Summary of Key Points
Yu Donglai, the founder of Pangdonglai, recently announced that he will no longer assist other companies or attend industry conferences in the next three years. After 2030, he plans to cease business expansion and focus on cultural and management research. This marks a temporary end to the phenomenon known as “Pang Reform” (where other supermarkets attempt to adopt Pangdonglai’s model), which once caused a frenzy in the supermarket industry. Supermarkets like Yonghui and Buchaogao have either had to stop their extensive reforms or continue to struggle with losses. The reason is that the fundamental underlying principles of traditional supermarkets are vastly different from those of Pangdonglai. Three major issues—financial model, supply chain, and governance mechanisms—make it impossible for others to truly replicate Pangdonglai’s success.
I. Why Did the “Pang Reform” Become Popular Then Falter?
In recent years, traditional supermarkets such as Yonghui and Buchaogao have faced tough times: e-commerce has stolen business, and the rise of instant retail has led to a decline in customer traffic and profits. Yonghui lost nearly 10 billion yuan between 2021 and 2024, while Buchaogao is in a debt crisis. Meanwhile, Pangdonglai has been thriving in Xuchang, with customers often queuing outside its stores. As a result, many companies tried to copy Pangdonglai’s strategies, even spending hundreds of thousands of yuan on training programs or inviting Pangdonglai’s team to help with reforms.
The initial results were impressive: Yonghui’s Zhengzhou store saw sales 13.9 times higher on the first day after the reform, and Buchaogao’s new stores saw daily sales increase from 50,000 yuan to 800,000 yuan. However, this success was short-lived. Most supermarkets ended up losing more money despite the reforms. Yonghui spent 1.1 billion yuan on reforms and had to close half of its stores to barely break even; Buchaogao’s Meitehao store closed down after the reform, leaving it in debt. Moreover, some companies that tried to imitate Pangdonglai made mistakes, such as competing with Pangdonglai in other regions, which damaged Pangdonglai’s reputation. Therefore, Yu Donglai decided to stop helping others and focus on improving his own business first.
II. The Financial “Sacrifice” That Traditional Supermarkets Cannot Make
How do traditional supermarkets make money? Not by selling products, but by charging fees from suppliers. Suppliers have to pay entry fees and display fees, and payment is often delayed for 3-12 months (taking up their capital). This puts all the risk on the suppliers.
Pangdonglai does the opposite: it eliminates all entry fees and settles payments immediately or with very short terms, taking responsibility for any unsold goods. This allows them to obtain the lowest prices from suppliers, making their products more cost-effective. However, this requires a high level of financial discipline from the supermarket itself. For traditional supermarkets, adopting this approach means sacrificing their profit sources and bearing inventory risks. For example, when Yonghui eliminated entry fees last year, its losses in the fourth quarter increased significantly, and supplier payments were not met on time, leading to failed collaborations. Without stable cash flow, how can they survive?
III. The Deadlock of High Costs: How to Reduce Them?
Pangdonglai’s employees earn an average salary of nearly 10,000 yuan, with a low turnover rate of only 0.5%. This is due to high sales per square meter and fast inventory turnover. Pangdonglai almost monopolizes customer traffic in Xuchang, allowing it to spread its high wages over its operations. Other supermarkets cannot achieve this: they operate in competitive cities with many competing stores, including warehouse outlets and discount stores, which dilute customer traffic and reduce sales per square meter. As a result, their employees earn much less (Buchaogao’s employees only earn around 6,000 yuan after the reform), and service quality suffers. There are also supply chain issues: Pangdonglai’s best-selling products (such as 29.8 yuan mooncakes) are popular in Xuchang but not elsewhere; its soy sauce is not well-known outside the region. With hundreds of stores nationwide, Pangdonglai’s supply chain cannot meet the demand, and other supermarkets cannot develop their own unique products, often ending up with the reputation of raising prices.
IV. The Gap in Governance: Pangdonglai’s “Arbitrary” Culture Is Unimitable
Pangdonglai is a private company not listed on the stock market, so Yu Donglai can make decisions as he sees fit. For example, he closes stores that generate 100 million yuan in annual revenue if the lease terms are unfair, and he voluntarily closes 13 stores during a period of rapid growth to avoid management issues. It does not need to report to shareholders and can distribute most of its profits to employees, using cultural cohesion to retain talent.
In contrast, companies like Yonghui and Buchaogao, which are listed, must perform well in their quarterly and annual reports and cannot close profitable stores at will. They also cannot distribute all their profits to employees (or else their stock prices would drop). The hierarchical management of large supermarkets distorts Pangdonglai’s culture: employees only follow superficial service standards without receiving corresponding benefits, turning the efforts into mere showmanship.
Conclusion
The “Pang Reform” was an industry experiment that demonstrated the need for change in traditional supermarkets. However, Pangdonglai’s model is unique—its market dominance in Xuchang, the personal charisma of its founder, and its commitment to quality over scale are难以 replicate. Other supermarkets must adapt to their own circumstances and develop models that suit them best. After all, the only true success comes from what works for them.