Weekly Preview:Can Pang Dong Lai's Re-Invention of the Supermarket Model Save Offline Retail? (AI Translation)
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文｜财新周刊 冯奕铭 孙嫣然
By Caixin Weekly's Feng Yiming and Sun Yanran
“我是来‘游学’的！”河南郑州永辉超市瀚海海尚店门口，一名从福建来的超市老板边走边拍视频。8月7日，永辉瀚海海尚店重新开业，早上9点半超市刚营业，门口便排起了队。店内摩肩接踵，除了普通顾客，各地超市老板、厂商、设备供应商、媒体等纷纷前来“打卡”。“最直观的感受是整洁。传统超市的商品太多、陈列杂乱，这里商品摆放整齐，且每个货架前几乎都有人站岗。”一名来自山东的商超从业者说。
"I am here for a 'study tour'!" exclaimed a supermarket owner from Fujian, recording a video as he walked towards the entrance of Yonghui Supermarket's Hanhai Haishang store in Zhengzhou, Henan. On August 7, the Yonghui Hanhai Haishang store reopened, and by 9:30 AM, a queue had already formed at the entrance as the supermarket started operations. Inside, it was packed with shoulder-to-shoulder crowds. Aside from regular customers, supermarket owners, manufacturers, equipment suppliers, and media personnel from various regions came to "check-in." "The most immediate impression is the cleanliness. Traditional supermarkets have too many products displayed chaotically, but here, the items are arranged neatly, and there is almost someone stationed at every shelf," remarked a retail professional from Shandong.
永辉瀚海海尚店是胖东来在郑州改造的第二家永辉超市，调整改造历经21天。永辉超市（601933.SH）称，改造涉及商品结构、价格、卖场布局、服务及员工待遇等多个方面。例如，相比调改前增加了10%的商品SKU（最小存货单位），引入胖东来自有商品，门店编制由64人增加至200人，基层员工最低工资从2800元增至4500元起等。
The Yonghui Hanhai Haishang store is the second Yonghui Supermarket in Zhengzhou to be remodeled by Pangdonglai, with the renovation taking 21 days. Yonghui Superstores (601933.SH) stated that the overhaul involved multiple aspects, including merchandise structure, pricing, store layout, service, and employee benefits. For instance, the number of Stock Keeping Units (SKUs) increased by 10% compared to before the renovation, Pangdonglai's own products were introduced, staffing increased from 64 to 200, and the minimum wage for entry-level employees was raised from 2,800 yuan to 4,500 yuan.
胖东来是成立于河南许昌的零售企业，仅在许昌、新乡两地拥有12家门店，涉及超市、百货等多种业态。胖东来创始人于东来十几岁便踏入社会，做过小生意、开过超市、倒卖过香烟，1995年在许昌拿下一间店面取名“望月楼胖子店”，该店被认为是胖东来的前身。从2000年起，于东来就将公司股份分给了员工，自己只保留10%；且每年都从公司净利润中拿出50%分配给员工；此外，他还规定员工每周只能工作40小时，晚上6点下班必须离开公司。
Pang Donglai, a retail enterprise established in Xuchang, Henan, operates 12 stores exclusively in Xuchang and Xinxiang, encompassing various business formats like supermarkets and department stores. The founder, Yu Donglai, entered the workforce in his early teens, dabbling in small businesses, operating a supermarket, and trading cigarettes. In 1995, he opened a store in Xuchang named "Wangyue Tower Fatty Shop," which is considered the predecessor of Pang Donglai. Since 2000, Yu has distributed the company's shares among employees, retaining only 10% for himself. In addition, he allocates 50% of the company's annual net profit to employees. Furthermore, he mandates that employees can work only 40 hours per week and must leave the office by 6 PM.
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- Yonghui Supermarket Hanhai Haishang in Zhengzhou reopened on August 7 with extensive renovations and improvements in cleanliness, product arrangement, and employee benefits, leading to a significant increase in customer traffic and sales.
