China's top 100 chain stores will see private-label products account for as much as 20% of their high-turnover consumer goods inventory within the next eight years, S&P Global Ratings said Thursday.
The shift has accelerated due to value-conscious shoppers, with private-label goods averaging 16% cheaper than branded names last year, S&P said, citing consumer research firm NielsenIQ.
Still, store brands yielded gross margins between 8% and 15% higher than national brands, according to the data.
Retailers boost margins by lessening middlemen and removing brand premiums, while also focusing on product quality despite the lower price tags, the rating agency said.
Private labels, which used to be cheap substitutes, are now tools for retailers to build profitability and drive market share growth, according to S&P.
However, the trend will benefit retail giants with established supply chains more, while smaller operators face a competitive disadvantage, S&P said.