To make business more valuable, the hottest internet celebrity right now is none other than Yu Donglai of Pangdonglai. In 2023, Pangdonglai, a supermarket chain deeply rooted in Henan, became famous nationwide for its unique business model, quality service, and generous treatment of employees. Founder Yu Donglai was dubbed "China's Best Boss" by netizens for his "extravagant" treatment of staff. Since last year, Pangdonglai has been a constant presence on hot search lists. On June 27 this year, topics like "Pangdonglai compensates customers who bought rolled noodles nearly 9 million yuan" and "Pangdonglai rewards customer who complained about rolled noodles with 100,000 yuan" topped the charts again. In the days prior, Pangdonglai had garnered unprecedented attention for its overhaul of Yonghui Superstores. To date, Yu Donglai and his team have revamped three established supermarket chains: Jiangxi's leading supermarket Jiabale, Hunan's veteran chain Better Life (Bugao), and Yonghui Superstores. Among these, Yonghui has drawn the most attention. This is because, in the face of Yonghui, a top-five player in the industry, Pangdonglai still seems like a small fry. On the 2023 Hurun Global Rich List, Yonghui founder Zhang Xuansong appeared as the only entrepreneur from Minhou, Fujian, with a net worth of 9.5 billion yuan. This unusual contrast has attracted countless netizens. Thanks to Pangdonglai's "golden touch," since June 19, Yonghui's Xinyuan Plaza store in Zhengzhou has seen exceptionally strong sales for consecutive days, adding to Yu Donglai's luster. Zhang Xuansong has also breathed a temporary sigh of relief. Born in 1971, Zhang Xuansong is from Minhou, Fujian. He dropped out of high school to enter the business world and joined the supermarket industry in 1995. Over more than two decades, he became the "King of Supermarkets in Fujian." However, despite still being Minhou's richest person, Yonghui has had few reasons to celebrate in recent years, instead mired in store closures and poor performance. Its market value has fallen from a peak of over 106.4 billion yuan to 22.5 billion yuan as of June 26. Thirty years east, thirty years west. While Yu Donglai basks in the spotlight, Zhang Xuansong, the supermarket king, has been retreating. A veteran retail insider told the author that in recent years, as economic cycles have shifted and the environment has changed, large supermarkets that failed to recognize the situation continued their expansion strategies. "The 'Yonghuis' didn't contract in time to achieve a soft landing, so they hit walls one after another. Pangdonglai, after decades of development, has become popular precisely because its focus on regional development aligns with this cyclical shift." Behind the "Fujian Supermarket King" bowing to the "Henan's Biggest Internet Celebrity" lies a capital game. A Capital Game Behind the Scenes The story begins with the catalyst for Pangdonglai's rise to fame, which is closely linked to a man named Pang Xiaowei. Born in 1973, Pang Xiaowei studied at Shanghai Jiao Tong University and Zhejiang Gongshang University. He was once named one of the top ten new angel investors by authoritative media. In 2000, he founded Lianshang.com, a retail business portal, and served as its actual controller and chairman. Yu Donglai and Pang Xiaowei co-founded the Lianshang Donglai Business Research Institute, with Pang as its dean and Yu as its chief mentor. The author found that information about Yu Donglai and Pangdonglai appeared on Lianshang.com as early as 2008. However, according to Pang, their first meeting was in 2021. That year, Pangdonglai, with sales of 7 billion yuan, did not make the "China Supermarket TOP 100" list, and Yu Donglai was only known in Henan. Pang recalled that seeing Yu Donglai made him feel "full" because there was "so much valuable content," and he quickly invited this "amazing entrepreneur" to be the star of a private sharing session on "Donglai's Business Philosophy." That was in December 2021, where Yu shared his management concepts. The session was a success. Pang later told media that over 500 people attended, and the venue was so packed that people stood in the back. Attendees included chairmen, general managers, and executives from retail companies nationwide. Seizing the momentum, Pang co-founded the Donglai Research Institute with Yu in March 2022. The institute launched a seed class, a first president class, and a second president class. Entry had requirements. According to Red Star Capital Bureau, the seed class involved Yu's on-site guidance, with tuition of 500,000 yuan per company, and only 12 companies per cohort, subject to rigorous review. The president classes were cheaper: 30,000 yuan for the first and 100,000 yuan for the second, but teaching was more like "eating from a big pot." The number of companies could reach up to 100. Even so, admission required three conditions: the company must be over three years old, have net assets of at least 5 million yuan, and be profitable in the previous year. Participants came from catering, e-commerce, retail, and other industries, and many had