The Chinese retail sector is experiencing an unprecedented crisis. Global giants, specified as Carrefour, have rolled up their operations, and national tycoons evidence losses over the years. Universal competition from e-commerce platforms and associate magazines, specified as Sam’s Club, takes conventional hypermarkets' marketplace share, while economical slowdown and changing consumer habits further worsen the situation.
In this hard landscape, a regional network from Henan Province, with only 13 stores, has become an unexpected function model and a symbol of hope for the full industry. Pangdonglai, a company founded in 1995 in the town of Xuchang (a town called the “fourth circle”) attracts managers from all over China who come to survey its phenomenon.
Phenomena Pangdonglai: The numbers that talk for themselves
The financial results of Pangdonglai (PDL) in comparison with marketplace trends are astonishing. In 2024, while the full manufacture fought to survive, 13 stores generated 17 billion yuan (about $2.34 billion) gross and over 800 million yuan (110 million) profit. A year later, in 2025, gross increased by almost 39% to 23.5 billion yuan.
At the same time Yonghui Superstores, China's second largest hypermarket network, with hundreds of outlets nationwide, recorded an income of 66.6 billion yuan, but at the same time suffered a net failure of 1.47 billion yuan (over $200 million).
The key to knowing this imbalance is the economics of a single store. Each Pangdonglai facility generates an average of 1.3 billion yuan (179 million dollars) of yearly revenue, reaching a gross margin of 30%, while in competitors specified as Yonghui, this rate is only 21%. These figures show that the PDL business model, based on maximizing the efficiency and profitability of a single location, declassifies the strategy of geographical expansion at all costs, utilized by marketplace giants.
| Index | Pangdonglai (2024) | Yonghui Superstores (2024) |
| Number of shops | 13 | ~1000+ |
| Revenue | 17 billion RMB (US$2.34 billion) | 66.6 billion RMB (9.31 billion USD) |
| Profit / Loss | +800 million RMB (US$110 million) | -1.47 billion RMB (US$20.7 million) |
| Average gross per store | RMB 1.3 billion (US$179 million) | ~67.6 million RMB (9.3 million USD) |
| Gross margin | 30% | 21% |
Secret of Success: doctrine of “Freedom and Love” in Practice
The success of Pangdonglai is based on the unique business doctrine of its founder, Yu Donglaia, focused on the thought of “freedom and love”. It translates into 2 pillars of the company's strategy:
- an unprecedented approach to workers and
- Obsessive attention to client satisfaction.
Yu believes that only a happy and appreciated worker is able to supply service at the highest level, which in turn builds client loyalty and drives business.
PDL employees enjoy employment conditions different in Chinese trade. The average wage exceeds 9000 yuan per period (1 yuan = 0,51 gold), while in another networks it ranges from 3700 to 6000 yuan. The working time is strictly limited to 8 hours a day, without overtime, and workers have weekends available, from 30 to 40 days leave per year and additional days off for the Chinese fresh Year.
The best-known benefit is, however, “surlop due to misfortune” which allows employees to take up to 10 days off a year erstwhile they feel emotionally or physically indisposed (It was a subject in 1 of our reviews). Moreover, 50% of the company's profits are redistributed among the crew. specified a policy minimizes rotation and creates an highly motivated and loyal team.
This investment in employees straight translates into client experience. Pangdonglai offers about 100 free services, ranging from blood force measurement to air-conditioning cleaning to insignificant repair of bags. On rainy days, the staff hands out umbrellas and escorts customers to their cars. Stores are equipped with peculiar wheelchairs for older people and families with children, and even with pet cabinets with forks. The return policy “without asking questions” and the client award program for submitting a complaint (a prize of 500 yuan) builds absolute assurance in the brand.
Quality Above All: How Pangdonglai Builds Trust
The second key component of the PDL model is an uncompromising approach to quality and price integrity. The company applies the “Every Day Low Price” (EDLP) strategy, offering stable, fair prices alternatively of continuous promotions. What is revolutionary in the Chinese market, Pangdonglai has completely waived the alleged slotting fees that suppliers must pay large networks to place their products in stores. This allows you to build partnerships with suppliers and reduce costs, which translates into client benefits.
Quality control is obsessive. Vegetables are tested regular for pesticide presence and the results are publically displayed. Fresh meat must be sold on the same day. The company conducts rigorous selection of suppliers, conducts inspections in their factories and guarantee precise labelling of products. In addition, PDL develops its own brands and has a central kitchen that produces high-quality ready-to-use food, which is highly popular and attracts customers.
Giants in trouble, the student becomes a master
The spectacular success of Pangdonglai, contrasting with the collapse of the remainder of the industry, forced the biggest players to take desperate action. In May 2024, after 3 years of loss, Yonghui Superstores' management decided to take an unprecedented step – to establish a strategical partnership with Yu Donglai in order to complete the transformation of its operations. This process accelerated erstwhile Miniso took over a controlling stake in Yonghui in September 2024, and its founder, Ye Guofu, headed the improvement Committee, publically declaring that “the Pangdonglai model is the only way to save Chinese supermarkets”.
The results of this transformation are striking. The first upgraded Yonghui store in Zhengzhou, which became an almost mirrored reflection of the PDL facility, recorded a five-fold increase in the number of customers on the day of reopening, and in subsequent weeks its sales increased 10 times. In another location, in Xi’an, regular sales jumped from 200 000 to 1.6 million yuan in just 2 days. By mid-2025 Yonghui had successfully rebuilt 100 of its stores, implementing PDL rules, from decor and service, through supply chain management, to the introduction of Pangdonglai's own brand products.
Challenges and the Future: Can the Pangdonglai model be scaled?
Despite the tremendous success and increasing crowd of followers, there is simply a fundamental question of the scalability of the Pangdonglai model. Its strength is profoundly rooted in the economical specificity of a quaternary city, where operating costs are lower and competition is lower. The transfer of the same model to top-class metropolises specified as Shanghai or Beijing would entail immense challenges, including drasticly higher costs and a customer-to-custom fight with mature global players.
Whether Pangdonglai decides to expand, its phenomenon has changed Chinese retail trade forever. The past of a tiny network with Henan proves that in the age of digitization and globalisation, the key to success does not should be to prosecute scale, but to build deep trust and authentic relations with employees and customers. Pangdonglai has proven that investment in man, honesty and quality is simply a strategy that can bring not only spectacular profits but besides become an inspiration for the full manufacture in times of crisis.
Sources
- CIW News, “Why China’s supermarket giants copy 13-store chain”
- Daxue Consulting, “Pang Dong Lai’s impact on Chinese retail industry”
- World Crunch, “Trader Joe’s Of China? Pangdonglai, A Grocery store The Masses Love To Trust”
- KrAsia, “One year after Miniso’s takeover, where does Yonghui Superstores stand?”
- China Chain store & Franchise Association (CCFA)
Leszek B. Glass
Email: [email protected]
© www.chiny24.com