- The renovations, guided by Pangdonglai, resulted in increased employee wages, staffing, and the addition of high-demand products, creating a boutique supermarket experience.
- Despite initial stock price surges and improved store performance post-renovation, analysts question the long-term sustainability and scalability of the Pangdonglai model in transforming traditional supermarkets.
On August 7, Yonghui Supermarket's Hanhai Haishang store in Zhengzhou reopened after a renovation led by Pangdonglai. By 9:30 AM, the store was bustling with customers, including supermarket owners, manufacturers, equipment suppliers, and media from various regions [para. 1]. The renovated store, noted for its cleanliness and organized layout, drew praise from retail professionals [para. 2][para. 3]. The renovation took 21 days, increasing Stock Keeping Units (SKUs) by 10%, bumping staffing from 64 to 200, and raising the minimum wage for entry-level employees from 2,800 yuan to 4,500 yuan [para. 3].
Pang Donglai is a retail enterprise established in Xuchang, Henan, operating 12 stores in Xuchang and Xinxiang. The founder, Yu Donglai, began sharing company profits and implementing employee-friendly practices since 2000 [para. 4]. Amid industry trends of cost-cutting and price wars, Pang Donglai emerged as a countertrend, becoming a "boutique supermarket" that offers first-tier city experiences in lower-tier cities [para. 5][para. 6].
Yu Donglai's unconventional practices include profit-sharing with employees and limiting work hours to foster a loyal workforce. This approach is seen as a countermeasure to the phenomenon of "bad money driving out good" in many oversaturated industries [para. 4][para. 5]. Analysts from Caixin note that Pang Donglai meticulously curates quality goods, gaining a regional competitive advantage [para. 6]. However, it operates conservatively to maintain profitability, keeping the gross margin below 30% and the overall net profit margin around 3% [para. 6][para. 7].
Pang Donglai experienced significant growth and influence in 2023, ranking 31st on the "2023 China Supermarket Top 100" list with sales of 4.6 billion yuan [para. 8]. This success starkly contrasts with the declining revenues and closures faced by other retail giants like RT-Mart, Carrefour, and others shifting to smaller, specialized store formats [para. 8][para. 9]. According to data, convenience stores, specialty stores, and supermarkets saw year-on-year retail sales increases, while department stores and brand specialty stores declined in sales [para. 9].
Fat Donglai's strategies also include supporting competitor stores by renovating them for free or subsidizing adjustments. These efforts have led to remarkable increases in sales and customer traffic at renovated stores across various regions [para. 10][para. 11]. For instance, BBK's Changsha Meixi Lake store and Zhongbai Warehouse Guanshan Optics Valley store saw massive sales increases after Pang Donglai's renovations [para. 10][para. 11].
Despite the initial surge in Yonghui Superstores' stock price following renovation news, the gains were short-lived. Analysts believe traditional supermarket companies like Bubugao, Yonghui, and Zhongbai are unlikely to see long-term investment opportunities amid competition from new business formats [para. 11].
Fat Donglai's model incorporates a high-quality product mix and strict procurement processes. It boasts a standardized operation manual with 85,000 pages detailing service and performance metrics [para. 15][para. 18]. Employees receive competitive wages and significant benefits, highlighting Yu Donglai's vision of "great love culture" [para. 18][para. 19].
Several industry insiders believe the "Fat Donglai model" requires time to prove its sustainability. They caution against blindly emulating it, as its success is built on long-term accumulation, practical refined management, and high operational costs that limit rapid scale expansion [para. 21][para. 23][para. 24].
Yu Donglai has started reducing Fat Donglai’s brand reliance, encouraging other enterprises to improve product optimization independently [para. 26]. Meanwhile, retailers like Yonghui are re-evaluating strategies, focusing on quality enhancements and potential market exits from less profitable regions [para. 26][para. 27].
