Chinese Retailers Accelerate Private Label Push, Sales Hit 380 Billion Yuan in 2025

Even in an era of material abundance, consumers are reluctant to open their wallets; though prosperous, they are especially sensitive to differences. — Toshifumi Suzuki

Source: LueDa Reference (hyzibenlun)

A prevailing judgment is circulating in the retail industry: if a retailer's private-label share does not reach 30%, it risks being eliminated from the market within the next five years.

This assessment carries a sense of urgency. But a look at store shelves confirms that change is already underway.

Shoppers visiting Sam's Club or Hema now specifically seek out Member's Mark and Hema Workshop products. On the Xiaoxiang Supermarket app, Xiang Dache has carved out its own space. In the past, consumers would first recognize a brand and then find a place to buy it. Today, a retailer's own products are becoming a reason for consumers to place an order.

This shift extends far beyond supermarkets. Mingming Henmang, through centralized procurement and collaborative customization, influences what is sold in street-corner snack shops. Miniso stamps its own brand on daily necessities, embedding product development into its store operations.

According to industry data, private-label sales at Chinese supermarket chains surpassed RMB 380 billion in 2025, a year-on-year increase of 17%. As consumers scrutinize every expense, retailers are also recalculating the cost of moving goods from factory to shelf.

Private labels are not a new concept. But when retailers begin using their own products to attract customers, how will industry competition change?

Walmart's New Bet: Bettergoods

In April 2024, Walmart launched bettergoods, a food private label—its largest food brand launch in two decades. The plan includes approximately 300 items, most priced under $5.

This move might seem redundant. Walmart already operates roughly 40 private labels, with over 190,000 products developed cumulatively. Its Great Value brand alone covers nearly 10,000 food and household items, generating over $27 billion in annual sales last year.

In terms of product count, bettergoods' 300 items are a fraction. In terms of suppliers, Walmart commands a global procurement network built over decades. In terms of affordability, "Everyday Low Prices" is practically its invention. By any measure, bettergoods appears unnecessary.

The answer lies in the products themselves.

Bettergoods shelves feature items like cardamom rose raspberry jam, fire-roasted salsa, plant-based cheese, and oat milk ice cream. These products seem more at home at Whole Foods or Trader Joe's, exuding a premium supermarket aura—yet priced "very Walmart."

Walmart specifically noted at launch that many bettergoods items have no directly comparable national brands; consumers can only find them at Walmart.

Consumer Response to Retailer-Led Products

Consumers are responding to this deeper retailer involvement.

According to Circana data cited by the Private Label Manufacturers Association, U.S. private-label sales reached $282.8 billion in 2025, up 3.3% year-on-year, compared to 1.2% growth for national brands. From 2021 to 2025, private labels' market share rose from 19.1% to 21.3%.

When macro data translates into corporate actions, the results become more concrete. Consider three companies: Aldi (Germany), Costco (U.S.), and Mingming Henmang (China).

These three enterprises differ vastly in store format, customer base, and even store ownership structure. Yet they are all doing the same thing: taking increasing control of the products on their shelves.

Aldi: Quality and Low Price Through Curation

According to Aldi's U.S. website, over 90% of its store products are exclusive brands. Most come from supplier factories, but their quality reflects on Aldi's reputation. Food items must pass through a test kitchen before hitting shelves and undergo repeated taste tests afterward.

Aldi maintains both high quality and low prices through its selection strategy. Within a given category, Aldi typically offers only a few choices. For ketchup, a regular supermarket might stock at least ten varieties; Aldi carries just two: regular and organic.

This approach concentrates orders on fewer items. The more Aldi buys of a single product, the stronger its bargaining position with suppliers. By operating its own stores, procuring its own goods, and setting its own standards, Aldi connects these links seamlessly.

Costco: Building Trust Through Kirkland

Costco tells a different story. Its shelves feature both manufacturer brands and its own Kirkland Signature label. Consumers can buy familiar big brands or choose Costco's own products. Once they grow accustomed to the quality and price of a Kirkland food item, the same name earns a greater chance of trust when they shop other categories.