some influence in their fields. In the industry's view, this laid the groundwork for Pangdonglai's nationwide fame. Yu's frequently mentioned operational details, such as the "grievance award" that made Pangdonglai famous in 2023, "minimum take-home pay of 7,000 yuan for employees," and "employees can take leave whenever they want," were widely spread. With these foundations laid, the companies being revamped by Pangdonglai stepped into the spotlight. Public reports trace Pangdonglai's makeovers: in July 2023, it began adjusting Jiabale, Jiangxi's leading supermarket; in April 2024, it sent a 20-person executive team to Changsha to assist Better Life; and in late June, the first revamped Yonghui store opened. Good news followed. Jiabale's general manager Zhou Shan even expressed gratitude, saying that "Brother Donglai pulled us back from the morgue to the ICU." After Jiabale, Better Life, and Yonghui, Zhongbai Group was also rumored to be learning from Pangdonglai. Amid public speculation, some questioned: why these companies? Yu Donglai sees himself as a "preacher" of "beauty." He explained his motivation for revamping Yonghui: "Yonghui has contributed a lot to China's retail industry, but it grew too fast and took some detours. I hope Yonghui can set sail again through this adjustment." He also told Chinese Entrepreneurs about his original intention: "Pangdonglai's philosophy is too precious. With it, you can do anything well. We want to share our experience and methods with more companies, at least to give them a hand, to make society less suffering and more beautiful." However, multiple industry insiders told the author that the companies already or about to be revamped have direct or indirect ties to Yu Donglai and Lianshang.com. Public information shows that Jiabale was a seed class student, learning with Yu since 2022 and receiving help from Pangdonglai and 11 other seed class companies since the second half of 2023. Zhongbai Group, a Hubei chain supermarket leader, also announced it would follow Pangdonglai's model, and it is close to this circle. In 2017, Zhongbai and Yonghui jointly established Yonghui Zhongbai Supermarket. Although Yonghui has been reducing its stake in Zhongbai since 2022, it still holds 9.86% as the third-largest shareholder. Better Life, Yonghui, and Lianshang.com have even more tangled relationships. ▲ (Equity structure chart of Better Life, Yonghui, and Yihe Network; source: Tianyancha) Tianyancha shows that Better Life Investment Group Co., Ltd. holds shares in Yihe Network, a NEEQ-listed company. Lianshang.com is a subsidiary of Yihe Network, and both share the same actual controller, Pang Xiaowei, who holds 60% of Yihe Network. Yihe Network's main business includes training and exhibition services. The author found in Yihe Network's prospectus that Better Life was originally the fourth-largest shareholder, but in 2015, it transferred its 6.25% stake to a person named Zhang Haixia, who is a shareholder in several Better Life-affiliated companies. Meanwhile, Better Life Investment Group also holds shares in Shenzhen Julin Chengze Venture Capital Partnership. Another key point: a person named Xie Xiangzhen, who holds shares in Shenzhen Julin Chengze, also holds shares in Yonghui Superstores. Xie Xiangzhen is a former executive at Yonghui and the brother-in-law of Zhang Xuansong and Zhang Xuanning. Zhang Xuanning, Zhang Xuansong's older brother, is another founder of Yonghui. In this interconnected capital game, Yonghui is the largest and highest-ranked, so its makeover by Pangdonglai has drawn particular attention. A pressing question arises: can Yonghui's makeover be replicated nationwide? "It's Impossible to Open 200 Stores" Feng Qing, a former Yonghui employee, reacted to the news of Pangdonglai's makeover with "It's a good thing." The internet fame of Yu Donglai and Pangdonglai can bring traffic to Yonghui, and they complement each other. "Pangdonglai is positioned higher, unlike Yonghui's overall market. Yonghui's green label stores are somewhat similar to Pangdonglai's positioning," Feng said. The green label, known as premium Yonghui, was a high-end supermarket brand launched in 2010, offering better quality products at slightly higher prices. "But unfortunately, over time, it became less premium and more about daily necessities." Today, the popularity of Yonghui's Xinyuan Plaza store shows that the partnership has indeed created a special chemistry. Zhang Xuansong seems to trust Yu Donglai immensely. At a mobilization meeting for the makeover, Zhang said, "From today, Yonghui will follow Brother Donglai to pursue light, quality, and great love." Perhaps anticipating the success, on June 19, the opening day of the Xinyuan Plaza store, Yu Donglai confidently told media that "more stores will be revamped, possibly 20, and we will gradually transform all 20 stores in Henan." Can Yu's wish come true? In the view of veteran retail expert Zhang Lan, if limited to Henan, it's feasible. Increasing labor costs, such as raising wages, would earn goodwill and traffic, which would certainly help Yonghui's performance. Undeniably, Pangdonglai