---
title: "The Underlying Logic of Retail Branding: 90% of Retailers Overlook It"
description: "The FMCG market has shifted from incremental growth to stock, and now to contraction, intensifying competition across the entire industry chain, with 'brutal' being the most apt description. On August 20, at the 5th China FMCG Retail Innovation Conference, Xue Wenfa, Deputy General Manager of Guangdong Yinxue Group and a senior private label expert, shared how retail enterprises can build differentiated competitive advantages through branding strategy in his speech titled 'Breaking Through Homogeneous Competition: Branding is the Urgent Task for Retail'. The following is an edited excerpt of his on-site speech, compiled by New Distribution for readers."
author: "薛文发"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2025-09-14"
categories: "Brand Marketing"
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# The Underlying Logic of Retail Branding: 90% of Retailers Overlook It

> The FMCG market has shifted from incremental growth to stock, and now to contraction, intensifying competition across the entire industry chain, with 'brutal' being the most apt description. On August 20, at the 5th China FMCG Retail Innovation Conference, Xue Wenfa, Deputy General Manager of Guangdong Yinxue Group and a senior private label expert, shared how retail enterprises can build differentiated competitive advantages through branding strategy in his speech titled 'Breaking Through Homogeneous Competition: Branding is the Urgent Task for Retail'. The following is an edited excerpt of his on-site speech, compiled by New Distribution for readers.

The FMCG market has shifted from incremental growth to stock, and now to contraction, intensifying competition across the entire industry chain, with 'brutal' being the most apt description.
On August 20, at the 5th China FMCG Retail Innovation Conference, Xue Wenfa, Deputy General Manager of Guangdong Yinxue Group and a senior private label expert, shared how retail enterprises can build differentiated competitive advantages through branding strategy in his speech titled 'Breaking Through Homogeneous Competition: Branding is the Urgent Task for Retail'. The following is an edited excerpt of his on-site speech, compiled by New Distribution for readers.
The focus of the FMCG industry is shifting—from 'product brands' to 'retail brands'. In the past, retail played more of a trading role; now, pricing power and consumer attention are shifting toward the retail end, and retail is gradually becoming the helm of the FMCG industry. But is retail ready? Clearly not. A key point for retail enterprises now and in the future is branding.
What is retail branding? Retail branding gives retail a reason for existence, with the core being differentiated competition and customer loyalty building. It involves not only products and services but also multiple dimensions such as strategy, operations, and marketing.
However, retail branding is not a must for all enterprises. If the goal is only short-term profit, such as making quick money through channels and shelf space, then branding is not very necessary; but if an enterprise has longer-term strategic goals and aspires to build sustainable competitiveness in the industry, then branding is a 'strategic necessity'.
Retail competition has entered deep waters
Retail has become the most core and intense battleground in the FMCG industry. The market has long entered deep waters, with elimination and adjustment accelerating, and industry and ecosystem integration also accelerating.
Hard discount has sparked a wave in the industry in recent years, once seen as a 'disruptor'. However, due to low gross margins and high dependence on traffic, with too narrow categories, the room for error is limited. Once the traffic dividend is exhausted, if the depth of the supply chain and the resilience of the profit model are insufficient, it is difficult to support long-term development. This is why some hard discounters have exited the market, while others are still struggling.
Meanwhile, instant retail has become a new focus. Traditional e-commerce has entered retail with capital and technology, bringing new competition under ecosystem integration. The empowerment of data, capital, and technology will have a significant impact on traditional retail. But it is still in its early stages, and the future direction is uncertain.
However, it is certain that brand remains the biggest moat—with its own scenarios and stickiness, it can resist competition relatively strongly and will not be quickly replaced.
Looking at industry changes from data is more intuitive. In the first half of 2025, household kitchen products grew 7% year-on-year, the overall beverage market showed negative growth, but the juice category grew 19.1%, all driven by growth in household consumption.
At the same time, the catering industry is even more alarming: in 2024, 2.163 million restaurants closed in China, a year-on-year increase of 60%; in the first half of 2025, it has already reached 1.05 million, a year-on-year increase of 75%. It can be inferred that in 2025, more restaurants will exit the Chinese market.
