Summary of Key Points
After Yonghui Supermarket attempted to mimic the service model of Pangdonglai, it not only failed to reverse its declining fortunes but also incurred a loss of 2.5 billion yuan and closed 381 stores in one year. The fundamental difference between Pangdonglai and Yonghui lies in their business models: Pangdonglai relies on exceptional customer service and employee incentives based on the principle of "sincerity for sincerity," while Yonghui only copied the superficial aspects, which was hindered by its own corporate burdens. Among other brands that tried to emulate Pangdonglai, some succeeded by grasping the core concepts, while others failed due to a lack of depth in their implementation.
I. Copying the Surface without Capturing the Essence
The essence of Pangdonglai's success does not lie in superficial practices such as unconditional return policies or free parking, but in the underlying philosophy of treating employees like family and customers like friends:
- Employees: Pangdonglai offers employees salaries twice the local average (for example, employees at Xuchang Supermarket earn over 5,000 yuan per month) and provides free food and accommodation. It also encourages a rebellious attitude among employees, allowing them to directly address customer complaints (with management's support), which motivates them to provide genuine service.
- Customers: Pangdonglai selects high-quality products at competitive prices. For instance, it buys the best batches of apples at lower costs because it does not charge suppliers for entry or display fees, focusing only on the reasonable profit from the goods themselves.
Yonghui, on the other hand, has only copied measures like return policies and additional service counters. However, employee salaries have not increased (with frontline staff possibly earning around 3,000 yuan per month), and the service is often perfunctory. The product selection remains the same, with suppliers still charging high fees, resulting in a lack of customer satisfaction.
II. Yonghui's Corporate Burdens Hindering Transformation
Pangdonglai is a regional chain with a small footprint (only a few stores in Xuchang and Xinxiang), making it easier to adjust its strategy. In contrast, Yonghui is a national chain with nearly 1,000 stores, making significant changes very costly:
- Employee Salaries: Increasing employee salaries across thousands of locations would cost millions each year.
- Eliminating Fees: Pangdonglai's fee structure accounted for one-third of its revenue; eliminating these fees would reduce earnings by half.
- Supply Chain Optimization: Yonghui's existing supply chain is large and comprehensive, requiring significant changes to switch to Pangdonglai's more efficient model, involving renegotiations with suppliers and new warehousing arrangements, which are costly.
Without shareholder approval for such investments, Yonghui's half-hearted efforts led to additional losses rather than improvement.
III. The Unimitable Culture of Pangdonglai
Pangdonglai's founder, Yu Donglai, is unique: he does not seek to go public or make quick profits and openly states that Pangdonglai's profit margin should not exceed 5%. He distributes any extra earnings to employees and customers (for example, distributing free vegetables during the pandemic or providing free accommodation during storms). As a publicly traded company, Yonghui is accountable to shareholders and must focus on short-term profit growth, which prevents it from making cost-inclusive decisions like Pangdonglai.
IV. Variations in Success Among Copying Brands
Not all brands that tried to emulate Pangdonglai failed; the key lies in whether they grasped the core concepts:
- Success Case: Lianxinglei (Hebei) is a regional supermarket that adopted similar practices, offering higher employee salaries and excellent customer service. Its employees earn 30% more than local competitors, and customers can return products for any reason. It has opened over 30 stores in Hebei and enjoys a great reputation.
- Current Efforts: Hema's CEO, Hou Yi, announced plans to adopt Pangdonglai's policies last year, including unconditional returns and higher employee salaries (up to 6,000 yuan per month in Shanghai). Hema has seen improved customer satisfaction and increased repeat business.
- Failure Cases: Some small supermarkets that only copied superficial aspects, such as setting up service counters and displaying return policies, continued with poor service, leading to their closure.
Why the Large Revenue Gap Between Pangdonglai and Yonghui?
Although Pangdonglai has a smaller scale (annual revenue of around 2 billion yuan), its higher per-store profit margins are due to high customer loyalty and efficient employee engagement. Yonghui, with a larger scale (annual revenue of nearly 90 billion yuan), suffers from low per-store profits due to customer churn, low employee motivation, and high costs. In short, Pangdonglai relies on reputation for success, while Yonghui depends on scale; without a strong reputation, its large size becomes a disadvantage.
In conclusion, emulating Pangdonglai is not about simply copying practices but about changing one's approach. Only by treating employees like family and customers like friends can a company truly attract and retain customers. Yonghui failed to understand this philosophy, leading to its declining performance.