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].
AI generated, for reference only
