Source | Blue Shark Consumption Wang Chonghe
In 2024, the supermarket and department store industry was exceptionally difficult. According to the 2024 financial reports already published, among 26 A-share listed supermarket and department store companies, 19 saw year-on-year revenue declines, and 17 saw net profit declines, with dismal performance. But the "leaders" of supermarkets and department stores in Henan and Hebei presented a different picture. In 2024, Pangdonglai Group (in Xuchang and Xinxiang) achieved cumulative sales of 16.964 billion yuan, with net profit exceeding 800 million yuan. Xinyu Lou, which originated from Huanghua City, Cangzhou, Hebei, achieved revenue as high as 23.9 billion yuan, and has maintained revenue exceeding 20 billion yuan for four consecutive years, with year-on-year growth. Xinyu Lou is known as "Hebei's Pangdonglai," but in fact, Pangdonglai's founder, Yu Donglai, highly praises Xinyu Lou, and some even call Xinyu Lou "Pangdonglai's teacher." How has this little-known county supermarket managed to traverse economic cycles, industry cycles, and corporate cycles, carving out a smooth upward curve?
Forty Years, Not a Single Store Closed
On New Year's Day 1985, Xinyu Lou officially opened at No. 43 Xinhua Road, Huanghua. Its founder, Zhang Hongrui, was a grassroots entrepreneur. He was born in Louxi Village Second Team, Chengguan Town, Huanghua County, Hebei. His father was a tailor who worked in Tianjin for years processing clothes. In 1960, at age 16, Zhang Hongrui graduated from junior high school. He scored full marks (100) in four of five subjects and 95 in the fifth, totaling 495 points. Because of his family's class background (his father, during the Rectification and Anti-Rightist Movement, had spoken some truths—"the weeds in the fields grow taller than the crops"—and was labeled a "bad element" among the "four categories"), his mother was often ill, his grandfather was old, and his younger siblings were young, he had to give up further studies and return home to work to help support the family. "I've farmed, raised pigs, worked as an accountant, and served as a production team leader for many years." (Zhang Hongrui, founder of Xinyu Lou)
In 1961, at 17, Zhang Hongrui worked as a laborer in the Huanghua County Construction Team, supplying mud and bricks to the master craftsman, always providing them abundantly. Later, he worked as a temporary worker at the Huanghua County Coal Construction Company and as an accountant at a food company station. Because his father was impacted in 1971, Zhang Hongrui was "dismissed" from the food company. Returning to the village, he led his production team from the poorest to the most advanced, receiving multiple commendations from the Huanghua County government. In 1984, Huanghua County planned to build a new market in the county seat to pave the way for farmers to enter business. Zhang Hongrui originally intended to find a few shops for the production team's shoe factory, but after advice from others, he took out a 100,000 yuan loan and opened the first Xinyu Lou. Zhang Hongrui had no prior business experience, and in the early days of reform and opening up, when the development of private enterprises was still unclear, he had to lead the team through difficult exploration.
From January 1985 to the end of 1990, Xinyu Lou did not make money and encountered many pitfalls:
- Deceived by unscrupulous merchants: For example, they were often cheated in purchasing. They were tricked by contracts, ordering 10,000 pieces of lace, buttons, and thimbles, which piled up and took years to sell; the thimbles even rusted.
- Management loopholes: For instance, the financial staff at the time had a vague understanding of procedures for purchasing, picking up goods, and bookkeeping. Sometimes, when a delivery note was sent, they would take it to pick up the goods but find none. The note would be hung up and ignored.
However, during these six years, Xinyu Lou accumulated substantial intangible assets centered on "integrity." For example, from the beginning, Xinyu Lou introduced a "five trials and one return" policy: bicycles could be test-ridden for three days; washing machines for seven days; TVs for half a month; radios and tape recorders for five days; and various daily cosmetics could be tried on the spot. Additionally, any product sold by Xinyu Lou with quality issues could be returned or exchanged with the invoice. This service was later refined into the "three guarantees" measure, and clear three-guarantee service notices and signs can be seen at every counter and in every store of Xinyu Lou.