This is not a single cyclical fluctuation, but a systemic adjustment under the superposition of multiple cycles. The law of consumption is also verified again—when the economy is sluggish and income expectations are unclear, consumers will first reduce dining out, while household consumption will grow significantly. Therefore, restaurants, bakeries, and fruit specialty stores will exit the market in large numbers.
Why? Because cross-format integrated competition is intensifying.
We see that supermarkets that have undergone fresh food adjustments are doing well, cutting into household consumption scenarios and seizing some traffic from restaurants, bakeries, and fruit stores. It is expected that this dividend can last for another one to two years. So where is the next growth for retail? I believe branding is one direction.
Another trend worth noting is 'consumer egalitarianism'—the equalization of price, opportunity, and supply. The underlying logic is that under the backdrop of sluggish consumption, consumers are more rational.
Sam's Club and Pangdonglai were early to see this trend, building a good reputation through quality products, reasonable pricing, and value output, and achieving both fame and fortune through intensified integrated communication. Although Pangdonglai is just a supermarket in a fourth-tier city in Henan, its voice far exceeds that of first-tier brands, which also inversely shows that most retail enterprises in China are not doing well enough and have not gained widespread recognition and praise.
But at the same time, the FMCG industry has also spawned a phenomenon of 'moral arbitrage'—using the broad consumer sentiment of egalitarianism to shape a moral image of the enterprise, create a personal IP for the entrepreneur, and place it at a moral height for commercial traffic and value realization.
Moral arbitrage is dangerous but also effective. It is effective in the short term because it can attract a large amount of traffic; the danger is that once there is a conflict of values or a collapse of the persona, the backlash effect is even more violent.
Personal IP is even more of a risk. The conclusion of persona economics emphasizes that 'personas will inevitably collapse', because people are not perfect. Even if they seem perfect now, over time, in a flattened and fragmented public opinion environment, such collapse is almost inevitable. Therefore, a clear-headed entrepreneur will not deliberately shape themselves into an IP to endorse the enterprise, but rather brand the enterprise itself. That is the correct path.
Private label chaos
2025 has been called the 'first year of private labels' in the industry. Indeed, more and more retail enterprises and channel players have joined the private label track. But in the rapid advancement, many problems have also been exposed.
1. Private labels done for the sake of doing: No goals, no direction, just 'doing for the sake of doing', unclear about the role and purpose of private labels, and casually setting up a lower-level position to execute private label work. In reality, private labels are a systematic project that must at least meet the following prerequisites:
  * It must be a strategic plan aligned with the enterprise's strategic goals, with clear purpose, goals, and path;
  * It must be a top-priority project, with the highest level of the enterprise personally involved; otherwise, it is easy to be killed in the cradle due to friction with traditional procurement departments;
  * It must have a professional team with strong comprehensive capabilities, including core competencies such as data analysis and category management, consumer insight, and product development.
2. Simplified private labels: Believing that private labels are just white-label or OEM, or 'copying homework'. This perception is too crude. If the system's sales are below 3 billion yuan, or more strictly, 5 billion yuan, it is difficult to systematically build private labels, because truly professional private label talent is scarce and expensive; they need to understand brands, products, processes, retail, and more.
3. Idealized private labels: Some enterprises fall into the 'idealization trap', always wanting to make private labels the 'best'. In fact, processes, production, and technology have realistic boundaries, and being overly demanding can backfire. Another common misunderstanding is that private labels are extremely profitable. In reality, private labels are positioned in tiers: economy, standard, and premium.
Economy private labels have quality lower than product brands, but prices are up to 60% lower than brand-name products; standard private labels have basically the same quality, but prices can be more than 30% lower; premium private labels are only suitable for retailers with strong brand assets, such as Pangdonglai, Aldi, and Sam's Club, where private label quality is higher than product brands, but prices are also more than 10% higher.
Why should retail brand?