Experts suggest that innovation, unique fresh food offerings, and membership-based discount strategies could also improve retail reform outcomes. Hema's attempt at discount reform illustrates the difficulties in balancing low prices with high consumer demand [para. 26][para. 27].
In conclusion, Fat Donglai's success is attributed to its customer-focused service, high-quality product mix, and employee-centric practices. However, its high operational costs and refined management limit replicability and rapid expansion, serving as more of an inspirational benchmark than a universal solution for the retail industry [para. 28].
- Yonghui Superstores
永辉超市 - Yonghui Superstores, listed as 601933.SH, recently collaborated with retail pioneer Pangdonglai to revamp its stores, notably in Zhengzhou. The renovations enhanced product variety, layout, and employee welfare, significantly boosting sales and customer traffic. Despite initial enthusiasm and stock price jumps, sustainability concerns persist in the market.
- Pang Donglai
胖东来 - Pang Donglai is a retail enterprise founded by Yu Donglai in Xuchang, Henan. It focuses on high-quality products and detailed services, setting a benchmark in the retail industry. Yu Donglai shares 50% of company profits with employees and maintains transparent operations. The model, while highly regarded, is difficult to replicate due to high operational costs and personalized management.
- BuBuGao
步步高 - BuBuGao, also referred to as BBG, is a retail chain in China. The article mentions BBG collaborating with Fang Donglai for store renovations. Specifically, BBG's Changsha Meixi Lake store saw an eightfold increase in average daily sales and a sixfold increase in daily customer traffic after the renovation. BBG plans to revamp its corporate culture, management, operations, and supply chain with Fang Donglai's assistance.
- Zhongbai Group
中百集团 - Zhongbai Group is a retail company in Hubei, Wuhan. It received assistance from PANDORIS for store renovations, notably at Zhongbai Warehouse Guanshan Optics Valley Store. According to "Changjiang Daily," the store's first-day sales on July 20, 2024, reached 1.23 million yuan, an 848% increase compared to before the renovation.
- ALDI
奥乐齐 - ALDI is a German discount supermarket chain known for its "hard discount" model. It achieves cost reduction by offering a limited range of SKUs (Stock Keeping Units) and high turnover, enhancing bargaining power with suppliers. This model allows ALDI to offer significant discounts. The article mentions ALDI as one of the models to study for efficient retail operations due to its cost-effectiveness and streamlined business practices.
- Costco
开市客 - Costco, a leading warehouse membership club, uses membership fees to subsidize discounts on products. It provides large-volume packaging, making the unit price appear more economical. This model promotes high customer loyalty and cost efficiency, which has led to the club's continued growth, particularly in economic downturns. It’s an example of effective cost reduction and competitive pricing in the retail sector.
- 2023：
- Fat Donglai Supermarket's sales amounted to approximately 4.6 billion yuan, ranking 31st on the '2023 China Supermarket Top 100' list.
- Throughout 2023：
- Retail industry consensus shifted towards smaller 'nearby small stores,' and the snack wholesale store model garnered significant capital attention.
- July 20, 2024：
- The Zhongbai Warehouse Guanshan Optics Valley store reported sales of 1.23 million yuan on its first day after being renovated with the help of Pang Donglai.
- August 3, 2024：
- Yunxi Wanjia Anningshop, the first store under the 'Mutual Assistance and Support Adjustment' model, completed its renovation.
- August 6, 2024：
- The Yonghui Supermarket at Xinwan Plaza had an average daily revenue of 1.8 million yuan and an average daily footfall of 10,000 people since reopening.
- August 7, 2024：
- The Yonghui Hanhai Haishang store reopened.
- By 9:30 AM, August 7, 2024：
- A queue had already formed at the entrance of the Yonghui Hanhai Haishang store as it started operations.
- August 12, 2024：
- Yonghui Supermarket's stock price began to decline, hitting the limit down.
- August 12, 2024：
- Yonghui Supermarket's Zhongmao Plaza store in Xi'an announced a temporary closure for renovations.
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