China’s leading retailers are increasingly turning to private-label products as a strategic avenue to boost profitability and foster customer loyalty, according to a recent report by S&P Global Ratings. The agency projects that private-label offerings could double their share of the country’s fast-moving consumer goods (FMCG) market within the next eight years, reaching approximately 20 percent of sales among the top 100 chain retailers by 2033, up from less than 10 percent in 2025.

This shift is driven by multiple factors, including declining income from supplier-funded listing and promotional fees, heightened competition, and changing consumer preferences. Tighter regulations, along with the rise of e-commerce and live streaming platforms, have reduced traditional revenue streams for retailers, prompting them to seek greater control over pricing, sourcing, and product development through their own brands.

Unlike earlier notions of store brands as low-cost alternatives, these private labels are evolving into retailer-owned brands designed to enhance profitability and encourage repeat purchases. On average, private-label goods were 16 percent cheaper than comparable branded products in 2025, while delivering gross margins that were between 8 and 15 percentage points higher.

S&P forecasts annual sales growth for private-label products at around 15 percent, significantly outpacing the broader retail sector’s expected growth of 2 to 3 percent. Major players in the market have already embraced this approach. Retailers such as Hema, Sam’s Club, JD 7 Fresh, Pang Donglai, and Dingdong Fresh currently achieve or are targeting private-label penetration rates of 30 to 50 percent. Meanwhile, Yonghui Superstores plans to substantially increase its private-label contribution from comparatively low levels.

Larger retailers are positioned to benefit most from this trend due to their more robust sourcing networks, advanced logistics infrastructure, and access to comprehensive consumer data. For example, Hema has extended its private-label offerings beyond groceries to include premium wellness products under its Hebubu brand, which appeal to younger consumers by offering goods priced 30 to 80 percent below comparable branded items.

However, S&P cautions that an exclusive focus on low pricing, without sufficient attention to product quality, may erode consumer trust and trigger a damaging “race to the bottom.” Such a dynamic could undermine overall sector profitability, highlighting the need for balance between affordability and quality in private-label strategies.