First, to break the homogeneous dilemma
Aldi in Germany is a typical case: when facing challenges from competitors like LIDL with similar positioning, it quickly turned the situation around by extremely simplifying SKUs to only 1,500 high-frequency items; achieving 90% private label penetration to eliminate middleman markups, resulting in prices 30% lower than competitors; and using unconventional store designs such as displaying products in original cartons and requiring a coin deposit for shopping carts. This established a clear positioning of 'extreme cost-effectiveness', not only escaping the homogeneous dilemma but also completing expansion from Germany to Europe and even China.
The strength of retail brand awareness is reflected by 'unaided top-of-mind awareness', meaning the first brand that comes to a consumer's mind without any prompts. Having such exclusive mindshare means higher visibility and a consumer preference advantage.
Second, cultivate loyalty, reduce customer acquisition costs, and gain stable traffic
Once retail forms a brand effect, it accumulates many highly loyal consumers. Loyalty not only brings stable traffic but also significantly reduces customer acquisition costs.
Pangdonglai's impressive performance in Xuchang and Xinxiang confirms this. Currently, many retailers even set up 'Pangdonglai-style' sections to attract and retain consumers.
Industry research shows that loyal consumers' repurchase rate is usually 3-5 times that of ordinary consumers, and for every 5% increase in repurchase rate, corporate profits can increase by an average of about 25%.
Third, brand is a weapon to transcend price wars
Take Trader Joe's in the United States as an example. Through scenario-based experiences, increasing private label share (over 80%), storytelling products, and mystery marketing, it not only attracted the target group of 'frugal connoisseurs', increased average transaction value, but also improved gross margins. Even the most budget-conscious consumers become less price-sensitive in its brand atmosphere. According to industry research, retail enterprises with brand effects can reduce consumers' price sensitivity by 40% during purchases.
Fourth, enhance risk resistance and supply chain control
Large hypermarkets often have tens of thousands of SKUs and dozens of major categories, making occasional product issues and related risks inevitable. If a retail enterprise has relatively stable brand assets, with high consumer awareness, reputation, and loyalty, it can weather crises with reasonable public relations; otherwise, there is a risk of liquidation. At the same time, a strong brand influence in retail also facilitates supply chain integration, whether in private label development or joint procurement, with higher bargaining power and communication efficiency.
How to do retail branding?
Retail branding is not a single-point breakthrough but a complete chain from planning to execution. The first step is to establish the retail brand positioning.
The first key is to clarify the target consumer group: who to sell to, who to serve?
For example, Zhao Yiming initially targeted mainly housewives and minors, but profitability was limited. So it launched 'savings supermarkets' to refocus on a broader consumer base; Sam's Club positions itself around the needs of middle-class families. The large parking lots, spacious shopping areas, large shopping carts, and open tasting areas are not accidental but closely revolve around the consumption habits of this group.
The second key is to clarify the competitive landscape: who are you competing with? What is the scope of competition? Where are your competitive advantages?
For example, Meiyijia positions itself as 'more convenient', so it continuously opens stores at high density to seize consumer mindshare and strengthen its competitive advantage. In core urban circles, you can encounter a Meiyijia store almost every 100 meters. Its direct competitors are convenience stores or small shops of the same format, but potential competitors include vending machines, hard discounters, supermarkets, instant retail, and traditional e-commerce, while tea shops, coffee shops, and fruit stores are substitute competitors. The scope, breadth, and complexity of competition are significant. Therefore, an important part of retail branding is to clarify the competitive scope and determine your competitive advantage.
The third key is analysis of format trends and resource capabilities.
Retail branding is not an isolated action but should be judged in combination with the current format and future trends. The essence of brand positioning is 'strategic abandonment'. Enterprises must recognize what they should do and what they resolutely should not do.
For example, Pangdonglai knows that its uniqueness cannot be replicated nationwide, so it only opens stores in Xuchang and Xinxiang, and sticking to the Henan region has actually made its brand; JD.com, on the other hand, chooses comprehensive competition, covering the entire chain with 'more, faster, better, and cheaper', because it has capital, data, technology, and a huge supply chain to support it.
There are many dimensions to retail brand positioning, including price and value, differentiation, scenario, convenience, channel characteristics, and even sustainability, social responsibility, and digital smart retail can be used for brand positioning. But different enterprises should make trade-offs based on their own resources.