In 1991, Xinyu Lou began to make money, and profits increased geometrically year by year: 200,000 yuan in 1991; 400,000 yuan in 1992; 800,000 yuan in 1993... In 1997, it moved to a new building on Xinyu Lou Street (formerly Kangning Road, Huanghua City), and in 2001, the first branch opened in Qing County... After 40 years of development, Xinyu Lou has grown from a "small store" with an area of just over 200 square meters and only 30 employees into a commercial group with 43 self-operated stores, about 1.2 million square meters of business area, about 40,000 employees, and operations spanning Hebei, Shandong, and Tianjin, with total assets exceeding 8 billion yuan. Since 2021, Xinyu Lou's annual revenue has exceeded 20 billion yuan for four consecutive years. In 2021, revenue was 20.26 billion yuan, a growth rate of 11.81%; in 2022, despite many stores closing for long periods due to the pandemic, revenue still exceeded 20 billion yuan; in 2023, revenue was 23.626 billion yuan, a growth rate of 18.1%. In 2024, revenue was 23.9 billion yuan, a growth rate of 4.1%... Notably, wherever Xinyu Lou opens, it becomes a bustling area, and surrounding shop rents and land prices rise. In 40 years since opening, Xinyu Lou has never closed a single store.
Xinyu Lou's "Secret"
Just as Pangdonglai has no "myth," Xinyu Lou has no "secret." The key to its 40-year longevity lies in embedding "integrity" into its DNA.
1. Products and Services
A consumer at Xinyu Lou's Huanghua flagship store said: "The ingredients here are fresh, prices are reasonable, and after-sales service gives me peace of mind." Another consumer was impressed by Xinyu Lou's product traceability system: "Every fish has a QR code ID card; scanning it shows the origin information." This trust is not accidental. Xinyu Lou has honored its commitment to "return or exchange even at a loss" for 40 years, integrating "honest business" into daily operations, ultimately giving consumers the confidence to "buy with eyes closed."
At the same time, Xinyu Lou practices clear pricing and never discounts or promotes. While discount promotions may create a temporary buzz, customers often feel prices are not genuine and may even develop a "beware of being cheated" mentality. Xinyu Lou advocates "rather clumsy honesty than flawless deception," "fear of customers losing out," and "not earning conscience money," truly achieving genuine goods at fair prices and "treating every customer well, especially those who don't buy."
In typical businesses, the salesperson's job is to sell products to customers, and sales volume is the most direct criterion for evaluating their performance. However, at Xinyu Lou, no one's income, including salespeople, is tied to sales volume. This is because once tied, employees would inevitably over-pursue sales. Only by treating customers as friends and family, genuinely caring for them, and being sincere can long-term customer trust be earned.
Xinyu Lou's assessment of salespeople is not based on profit but on how well they consider customers' needs. If they help customers solve practical problems, even if the customer doesn't buy anything, the salesperson is praised and encouraged. If they violate the "integrity" principle, the company will handle it seriously.
2. Supply Chain
Behind the "genuine products" and "sincere service" lies Xinyu Lou's deep accumulation in its supply chain system. To find its position in industry price competition, Xinyu Lou chooses a "long-termism" approach to challenges, effectively reducing costs through direct sourcing and refined supply chain management while ensuring product quality.
Currently, many large shopping malls and supermarkets intensify monopolistic sales channels, either压低 supplier product prices or squeezing suppliers' profit margins through channel fees, counter fees, festival fees, rebates, commissions, delayed payments, and other means, shifting all risks to suppliers. Regarding this business "unspoken rule," Xinyu Lou believes that blindly squeezing supplier profits will either force suppliers to raise prices or lower quality, ultimately harming consumer interests and, in turn, the mall's interests.
To this end, Xinyu Lou has insisted for years on self-purchasing and self-operating all products, maintaining reasonable product markup rates, minimizing returns to suppliers, and bearing all inventory risks itself. At the same time, it prohibits delayed payments, accepting rebates, or accepting meals, and feeds consumer feedback to suppliers to improve product quality. A supplier said, "In nearly 30 years of cooperation with Xinyu Lou, we have never paid entry fees, and payments have never been delayed." For every new store, Xinyu Lou insists on acquiring land and building the building itself, aiming to pass benefits to consumers and suppliers.
