Source | Retail Business Finance Liu Qiangdong and Yu Donglai, two entrepreneurs recently at the center of public opinion, have officially "joined forces." According to the official website of the Management Committee of Dongcheng District, Xuchang City, Henan Province, in June this year, the first Henan supply chain industrial base jointly built by Pangdonglai Trading Group and JD Logistics Group—the JD Logistics (Xuchang) Supply Chain Industrial Base project—will officially begin operations. After production, the project is expected to achieve an annual output value of about 2.5 billion yuan and taxes and profits of 50 million yuan. Image: JD Logistics (Xuchang) Supply Chain Industrial Base Specifically, the supply chain industrial base built by Pangdonglai and JD has a planned total investment of 1.25 billion yuan, with a total construction area of about 185,000 square meters, including 2 buildings for picking cart temporary storage, split-case replenishment, and hot product replenishment, as well as 9 processing workshops for Pangdonglai's industrial chain products. One detail in the official announcement is noteworthy: after the base operates, more than 100 Pangdonglai private-label products will use JD Logistics' warehousing services to meet the multi-channel shopping needs of consumers nationwide. This means that Pangdonglai's private-label products will open up nationwide sales channels and provide a better logistics service experience. Relying on JD's e-commerce supply chain capabilities, Pangdonglai is also expected to solve the problem of insufficient supply for its hot-selling private-label products. After the ebb of the new retail era's supermarket digital transformation, this cooperation between Pangdonglai and JD may represent a model of "1+1>2" cooperation between traditional retail and the internet. Pangdonglai Needs Online An indisputable fact is that since Pangdonglai was "put on a pedestal" in public opinion, due to visits by consumers from all over the country and the widespread existence of purchasing agents, Pangdonglai's hot-selling private-label products have been in a state of "highly insufficient supply." According to Yu Donglai's own disclosure, in 2024, DL private-label brand sales reached 2 billion yuan, accounting for 12% of the year's total store sales (16.964 billion yuan) and about 25% of total supermarket sales (8.094 billion yuan); but Yu Donglai also said that 600 million yuan of private-label products were distributed to assisted enterprises such as Bubugao and Yonghui. It is understood that at the first "Pangdonglai-renovated" Yonghui supermarket store in Zhengzhou, Xinwan Plaza, on the opening night, sales were so hot that they announced a suspension of DL craft beer sales (now resumed); at the second "Pangdonglai-renovated" store in Zhengzhou, Haihan Haishang, due to the Mid-Autumn Festival approaching at the beginning of the opening, some customers would buy 20-30 DL "internet-famous big mooncakes" in one batch, and on-site staff did not stop them. Image: Adjustment announcement for Yonghui Supermarket Xinwan Plaza store To limit purchasing agents, Pangdonglai launched strict purchasing agent control measures on December 14, 2024, including quantity and frequency limits on some products; behaviors such as privately occupying goods, repeated queuing to buy, reselling at inflated prices, or inciting panic buying would result in termination of Pangdonglai membership. But this did not completely alleviate the product shortage. At that time, a staff member at Pangdonglai's Xuchang Angel City store told Daxiang News that the shortage in the supermarket was still serious. Until December 21, 2024, Pangdonglai announced that some products would be adjusted to online sales, including the most popular private-label products such as DL laundry detergent, DL craft beer, DL first-pressed peanut oil, and DL black soybean soy sauce. Transferring some sales channels online did not truly solve the shortage problem, and to some extent even affected the service experience. Pangdonglai officially opened its online mall in October 2022. Currently, its official online sales channels include the "Pangdonglai" WeChat mini-program and the "Pangdonglai Exclusive Store" on Douyin. As of May 18, its Douyin store had 12.551 million followers and total sales of 3.079 million. Image: Douyin store "Pangdonglai Exclusive Store" On the official WeChat mini-program, the announcement shows that restocking begins at 10 a.m. every day. However, after experiencing it, the author found that hot products such as DL soy sauce and craft beer were sold out almost as soon as they were listed. Even if you tried to buy non-sold-out products an hour after restocking, the mini-program would prompt "There are too many visitors currently, please try again later." On the day of the experience, May 18, the author could only shop normally on the mini-program until 1 p.m. (three hours after restocking). At that time, only private-label gift boxes, canvas tote bags, towels, and bath towels were still available for purchase, and the order page had purchase restrictions: each person can buy only 1 of each product per store every 7 days. Image: Pangdonglai Mall WeChat mini-program In terms of delivery services, the mini-program showed an estimated delivery time of "shipping in order of order placement," while on the Douyin store, different products had different estimated shipping times, such as 21 hours for liquor and 48 hours for long-staple cotton face towels. Image: Pangdonglai product online delivery times In terms of shipping costs, the delivery fees on the