Harvard Business School retail professor Rajiv Lal and scholar Marcel Corstjens studied this dynamic: under conditions where consumers value quality and exhibit habitual purchasing behavior, high-quality private labels help retailers differentiate and build store loyalty. The value of one product thus extends to the next shopping trip.

Mingming Henmang: Scale in China's Counties and Towns

In China's counties and towns, Mingming Henmang offers a third model.

Consumers see "Snack Busy" or "Zhao Yiming Snacks" on street corners. Most stores are run by franchisees, while headquarters centrally procures goods from factories and supplies them to individual stores. A single store has no bargaining power, but once the store network reaches scale, headquarters gains leverage in upstream negotiations.

This influence extends to selling methods. According to disclosures, over 40% of inventory items are sold by weight in bulk, and collaborative customization of small packages lowers the barrier to trying new products. Faced with an unfamiliar snack, consumers might hesitate to buy a full bag, but two small packs make the purchase much easier.

As of September 30, 2025, Mingming Henmang had over 3,900 SKUs in stock, covering more than 750 brands, with approximately 34% coming from collaborative customization with manufacturers.

In other words, the manufacturer's name can remain on the packaging, but the retailer participates in product development.

The Evolution of Chinese Retailers

Chinese retailers are no strangers to these practices.

When foreign supermarkets entered China, centralized procurement and private labels came with them. Local supermarkets accumulated experience in fresh food procurement and supplier management over time. However, early private-label products were mostly concentrated in basic categories like tissue paper and trash bags, with the main selling point being value for money.

Back then, simply opening a store could attract a wave of new customers. Product development, by contrast, required long-term investment with slow returns. Retailers preferred to allocate resources to expansion. Private labels sat on shelves but mostly remained a cheaper alternative to big brands.

But as shopping channels multiplied and supply far exceeded demand, products that failed to meet specific consumer needs struggled to sell—even at lower prices.

Toshifumi Suzuki, in The Philosophy of Retail, once recorded a puzzle: Japanese consumers displayed contradictory "two-sidedness" in their thinking—reluctant to spend even in an era of material abundance, yet especially sensitive to "differences" despite being well-off.

Here, "differences" refers to people paying more attention to experiential nuances.

So when consumers flocked to Sam's Swiss rolls, Hema's strawberry cake boxes, and Xiaoxiang's milk-salt cheese sticks, competitors were inspired: consumers will make a special trip for a single product, and product development can drive new store traffic.

Walmart increased investment in its Marketside brand. Pangdonglai's DL beer and other private-label items attracted customers to its stores. Yonghui, learning from Pangdonglai, launched "Quality Yonghui," with 57 products on shelves by the end of 2025 and plans to develop 500 private-label items over the next five years.

Platform Self-Operation: A New Wave

This round of investment in local retail also includes platform self-operation.

As instant retail expands from food delivery to daily shopping, retail platforms are directly procuring goods, stocking nearby warehouses, and applying existing delivery capabilities to a broader business. Their starting points differ:

• Hema Fresh began with large, integrated store-warehouse units. The same store serves as both a retail space and a warehouse. Customers push carts while pickers navigate aisles to fulfill online orders. Try before you buy, then reorder online. The store becomes an ideal testing ground for new products, with fresh produce and daily meals driving continuous product development.

• Qixian leverages JD.com's supply chain. JD has spent two decades building procurement and logistics capabilities to deliver nationwide. Qixian uses this system to bring supermarkets closer to consumers. When its first store opened in 2018, customers could shop in-store or order online for delivery within 30 minutes. In 2024, Qixian further integrated its dark-store business, connecting store and warehouse operations.

• Xiaoxiang Supermarket started with community-based dark stores. Consumers order via mobile app, and the dark store picks and delivers. Ensuring timely delivery to nearby residents is Meituan's core competency. The real new challenge is procurement: knowing what nearby households need to restock in their refrigerators, and how much.