Moreover, Xinyu Lou has built a Bohai Rim county-level commercial network with 43 stores, and 240 direct sourcing bases form a quality supply chain, with full traceability from farm to table and daily sampling quality control. Through such "painstaking efforts," it has created a private brand matrix accounting for 8.6% of sales. Currently, Xinyu Lou has 240 direct sourcing bases, achieving full traceability from farm to table. Relevant data shows that Xinyu Lou's private brand annual sales have reached 2.07 billion yuan.
At the same time, Xinyu Lou has established a model of gaining insights into frontline consumer demand, developing customized products with brands, and implementing terminal marketing. For example, the Tianyuan Benzao zero-added soy sauce developed jointly with Haitian achieved single-product sales exceeding 1 million yuan, becoming a major product in the condiment category and driving category sales up by 16.2%.
Notably, Xinyu Lou also considers local market characteristics when customizing products. For instance, Xinyu Lou learned that some customers are not very receptive to the strong aroma of fragrant rapeseed oil, so through in-depth communication with the COFCO manufacturer, they adjusted the formula to suit northern tastes, producing first-pressed rapeseed oil. Through advance planning and pre-sale promotion, sales reached 800,000 yuan in the first month, driving overall rapeseed oil category sales up by nearly 300% in a single month.
3. Deep Cultivation of Lower-Tier Markets
Xu Shengli, Vice President of Xinyu Lou Department Store Group Co., Ltd., stated that through 40 years of county-level cultivation, they have discovered that lower-tier markets hold enormous growth potential and capacity. Facing the ever-changing market environment, enterprises need to respond flexibly, using innovative thinking to meet emerging demands, thereby building a new ecological closed loop for the county economy and seizing the new blue ocean in the department store industry.
As of now, Xinyu Lou's stores are mainly distributed in Cangzhou (11 stores), Shijiazhuang (10), Baoding (6), and Hengshui (7) in Hebei, as well as Tianjin and Shandong, with almost all stores located in counties at the fourth- and fifth-tier levels and below.
In lower-tier markets, Xinyu Lou adheres to "long-termism." In recent years, a major reason for the rapid development of online shopping is that online products are cheaper than physical stores because they save on store rent. At Xinyu Lou, however, there is no rent issue at any counter, and all products are self-purchased and self-sold. This is because all new Xinyu Lou branches adopt a model of buying land and building buildings themselves, which on one hand avoids a large rent expense and reduces operating costs; on the other hand, it avoids risks from rent fluctuations, conducive to long-term stable operation.
4. Organizational Management and Cultural Drive
In 1984, Zhang Hongrui founded Xinyu Lou. At that time, Xinyu Lou was entirely Zhang Hongrui's personal enterprise, and its assets were entirely his personal assets. But today, Xinyu Lou has become an enterprise of all Xinyu Lou people, with core employees as the mainstay, and its assets are the assets of all Xinyu Lou people, with core employees as the mainstay.
This is due to the fact that in June 2002, after convening a new shareholders' meeting, Xinyu Lou formally implemented a new equity allocation plan. The structure of this plan is: all shares are position-based (not employee-wide shareholding), with different positions granted different equity; when positions change, equity changes accordingly; when employee shareholders retire or leave, their equity is fully bought back at the price at the time of departure, ensuring that equity always remains in the hands of core employees who can create significant value for the company; including the founder, equity cannot be inherited, and no individual is allowed to hold a controlling stake.
Zhang Hongrui once said: "When I first started Xinyu Lou, I understood this relationship—it's not customers first, but employees first. People are the primary factor. If we think for employees and start from their fundamental interests, employees will work happily. Forming such core competence, the enterprise will be invincible. Of course, we improve core competence not to defeat others, but to remain undefeated."
By continuously improving the teaching-oriented organization, Xinyu Lou enhances the knowledge, professional quality, and comprehensive abilities of cadres and employees, enabling them to engage in work with pleasure. This virtuous cycle not only improves the enterprise's operational level but also further consolidates the close connection between employees and the enterprise.
Xinyu Lou has no parachuted executives. The existing 30,000-plus employees are all recruited and trained by the company itself. The general managers of 26 stores, 5 regional general managers, and dozens of group senior management cadres are all self-cultivated, rising step by step from the grassroots.
Through 40 years of practice, Xinyu Lou has proven one thing: the foundation of county-level commerce lies in gaining consumer trust through actual products and services, while continuously upgrading according to consumption trends and local realities. The lower-tier market holds great potential.