Pangdonglai Mall mini-program also fluctuate. The author set the location to a residential area in Zhongyuan District, Zhengzhou, and found that shipping costs for different products ranged from 7 yuan to 25 yuan. For example, the delivery fee for 4 barrels of 5-liter first-pressed peanut oil reached 25 yuan. Image: Donglai Premium Supermarket Regarding the "instant sell-out" of hot products on the online mall, some consumers commented: "There are too few types of tea, only four kinds" and "Pangdonglai products are worth buying with eyes closed, trustworthy, but hard to grab; hope they stock more." Pangdonglai also has another WeChat shopping mini-program called "Pangdonglai Department Store," which mainly provides e-commerce services for department store shops in selected stores, such as Anta in Angel City store and La Mer in Xinxiang store. Only four Pangdonglai stores (three in Xuchang and one in Xinxiang) offer department store services. Image: Pangdonglai Department Store WeChat mini-program Obviously, while channel transfer has alleviated offline purchasing agent problems to some extent, it has also facilitated the transfer of purchasing agents online. Judging from the e-commerce and logistics experience alone, many details of Pangdonglai's private-label mall need improvement. In the final analysis, the "insufficient supply" problem of some Pangdonglai private-label products stems from the supply chain. Especially after the massive surge in demand, the product supply chain that previously only supplied 13 stores actually needs to meet consumer demand far exceeding the volume of 13 stores. Pangdonglai also has its own supply chain company. Xuchang Pangdonglai Industrial Co., Ltd., established in 2020, is mainly responsible for supplying Pangdonglai's bakery products, but these fresh food products are not listed on Pangdonglai's online mall. Image: Pangdonglai taro and sesame cake Most hot-selling DL products are developed in cooperation with external suppliers, and their production capacity is closely related to the scale of the suppliers. For example, the supplier of DL compound juice, Zhejiang Leyuan Biology, is also a supplier to supermarkets such as Yonghui and RT-Mart; and the supplier of DL laundry detergent, Guangdong Jiaqianya, is also a partner of Procter & Gamble, Sam's Club's private label Member's Mark, and JD.com's own brand Jingdong Zao. As producers, suppliers naturally need to "bloom in multiple places" and supply through multiple channels. As one of the cooperation channels, although there is no public data on the actual production capacity allocated to Pangdonglai, such a surge in demand is definitely a huge challenge to suppliers' production capacity. Therefore, joining forces with JD is a "clear strategy" for Pangdonglai. The supply chain base model may be just the first step. In the future, JD can not only improve Pangdonglai's online shopping experience but also potentially alleviate the impact of product capacity and logistics fulfillment on consumer experience from the supply chain level. For JD, it also needs strong physical retail partners like Pangdonglai. JD Can't Let Go of Physical Retail Among e-commerce platforms with GMV exceeding one trillion yuan in China, JD is almost the most "obsessed" with offline physical retail. JD started as an offline store in Zhongguancun. After transforming to e-commerce in 2003, it has been trying offline formats. Currently, it has built a multi-format offline layout covering convenience stores (JD Convenience Store, Jingxi Convenience Store), discount stores (Huaguan Discount Supermarket), fresh food supermarkets (JD 7Fresh), and commercial complexes (JD MALL, JD Outlets). Among them, JD Convenience Store, a project explored since 2017, has about 4,000 stores nationwide as of 2024; JD 7Fresh, a product of the new retail era, has a total of 71 stores (7Fresh Supermarket + 7Fresh Life) according to the latest official website data; JD MALL, which integrates 3C electronics and comprehensive services, has covered 14 cities nationwide and plans to reach 27 stores by the end of this year. Image: JD MALL In terms of strategic cooperation, JD has invested in Yonghui Superstores and also accepted investment from Walmart. These two investment cases lasted about eight years from initial shareholding to final exit. As a result, JD has accumulated rich experience in cooperation between the internet and traditional retail. For example, Sam's Club has been cooperating with JD since it joined JD in 2016. In September 2024, Walmart China also responded publicly that Sam's Club's official e-commerce channels in China are only the Sam's Club APP and Sam's Club mini-program's hourly delivery, city-wide delivery, and nationwide delivery, as well as the Sam's Club official flagship store on JD and the Sam's Club on JD Daojia. Sam's Club does not conduct business on online channels other than the above platforms. Behind the official certification from Walmart, the Sam's Club official flagship store on JD has accumulated 11.97 million followers to date, with the best-selling product being Member's Mark sea salt soda crackers, showing total sales of over 2 million. Image: Sam's Club official flagship store on JD In addition, since 2018, Sam's Club has built a cloud warehouse system in China. JD provides online entry points and logistics supply chain support, helping Sam's Club build a fulfillment network that supplies the whole country with different delivery times. Currently, Sam's Club's cloud warehouses in China average over 1,000 orders per day. In the first quarter of this year's financial