Different operating models naturally require different products. In 2025, Meituan launched a cooperation plan for foreign-trade enterprises, inviting source factories to participate in developing private labels like "Xiang Dache," "Xiaoxiang," and "Xiang Xiaojia." Collaboration has moved from buying finished goods to discussing with suppliers what a product should look like.

This increasingly overlaps with what local supermarkets are doing: organizing procurement based on consumer needs, then incorporating insights from sales into the next product.

When the same branded product appears on multiple apps, consumers can easily compare prices and switch orders. But stable quality and everyday prices require long-term supply arrangements. If shelves also feature exclusive, familiar food items, retailers have a chance to secure a more fixed shopping list.

The Economics of Self-Operation

In 1937, economist Ronald Coase asked in The Nature of the Firm: if the market can organize transactions, why do firms exist?

Finding trading partners, negotiating, and monitoring contract performance all incur costs. Firms can save these costs by bringing some work in-house, but organizing internally also comes with costs. The scope of a firm's expansion depends on comparing these two accounts.

Nearly 90 years later, retailers deeply involved in product operations still face this calculation.

Direct factory procurement can reduce some distribution costs, but a few inventory missteps can wipe out negotiated price advantages. Sustaining long-term low prices requires support from inventory turnover and waste management.

This is driving deeper collaboration between retailers and factories.

In September, Yang Hongbin, Vice President of Junlebao Dairy Group, explained at a Xiaoxiang Supermarket supplier conference that the two parties adjusted dairy products based on consumer demand data, launching items like Xiaoxiang a2 fresh milk. Junlebao then coordinated production capacity across its national factories, arranged dedicated production plans, and shifted distribution from regional warehousing to direct dark-store delivery.

For factories, such cooperation means greater certainty about sales channels. For retailers, reducing intermediate transfers and better matching orders with production allows cost improvements to be reflected in everyday prices.

This type of collaboration is entering the plans of more local retail enterprises.

In 2025, Pangdonglai's private-label sales reached RMB 6.4 billion, accounting for about 30% of total sales. Metro's private-label sales maintained double-digit growth for four consecutive years, reaching 30% of its consumer-facing business.

Once private labels reach this scale, ongoing investment is required. Products that have achieved sales volume must maintain quality, while new product development needs dedicated teams. Dingdong Maicai established a "Private Label Strategy Committee" led by core executives. Yonghui proposed creating 100 billion-yuan-level single products within three years, embedding product development into its growth plans.

For local supermarkets undergoing transformation, this is harder than introducing a few popular products. It tests a company's product development and sustainable operations capabilities: finding the right factory is just the beginning. Deciding whether to reorder after trial sales requires procurement teams to make judgment calls and bear the inventory risk of mistakes.

Competitors are already using these capabilities to win customers: Mingming Henmang has turned supermarket snack sales into a specialized chain. Miniso develops products around daily necessities. Xiaoxiang Supermarket has moved household grocery shopping onto mobile phones. The same household's shopping list can now be split among several retailers.

For traditional supermarkets, convenient locations and wide product selection are clearly no longer enough to meet all consumer needs.

This competition will also influence which factories receive production capacity: retailers with sustained sales volumes are better positioned to offer long-term orders, making suppliers willing to adjust production for them. Traditional supermarkets and expanding self-operated retail platforms are both competing for these upstream cooperation opportunities.

From Yonghui writing big single products into its growth plan to retail platforms co-developing products with factories, local retail enterprises are extending their reach further upstream. To become consumers' first choice, retailers must rely on specific products to bring them back again and again.

Undoubtedly, private labels will increasingly shape the retail business. Retailers are beginning to participate in deciding how products are made—and must also bear the risk of products not selling. The next round of industry rankings will be determined in these daily operations. Where customers spend their money will ultimately decide whose shelves continue to expand.