has inherent advantages in Henan, with a complete supply chain, popular private-label and direct-sourced products, and an excellent reputation. Many Henan residents share a similar trust: "In Henan, Pangdonglai is a guarantee of quality; you can buy anything there with your eyes closed." However, expanding this model nationwide "would be very difficult." Yonghui has been strategically contracting for three years. Although its store count has dropped significantly from the peak of 1,440, the 2023 annual report shows it still has 1,000 stores. "With hundreds or thousands of stores, it's unrealistic to apply the adjusted labor costs across the board," Zhang Lan argued. After all, Yonghui is a listed company and must consider returns on investment. The company's cash flow has been tight in recent years. "Yonghui's tight cash flow and delayed payments have made us more cautious in our cooperation," a supplier to Yonghui in Guangxi told the author. Even if Yonghui were to roll this out nationwide, it would likely need to replace most products with Pangdonglai's, as the popular items in the revamped Better Life and Yonghui stores are mostly Pangdonglai's private-label products. Zhu Danpeng, a Chinese food industry analyst, explained that Pangdonglai is a regional brand. It can achieve fine store management, precise product mix, and humane team management in a small number of stores, but "replicating it to a large chain, nationwide or globally, is extremely difficult." Feng Qing is more optimistic about the possibility of nationwide expansion. "If the model is truly recognized, it can be replicated on a larger scale," he said. "The key is whether Yonghui has the determination to change, whether it can sustain the Pangdonglai model, and whether customer service is up to par. It depends on whether Yonghui has a clear positioning." Yonghui has borrowed from others before, such as learning from Ito-Yokado in Japan and Dairy Farm in Hong Kong. "But after learning, not much was implemented," Feng admitted. The author also learned that while being revamped by Pangdonglai, Yonghui stores in some cities, like Fuzhou and Beijing, have seen some changes, but they are relatively superficial. For example, at a Yonghui store in Daxing Xihongmen, Beijing, "apart from changing the morning opening time from 7:00 to 7:30, there are no other obvious changes," a staff member said. Yu Donglai is more cautious about expansion. On June 19, when asked why not revamp 200 Yonghui stores, he shook his head and waved his hand, saying, "That's impossible. There need to be other brands to serve the market together." ▲ (Yonghui stock price trend chart; source: Tonghuashun) In any case, for now, Yu Donglai and Zhang Xuansong have achieved a win-win. Pangdonglai's products can be sold in Yonghui stores, and Yonghui gains Pangdonglai's popularity and management experience. Moreover, since the market rumor that Zhang Xuansong would become Yu Donglai's apprentice, Yonghui's stock price has hit three consecutive limit-ups, rising nearly 30% from 2.3 yuan to a high of 2.93 yuan. The revamped first store has seen exceptional performance for days, and amid this amplified single-store effect, the news that "Yonghui will close 200 stores nationwide" has received less attention. "The news of Pangdonglai helping Yonghui has, to some extent, released positive signals to the market, offsetting the store closure news," said Zhang Lan, who is also familiar with public relations. On the evening of June 18, a retail self-media reported that Yonghui would significantly optimize its store network in 2024, planning to close about 200 tail-end stores, accounting for about 20% of its current stores. Yonghui responded to multiple media outlets that it had "no comment" and that "this news was not released by the company; it's a market rumor. The company has store opening and closing plans every quarter. Please refer to the company's official announcements." However, various signs suggest the closure news is not unfounded. Minhou's Richest Man: The More Anxious, the More Chaotic On the evening of June 23, around 9 PM, Wang Si, a post-90s woman from Xintang Town, Zengcheng District, Guangzhou, suddenly craved watermelon. She ordered online from the Yonghui store at Xintang Wanda Plaza. She thought it was convenient because orders over 38 yuan qualified for free delivery within an hour, "which suits a lazy person like me." However, something unexpected happened. The delivery person handed her the items and said, "I know you often buy from Yonghui, but this store will close next month. Be prepared." At that moment, Wang Si felt very disappointed. Calming down, she realized the closure was inevitable. Xintang is just a town under Zengcheng, with limited spending power, especially in recent years as people have become more cautious. Wang Si noticed that many shops around her were struggling due to reduced foot traffic, even those in the Wanda mall. A bigger blow came in 2021 when Aeon Mall, touted as Asia's largest comprehensive mall, opened next to Wanda, "taking away the mid-to-high-end customers," Wang Si lamented. Similar situations