China’s supermarket giants using store brands to lure frugal shoppers, risking price war
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Once dominated by sprawling hypermarkets packed with name-brand goods, chains from Walmart and Wumart are streamlining and pushing their own brands.
PHOTO: REUTERS
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BEIJING – The cheap croissants and no-name detergents that power discount grocers in the United States and Europe are now filling shelves in China, where struggling chains are betting on store brands to lure back shoppers.
Once dominated by sprawling hypermarkets packed with name-brand goods, purveyors – from Walmart and Wumart to Alibaba Group Holding’s Freshippo – are streamlining: cutting clutter and pushing their own lines, a category known as “private label”, that can match or beat the quality of established brands.
They are betting that a playbook honed by the likes of German discounters Aldi and Lidl, and even Amazon.com’s Whole Foods – which has rolled out its budget 365 by Whole Foods Market brand as far as Singapore – can revive an ongoing slump as economic uncertainty sees consumers pull back. Sales at China’s top 100 operators were flat in 2024, while store counts fell nearly 10 per cent, according to the China Chain Store & Franchise Association.
Store brands often sell for less than name products by skipping middlemen, including distributors, and keeping packaging simple to reduce marketing costs.
“Chinese consumers are becoming more sensitive to prices as they expect to earn less in the slowing economy,” said Mr Jason Yu, Shanghai-based managing director of CTR Market Research. “The growing urge for value-for-money offers huge demand for discounters.”
Walmart opened its fourth “community store” in Shenzhen in September, targeting middle-class shoppers with “trusted quality” and “heart-racing prices”. The company is accelerating store upgrades, saying the outlets are reshaping shopping experiences. Smaller than hypermarkets, the outlets feature simpler layouts and shelves stocked heavily with its Marketside brand, from cream puffs to grape juice for 9.99 yuan (S$1.80).
Wumart operator Wumei Holdings has launched budget markets in Beijing. Freshippo has 300 stores under discount chain Chaohesuan NB, where store brands make up 60 per cent of sales, and plans to step up its expansion.
Yonghui Superstores, the No. 4 supermarket chain, is remodelling stores after boutique grocer Pangdonglai, which built a cult following with store brands and streamlined operations. Aldi itself doubled China sales in 2024 – the fastest growth among the top 100 operators – and is expanding into two more cities beyond Shanghai.
Members-only chain Sam’s Club is another bright spot in the struggling sector, fuelling operator Walmart China’s total sales growth, in part through store-brand development.
‘Squeezed out’
China’s revamped aisles are the latest effort to reignite sluggish retail sales. While they could lure consumers back to bricks and mortar, e-commerce giants set a high bar: Orders delivered in 30 to 60 minutes, less time than it can take to get to a store and back.
“In the era without e-commerce, a traditional supermarket could lure consumers living within 5km to 10km. Now, unless people live very close to a supermarket, they won’t consider going,” said Mr Edison Li, a former Sam’s Club China director who runs a cross-border trading company in Shanghai. “Budget stores have good growth potential, but have to offer the full package to win a highly competitive game.”
At Freshippo’s discount chain, a 5kg jug of private-label detergent costs just 17.80 yuan, versus about 40 yuan for a smaller bottle from popular brand Blue Moon. Store-brand milk sells for about half of Meiji’s price.
Such discounts lure bargain hunters but risk fuelling another price war, a phenomenon that is already eroding margins in consumer sectors from cars to coffee. Store brands can also face stigma, as some shoppers equate “budget” with unsafe or low quality, after past food safety scandals.
“The prices are indeed so low! Twelve bottles of 550ml mineral water are selling for 5.50 yuan,” one netizen said recently on Xiaohongshu, China’s Instagram equivalent, as she visited a Wumart budget store. “I can’t believe it’s real water.”
The private-label boom could eventually push established brands “to strengthen their brand influence and innovation capabilities”, said CTR’s Mr Yu. “However, small and medium-sized brands that fail to achieve differentiation may be squeezed out.” BLOOMBERG