report, Walmart China's net sales in the first quarter reached $6.7 billion (approximately 48.3 billion yuan, accounting for more than one-fifth of international business); at the same time, China's e-commerce business revenue grew 34% in the first quarter, with online business accounting for more than 50% of total sales. The "mutual success" of Sam's Club and JD in online-offline cooperation may serve as a "model" for the cooperation between JD and Pangdonglai. In the future, based on the supply chain industrial base jointly built to ensure product capacity, Pangdonglai may also open an official flagship store on JD like Sam's Club, which can further control online supply and combat the purchasing agent industry chain. One detail: searching for "Pangdonglai" on JD, the first result is a store called "Xuchang Donglai Specialty Store," which specifically notes "authentic purchasing agent, direct from Xuchang." The top-selling product in the store is DL black soybean soy sauce, and the second is DL craft wheat beer. Image: Pangdonglai purchasing agent store on JD Not only flagship stores, but JD Seconds is currently vigorously promoting instant retail business. In the future, Pangdonglai products may also achieve same-city "ultra-fast delivery," and even in cities without Pangdonglai stores, with the help of JD Logistics' nationwide warehousing and distribution network, Pangdonglai products can achieve "nationwide distribution." According to the official website, JD Logistics currently has over 3,600 warehouses globally, with a total warehousing area of over 32 million square meters, and by the end of 2024, the cloud warehouse ecosystem platform had over 2,000 partner cloud warehouses. From the perspective of the "1+1>2" effect of cooperation between the internet and physical retail, JD and Pangdonglai "should have cooperated long ago." Returning to the Essence Re-exploring Retail Digitalization As mentioned earlier, in addition to the strategic cooperation in retail digitalization, the joint construction of the industrial base by JD Logistics and Pangdonglai is also an important step in JD Logistics' in-depth strategic layout of the Henan market. Henan is located in the Central Plains and is an important transportation hub geographically, giving it unique advantages for developing the logistics industry. Official data shows that in 2024, the total social logistics volume of Henan Province reached 19.6 trillion yuan, ranking first among the six central provinces (Henan, Hubei, Hunan, Jiangxi, Anhui, and Shanxi). JD Logistics also attaches great importance to Henan's logistics market position. For example, the Zhengzhou Asia One intelligent logistics park, which began operations in 2020, is the third intelligent logistics park built by JD Logistics with a construction area exceeding 600 mu, after Dongguan Asia One and Wuhan Asia One. Data shows that the Zhengzhou Asia One park is a benchmark for JD Logistics' intelligent logistics in the central region. The park has a total area of 570,000 square meters and handles 80% of order processing tasks in Henan and the surrounding six provinces. The model of JD Logistics and Pangdonglai jointly building a supply chain industrial base is also an exploration by JD Logistics of the Henan market and its own new model. Especially since JD Logistics opened its services to external customers in 2017, its main model has become providing external logistics warehousing and distribution solutions, and external customer revenue has become the core of JD Logistics. According to the 2024 JD Logistics financial report, external customer revenue reached 127.8 billion yuan, accounting for nearly 70%. JD's online platform and logistics fulfillment solutions are exactly what Pangdonglai needs, and JD Logistics' cooperation ambitions are not limited to Pangdonglai alone. According to official introductions, the JD Logistics (Xuchang) Supply Chain Industrial Base will not only realize the production of more than 400 Pangdonglai private-label products in the future, but will also attract 20 upstream enterprises to settle in, providing 1.5 billion yuan of self-operated park products for physical stores. Ambitions are gradually being realized. This time, the cooperation between JD and Pangdonglai starts with a focus on offline. Whether it is building a supply chain base or upgrading the logistics system, this may mark that after the new retail boom has faded, cooperation between the internet and traditional retail will further return to the essence: the overall consumer experience of products and services. In the past, the new retail transformation of traditional supermarkets started with store renovations, changing to warm lighting, installing hanging transport chains, launching digital memberships, etc. These seemingly "new" scene changes actually cannot constitute the core competitiveness of a retail enterprise. In other words, this type of new retail transformation has no business model barrier. Now, the cooperation between JD and Pangdonglai first focuses on the product side, maintaining the continuous supply of high-quality products from traditional retail, supplemented by the traffic of internet platforms (online flagship stores) and the efficient logistics services of e-commerce infrastructure, to improve consumers' comprehensive service experience online and offline. In the future, the two sides can further deepen their layout in new scenarios such as instant retail. Everything changes but its essence remains the same. The "internet + retail" cooperation focused on products and services may be the model that fits current needs.