are playing out in other cities. After buying a rotten chicken leg at Yonghui, Xiao Yang from Chongqing never went back. Yonghui's fresh produce, once its strength, has declined in quality. Compared to competitors, Yonghui's prices are not competitive, and "the staff attitude is poor," Xiao Yang complained. The author learned that Yonghui is still strategically contracting, with store closures continuing, mainly in third- and fourth-tier cities like Zengcheng, Chongqing, Guangxi, and Sichuan. For example, four Yonghui stores have closed in Chongqing's main urban area. However, in larger cities like Beijing, Yonghui is still performing reasonably well. This is because Beijing relies on centralized procurement, with sufficient volume to leverage supply chain advantages and maintain quality. "In third- and fourth-tier cities, procurement is regional, with limited volume, less strict quality control, and lack of long-radius support," Feng Qing explained. ▲ (Yonghui Chairman Zhang Xuansong) "The current contraction is correct because some stores were opened blindly. If a store's revenue is poor, it should be closed," Zhu Danpeng explained. Yonghui, listed on the A-share market, has had its "glory days." Since its listing in 2010, its stock price rose steadily, reaching a high of 11.72 yuan per share in 2018, with a total market value of up to 106.4 billion yuan, earning it the nickname "King of Supermarkets." Zhang Xuansong has repeatedly been Minhou's richest person, even in 2023 during the contraction. However, starting in 2018, after net profit suffered a major decline, Yonghui began its downward trend. Since 2021, it has been closing stores and laying off staff. Public information shows that Yonghui closed over 400 underperforming stores in three years. There were signs before this. The turning point was 2015. Feng Qing felt that Yonghui was no longer moving upward. Although the stock price hadn't reacted yet, employees sensed the company had hit a bottleneck. Moreover, the operational differences between Zhang Xuansong and his brother Zhang Xuanning became apparent. "The elder brother wanted to focus on premium green-label stores, while the younger brother was mainly into capital and later got involved in specific operations," Feng explained. To keep the stock price looking good and not affect the listed company's performance, they spun off the loss-making Yonghui Life (under Yonghui Yunchuang), planning to merge it back once profitable. At the end of 2018, Zhang Xuanning took the new retail business Yonghui Yunchuang out of the Yonghui system, which caused a stir. The key point is that Zhang Xuanning and Zhang Xuansong, originally acting in concert, held a combined 22.17% of Yonghui. But in 2018, they dissolved that agreement. After this move, neither brother was the largest shareholder, and they lost management control of Yonghui. Although they later reconciled, Yonghui had missed the opportunity to overtake on the curve. "With the entry of capital like JD.com, Tencent, and Dairy Farm, many decisions at Yonghui were not its own. Capital needs innovation and topics," Feng believes. Since 2015, Yonghui's internal structure has been constantly adjusted, with focus shifting between regions and headquarters. Employees felt the company was always changing, without stability, losing execution. Some employees who joined around 2015 changed positions almost every year and moved cities frequently. "A colleague once rented an apartment in a city and was transferred before even settling in," Feng sighed. Consequently, Yonghui couldn't fully achieve its performance targets. Although externally the overall data looked good with continuous growth, only insiders knew that same-store growth was declining, and the impressive results were mainly driven by expansion. Unfortunately, Yonghui expanded too fast and too scattered, "even opening stores in Tibet, which prevented it from leveraging its scale and supply chain advantages." By 2021, Yonghui's decline was well known. Zhang Jingyi, former board secretary, posted on WeChat Moments upon leaving that year that Yonghui was "going downhill." Over the years, Zhang Xuansong has tried many things. Feng was impressed by the private-label brands, such as mini Yonghui, Yonghui Life, and Super Species. Zhang wanted to do them well. At internal meetings, he expressed a desire to invest the raised funds in the supply chain to enhance product competitiveness. However, Feng was frustrated that many decisions were made hastily, following market trends without thorough research. "It was a bit of a copy-paste. When problems arose, they weren't analyzed or solved properly, so these initiatives ended as quickly as they started." After all the noise, mini Yonghui, Yonghui Life, and Super Species did not meet a good end. In desperation, Zhang Xuansong, once a dominant figure, bowed his head and became Yu Donglai's "disciple." On one side, the makeover of Yonghui by Pangdonglai is still ongoing, and Zhang Xuansong hopes to turn the tide. On the other, the wheel of time continues to roll forward. 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