy. White labels are typically high cost-performance products. With sales peaking in various industries, brand premiumization is one trend to meet high-end consumer needs. At the same time, facing consumption divergence, white labels focusing on value for money are naturally popular. This is **demand-side driving white labels.** The rise of white labels is a phenomenon of commercial profits shifting from brand owners to channel partners. After all, whoever builds brand awareness enjoys premium returns. This is a normal outcome of manufacturer-channel competition after the rise of channel partners. This is **supply-side driving white labels.**

So why has the white label phenomenon, prevalent in Europe and America for a long time, only recently emerged in China?
1. **Overall sales peaking and platform traffic exhaustion.** When scale growth is limited, merchants mainly rely on scale for profit growth. With traditional industries reaching their ceiling and platform traffic drying up, channel partners and platforms are willing to go the extra mile to make white labels. When white labels can bring more profit to channel partners (platforms) than brands, the rise of white labels becomes a trend. Making white labels is not the goal; solving profit problems through white labels is the real goal.
2. **Mature business environment.** Even white labels are trustworthy, a trust that did not exist in the era of counterfeits.
3. **Rise of channel partners (platforms).** Business leaders before 2010 were mostly brand owners. The internet made more platform companies the darlings of the era, leading to a "brand coverage" phenomenon where platform (channel) brands cover brand owner brands. Even new brands on Taobao (like C2C brands) benefit from trust extension due to trust in the platform (channel), including quality screening and after-sales service.
4. **China as the "world's factory."** China is the world's factory, having provided supply chains for Western private labels. China's exports are mainly OEM and ODM, not Chinese brand exports. Now the world's factory is starting to provide OEM and ODM for Chinese enterprises.

**Why can white labels rise?** The rise of white labels does not mean brands are no longer important. White labels actually survive under a larger brand umbrella, which forms their survival background. For Meituan and Pinduoduo making white labels, the background is the large platform. For community group buying, it's the group buying platform. For retail stores, it's the retailer brand. These brand umbrellas are stronger than product brands, providing shelter for white labels. The rise of white labels, **besides the endorsement of brand umbrellas, also involves the awakening of channel partners' self-awareness and the awakening of their subject consciousness.** Merchants selling brands are merely value transferors. Brand value creation is done by manufacturers (brand owners). Merchants (platforms) are just sales venues. In China's traditional channels, deep distribution extended the manufacturer's channel role from distributors to terminals, even with terminal sales promoters borne by manufacturers. For example, manufacturer personnel participate in distributor distribution, promotions, and terminal management; they also engage in terminal interception. Work that should be done by distributors and retailers is done by manufacturer personnel and at manufacturer expense. Now many distributors' salespeople are paid by manufacturers. Who benefits and who loses? Losing channel dominance is the biggest loss for merchants in the manufacturer's deep distribution process. **The rise of white labels is not just about making a white label product; it's about merchants taking on the manufacturer's functions in reverse.** When merchants sell white labels, they must undertake the full range of work including value creation, value communication, and value delivery, which was previously the responsibility of the entire business system including manufacturers.

**Value creation includes demand insight, product design, etc.** White labels generally adopt an ODM cooperation model, mainly with mature products, not emphasizing differentiation or bearing the responsibility of value creation, but using C-end data to decide which products to select is still very important.

**Value communication includes consumer awareness formation, brand positioning, etc.** In the past, building a brand was the manufacturer's natural job. White labels are also brands; whoever builds the brand must do brand communication and awareness like a manufacturer.

**Value delivery was originally the work of commercial institutions.** In the past, deep distribution was handed over to manufacturers; now it must be taken back. The rise of white labels means channel partners must reposition and reorganize their functions. In the past, Chinese marketing was brand-driven plus channel-driven. The rise of white labels means achieving "channel brand driving."

**What is "channel brand driving"? It is using channels to build brands.** In the traditional era, brand communication platforms were mass media; now they are self-media. Another important auxiliary medium is the terminal as media. The "channel brand driving" of white labels is to build channel brands, leveraging channel partners' advantages in occupying terminals (retailers) and platforms (traffic), doing both brand awareness and delivery. It is a typical trinity of awareness, transaction, and relationship.

Therefore, **the rise of white labels is both driven by environmental pressure and a transformation of channel partners' functions, expanding marketing functions by leveraging terminal advantages.**

**What categories are suitable for white labels?**

During the three years of the pandemic, some predicted a K-shaped recovery with clear divergence. The means to cope with K-shaped recovery are, on the one hand, manufacturers' premiumization, and on the other, merchants' white labels.

If products are divided into value-based and cost-performance products, high-end is value-based. Brand premiumization is currently a trend for manufacturers.

Whether premiumization or white labels, both are based on new demand to solve profit growth issues.

The category options for white label products roughly focus on three aspects:
1. **Mature categories and mature products.** White label products should avoid category education as much as possible. Mature products do not emphasize differentiation. This is the foundation for white label cost-performance. White labels generally adopt ODM mode, which typically does not emphasize differentiation.
2. **Cost-performance products.** White label consumer awareness is simple, mainly based on terminal scenarios. Cost-performance products better achieve the integration of awareness and transaction. This integration requires rapid awareness. Value and cost-performance: cost-performance emphasizes "hard performance" and requires only "shallow awareness," which is easier to demonstrate; value is "soft power" and requires "strong awareness."
3. **Household products.** Household items are mostly mature products, buyers pay more attention to cost-performance, are sensitive to various store promotions, and have a typical "bargain-hunting" mentality.