Price positioning: Retail enterprises all like to advertise 'I am the cheapest', which is the most effective but also the most difficult. For example, Walmart relies on global supply chains, efficient operations, and a large private label portfolio to stand on low prices, but it still faces challenges in China, which were only alleviated with the rise of Sam's Club.
Value positioning: Low-price positioning is effective, but credibility is more important. Aldi in Germany transformed from a 'premium supermarket' to 'hard discount', building an image of 'good quality, low enough price' with 90% private labels, not pursuing 'lowest' but a deliverable 'low enough', ultimately forming a positioning of 'extreme cost-effectiveness' in consumers' minds.
Scenario positioning: Biyoute Supermarket clearly positions itself as 'the family purchaser for Northeasterners', focusing on region and scenario, with two-thirds of its areas dedicated to family shopping scenarios. It even spent millions to establish a testing center to strengthen food safety and integrity systems.
Category positioning: Qian Dama stands on 'not selling overnight meat', deeply cultivating the category through supply chain, store experience, and community operations, quickly establishing differentiated mindshare.
The difficulty of retail positioning lies in finding a differentiated advantage that combines the enterprise's own resources and capabilities, is recognized by the target consumer group within the competitive scope, and can surpass major competitors. In retail brand positioning, it is also necessary to avoid various positioning contradictions, such as standardization vs. localization, low price vs. high quality, and high-end vs. mass-market.
The fourth key is product support
First, conduct category analysis based on brand positioning to clarify which categories can support the enterprise's differentiated value.
Analyze and label the identified relevant categories as the focus of product strategy.
Purpose categories: Prioritize private label development; if not possible, focus on direct sourcing.
Regular categories: Use efficient direct sourcing to maintain market competitiveness, ensuring cost and efficiency.
Supplementary categories: Must undergo review-based procurement to avoid 'deviation' from brand positioning.
Private labels are the core of product support strategy. In building, developing, and operating them, consistency is essential. First, clarify the logical relationship between private labels and the parent brand.
Parent brand strategy: Use the main brand to carry everything, such as Pangdonglai directly using 'Donglai'.
Hybrid brand strategy: Have both parent brand endorsement and sub-brand personality, such as JD.com's 'Jingzao'.
Independent brand strategy: Maintain the independence and personality of private labels while avoiding impact on the parent brand image.
Retail brands with strong overall strength are more suitable for the parent brand strategy. For most retail enterprises, the hybrid brand strategy for private labels is currently a more feasible choice, as it can leverage the parent brand endorsement while allowing flexible differentiation.
After completing brand positioning and product support, the more core work is value communication, strengthening the brand image through products, services, and scenarios, and using integrated online and offline communication to expand brand influence and accumulate brand assets.
The following is a complete retail enterprise branding model:
For small and medium-sized retail enterprises, a simpler branding approach is to focus on 'low cost, high perception, quick results'.
First, reposition the brand: under the premise of corporate strategic planning, explore and match feasible differentiated value positioning, and propose a clear, credible, feasible, relevant, and unique proposition or slogan;
Second, upgrade key touchpoints: focus on the product level, make clear commitments at the service level, and comprehensively refresh the visual level;
Third, strengthen the brand image through products, services, and scenarios, discover, explore, and create products or events, and through a series of continuous integrated online and offline communications, expand brand influence, enhance image, and accumulate brand assets.
For small and medium-sized retail enterprises, branding means grasping three key actions: able to propose—core value, able to deliver—promised products and services, and able to spread widely—brand image.
The essence of retail branding is to use certainty to cope with the uncertainty of traffic. Only when stores and retail enterprises become the default choice in consumers' lives does the brand moat truly form.


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## Citation metadata

- Publisher: New Distribution
- Author: 薛文发
- Published: 2025-09-14
- Canonical: https://xinjignxiao.com/en/articles/the-underlying-logic-of-retail-branding-90-of-retailers-overlook-it-39f1191e/
- Original source: https://mp.weixin.qq.com/s/PQ74mu2DZPMj_0M8_YJ1fQ

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