You make a good product. You sell it through distributors. Then one day, the distributor launches their own private label version of your product, at a lower price, with better placement on the shelf.
Welcome to China’s manufacturing crisis. And there are five ways out of it.
Why manufacturers are under pressure
China’s biggest retail channels, Sam’s Club, Hema, Walmart, Pinduoduo, are all building private label brands. They know the supply chain. They have the distribution. They have the consumer data. And they have the margins that traditional manufacturer brands cannot match.
This is not unique to China. It happened in European grocery, in US department stores, in every mature retail market. But in China, it is happening faster and at a larger scale because the platform economics are so efficient. A Hema private label product can go from concept to shelf in months. A foreign brand’s supply chain cannot move that fast.
The manufacturers that survive this shift are the ones that make a clear strategic choice about their relationship to the channel. Here are the five paths.
Path 1: become a channel brand yourself (DTC)
Stop relying on third-party channels and build your own direct-to-consumer presence. Biaonei (蕉内) is the reference case here. It started as an underwear manufacturer and became a brand by controlling its own content, stores, and consumer relationship across every channel simultaneously.
The Digitaling analysis puts it clearly: “Whoever controls direct channels and consumer content experience wins in the C-end market.” The key word is “and.” Channel access without content experience is not enough. Content without channel control is not enough. You need both.
For Western manufacturers, this path means committing to China as a consumer market, not just as a distribution channel. It requires investment in brand content on Douyin and Xiaohongshu, in a Chinese CRM system, in after-sales infrastructure. The payoff is that no Chinese retailer can easily displace you if your consumer relationship exists independent of their shelf space.
Path 2: become irreplaceable B2B (technical monopoly)
The second path is going the other direction entirely. Stop trying to be a consumer brand. Be the supplier that no consumer brand can function without.
Baocheng Industrial and Huali Group produce over 20% of all global sports shoes. Their clients include Nike, Puma, Vans, and HOKA. No one reading this has ever bought a Baocheng or Huali shoe. No one needs to. Their strategic position is so strong that their clients depend on them, not the other way around.
Sanyuan Biology supplies sweeteners to China’s leading tea chains. When your ingredient is in every cup of tea that a 500-location chain sells, you do not need shelf space or social media. Your brand is the “Intel Inside” of a product category.
For manufacturers with proprietary technology, formulations, or production scale, this path offers stable revenue and high switching costs. The risk: if you lose a major client, you lose a large portion of revenue with no consumer relationship to fall back on.
Path 3: partner strategically with channels
Rather than competing with private label or surrendering to it, some manufacturers are partnering with channel buyers to co-develop products. This is the middle path, and it has several tactics inside it.
Price-separated sub-brands: maintain your main brand at its price point and create a separately named line exclusively for the channel at a lower price point. The channel gets the product they need. Your main brand is protected.
Co-developed joint brands: Oreo collaborated with Hema on a product that neither brand could have created alone. The Hema-exclusive format gave Oreo access to Hema’s distribution and consumer data. Hema got brand credibility it could not build with its own private label. This model works when both partners bring something genuinely distinct.
Channel cold-start: use a premium retailer partnership to establish product credibility, then expand independently. Newland Beef used Hema as its initial distribution partner to build trust signals, then moved to Tmall, Douyin, and larger supermarkets from a position of demonstrated quality. Hema access opened the door; their own brand built the house.
Path 4: vertical niche channels
The fourth path is to stop competing for supermarket shelf space entirely and target vertical channels that are too small for large retailers to care about.
Meduojia makes mosquito nets. Not a product with obvious brand potential. But they found three distinct use scenarios: baby safety, dormitory privacy, and outdoor camping. Three completely different channels, three different content strategies on Douyin, three different consumer communities. Each channel is too niche for a Sam’s or Hema private label investment. Together, they add up to a real business.
For Western manufacturers, this path often means going deeper into a specialist category rather than trying to compete in the mainstream. A food brand that wins in the high-end restaurant supply channel, a skincare brand that dominates the dermatology clinic recommendation channel, a technology manufacturer that owns the professional installer market. These positions are defensible in ways that mass retail shelf space is not.
Path 5: special channels with no private label competition
Corporate bulk purchasing, high-end gifting, tourism and cultural venues, government procurement. These channels exist outside the supermarket and e-commerce competitive dynamics entirely.
Xuegu Chuanjia (雪谷传家) sells premium Chinese teapots. Their channels are luxury hotels, corporate gift programs, and cultural tourism sites. Sam’s Club is never going to launch a private label teapot set for this market. The channel is structurally protected.
For Western brands, this means thinking about where the private label threat does not follow you. Corporate gifts for Chinese enterprises with international operations. Premium hospitality partnerships. Cultural institution collaborations. These channels have different sales dynamics and longer cycles, but they are not subject to the same margin compression as mainstream retail.
The question every manufacturer needs to answer
Which of these five paths fits your product, your team, and your available capital in China? The wrong answer is “all of them.” Manufacturers that try to be DTC brands, B2B suppliers, channel partners, niche operators, and special channel players simultaneously end up doing all of them poorly.
Pick one path. Build it completely. The formula that keeps coming up in the analysis: “Brand original information times marketing actions equals brand assets.” The marketing amplifies what exists. If the original position is unclear, the marketing cannot save it.
For context on how to build your brand in China’s e-commerce ecosystem, read our guide on China’s major shopping apps. And for how co-branding partnerships work in practice, see our piece on co-branding in China.
For the full strategic analysis, see the Digitaling analysis of manufacturer brand paths in China (Chinese) and iResearch’s China retail and brand reports.
If you are a manufacturer trying to figure out your China brand strategy, GMA’s e-commerce team has helped brands across all five of these paths find the right entry point. The answer depends on your product, your category, and your competitive position. Talk to us about yours.