**How to promote white labels?** White labels can also become well-known brands, but as commercial well-known brands. White labels focus on cost-performance but also require a premium. This seems contradictory. To resolve this contradiction, first, white labels must use ODM mode for supply chain. ODM supply chain ensures white label products are mature products with no marketing costs, thus ensuring both quality and low price. This is a very important foundation for white label success. As long as the product supplier has a marketing department and marketing activities, it will be reflected in the price, losing the white label's price advantage, unless the supplier has special ODM policies. ODM mode (unlike OEM) only ensures the price is low, with cost-performance advantage. But to turn cost-performance advantage into a premium rather than a low price, a white label promotion model is needed. Cost-performance is actually the consumer's feeling after successful promotion. Through promotional activities, cost-performance is maximized to generate a premium, making consumers feel value for money while giving white label merchants profit. **The key to white label promotion is to showcase cost-performance and turn it into consumer awareness.** Because they are mainly mature products, consumers have no problem understanding basic performance, but since white labels are not as well-known as famous brands, awareness still needs to be built around cost-performance. Based on the white label entity, there are roughly three methods:
1. **Using terminal scenarios as touchpoints.** Especially suitable for KA stores. Using the terminal as a scenario for scenario-based experience is the most effective method. After all, the advantage of KA stores is that the terminal is the user touchpoint. Scenario + experience is a very effective means for Pangdonglai to promote its "self-purchased" products. It has now become an effective means for promoting high-end products and white labels.
2. **Using key figures at the b-end (small terminals) as touchpoints.** Especially suitable for community group buying, distributor white labels, and B2B platform white labels. For example, community group buying platforms use "group leaders" (b-end) and key opinion consumers (KOCs) as touchpoints; they are the key figures influencing users. Their importance lies in the monetization of community relationships, also known as private domain relationship monetization. For distributors and B2B platforms making white labels, the main touchpoints are still small terminal store owners, precisely because their strong community relationships with users lower the awareness threshold, allowing white labels to monetize quickly.
3. **Using internet influencers as touchpoints.** Suitable for MCN institutions, such as East Buy. Live streaming itself integrates awareness, transaction, and relationship, with anchors demonstrating on-site to build awareness.

2C is brand awareness; 2B is channel transaction. In traditional marketing, brand driving and channel driving are separate. Brand operations must face 2C (e.g., advertising, content fission) to build the brand, and complete transactions through channels, with brand awareness and transactions completed simultaneously. The marketing model for white labels is channel brand driving. Therefore, white label operations are not just adding a category of white labels but a change in the operating system. It is necessary to reach C-end through b-end (terminals, group leaders, etc.). Only by reaching C-end can product awareness be completed. This is a typical bC integration model. bC integration means using b as a touchpoint to complete both awareness and transaction marketing processes simultaneously.

The three promotion models share common features: **First, find user touchpoints, reaching C through b. Touchpoints can be people (like small store owners) or scenarios (terminal scenarios); second, create scenarios and atmosphere; third, experience.** Perhaps because white label products are mature, they don't require complex experience activities like high-end products, but without experience, consumer awareness is still not strong enough to generate a premium.

**White Label Marketing System**

White labels are not just adding a few SKUs to traditional commerce; they represent an awakening of channel partners' business consciousness. Traditional channel partners are extensions of brand marketing; now they must do the opposite. To have a premium, channel partners must awaken their marketing consciousness. After all, whoever does brand promotion enjoys higher premiums. From the above analysis, the white label marketing system includes at least four aspects:
1. **White label buyer system.** Buyers must change from waiting for suppliers to come to them to finding good products at the source of the supply chain. Of course, small and medium channel partners can find good products through white label alliances.
2. **Establish a 2C organization.** For a long time, KA store sales promoters have been dispatched by manufacturers and distributors, meaning the front line has been handed over to brand owners. This is an important position for reaching users. Retailers promoting white labels must "take back" the front line. A 2C organization, i.e., an organization that reaches users (C-end), is the prerequisite for scenario-based experience. Whose team it is, it promotes for whom.
3. **Scenario-based terminal stores.** The upgrade from vividness to scenario-based terminals is an important scenario upgrade and the foundation for later experience. In this regard, Henan Xuchang Pangdonglai and Yichang Yasi have done very well with their private labels.
4. **Experience system.** Good or not, taste it; good or not, try it. Although white label experience is not as complex as high-end, without experience, cost-performance cannot be demonstrated.

The above four aspects are not complicated. But any transformation is difficult, mainly because long-formed habits are hard to change. Changing one person is hard, changing a group is harder, and changing an industry system is especially hard.

Liu Chunxiong, advocate of new marketing, dean of the Marketing Digitalization Research Institute. Currently associate professor at Zhengzhou University, author of the new marketing trilogy: "New Marketing," "New Marketing 2.0: From Deep Distribution to Three-Dimensional Linking," and "New Marketing 3.0: bC Integrated Digital Transformation."

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