In February 2025, as the last Walmart in downtown Hangzhou posted a closure notice, a cruel metaphor for China's retail industry emerged: the layers of white price tags inside the store were precisely the epitaph of the golden age of hypermarkets. At the other end of this decline is a self-rescue movement among traditional supermarkets called “Pang Reform” (胖改). Starting in January 2024, when Pangdonglai assisted Bubugao, 15 companies including Yijiaqin, Wanjiahui, and Runxing Wanjia successively joined this wave. The climax of this experiment was Yonghui Superstores. This largest supermarket chain in China, once a “dragon-slaying youth” that disrupted the wet market landscape with its “agriculture-to-supermarket” model, suffered cumulative losses exceeding 8 billion yuan from 2021 to 2023, and is now attempting self-redemption through “de-Yonghui-ization.” In January 2025, Yonghui's Jinshan Wanda store reopened after undergoing “Pang Reform.” The disappearance of promotional displays, the transparent shelf layout, and the prominent prepared food and bakery sections made old customers feel as if they were in a Pangdonglai store. The store that no longer looks like Yonghui clearly won the votes of the capital market and consumers: since September 2024, Yonghui's stock price surged, at one point rising over 300% to a high of 7.87 yuan per share, and on the first day of the reopened store, daily sales soared 13.9 times. But behind this seemingly lively transformation lies the collective anxiety of Chinese supermarkets. When the golden age of hypermarkets passed, the industry once blamed the decline on the impact of the internet, but when Alibaba stopped talking about new retail, Pangdonglai delivered results of 4.413 billion yuan in annual sales for a single store and an average profit of 61 million yuan per store, Sam's Club and Costco conquered markets with their membership models, and discount stores flourished everywhere, people suddenly realized: what truly killed traditional supermarkets was never the simple online-offline competition, but the “sit-and-wait” business logic that had once fueled their growth. “The reason for the poor performance of small and medium-sized retail stores is not the rise of large supermarkets, but that their business methods have fallen behind the times,” said Toshifumi Suzuki, founder of 7-Eleven, in “Retail Philosophy,” and this conclusion applies equally to the demise of today's traditional supermarkets. Fortunately, the Yonghuis of the world have realized this. But as Hou Yi, founder and former CEO of Hema, said, “Pangdonglai was popular 20 years ago, and countless people have studied it. The reason it's popular again now is that retail has no other way to go. ” What is worth discussing is: when consumers flock to stores for Pangdonglai's private-label products, is this gamble to save Yonghui through “de-Yonghui-ization” truly finding a new way to live, or is it falling into the cage of imitative innovation? The Hypermarket Dilemma: The Disintegration of Channel Power In 1995, Carrefour's Beijing Chuangyijia store opened, bringing three enlightenments to China's retail industry:

  • Modern circulation design reshaped spatial efficiency;
  • Global supply chain integration expanded product awareness;
  • Self-service shopping experience reconstructed the relationship between people and goods. This hybrid form of “supermarket + department store” once filled the consumption vacuum at the dawn of the market economy. However, under the dominance of the “sit-and-wait” logic, hypermarkets gradually deviated from the essence of business—from “how to efficiently deliver product value” to “how to maximize slotting fees”—and eventually evolved into a double yoke: First, severe product homogenization. The high walls built by entry fees, barcode fees, and display fees blocked innovative blood, creating a shelf hegemony for P&G, Unilever, and others that remained unchanged for a decade. Meanwhile, convenience store shelves could launch new products in just one week. Second, distorted pricing systems. To cover channel costs, brands set inflated prices, making “no promotion, no sale” an industry curse, and creating an absurd reality—consumers touched physical products in stores but ultimately turned to more cost-effective online channels. Clearly, everyone saw the crux of the problem. When Hou Yi pushed for discount reforms two years ago, he bluntly stated, “Going away from the KA model is a matter of life and death; there is no retreat.” Transformation anxiety thus erupted. Yonghui successively incubated various store formats such as red-label stores, green-label stores, premium stores, membership stores, and Super Species. Hema was not to be outdone, launching five sub-formats in 2019 alone, including Hema Li and Hema Xiaozhan. Behind this retail transformation is a blind worship of “scale = bargaining power.” When black-label stores, mini stores, and X membership stores fought on the streets, what consumers saw was not format iteration but a self-indulgent channel personality split. In the end, sluggish sales, inventory backlog, and the supply chain that was blindly expanded earlier backfired—format innovation became a catalyst for accelerated decline. In other words, obsessing over shifting between various formats is hoping to use new directions and new growth to smooth over the backwardness of old models, using tactical diligence to mask strategic laziness. Hou Yi's remarks tore off the industry's fig leaf: “In the past few years, traditional retail has been led into a pit by e-commerce, forgetting the essence of retail.” So-called traffic and digitalization are ultimately just icing on the cake. But clearly, this once-disruptive retail format still carries a historical mission in the new era, but it requires a thorough value chain reorganization: in terms of efficiency, Costco's 4,000 SKUs create an average daily sales of over 4 million yuan per store, proving the lethality of curated selection, extreme supply chain, and extreme low prices; in terms of experience, Pangdonglai redefines service standards with details, achieving a dimensionality reduction against price sensitivity. This restructuring movement points to the same truth: The only reason for a channel to exist is to create higher overall efficiency or experience than direct sales. As the century-long evolution of retail reveals, all fixed channel forms will die, but the value chain that meets consumers' essential needs never ends. Pangdonglai: A Commercial Utopia Against Scale In Pangdonglai's stores, the janitor's focused expression while wiping shelves rivals that of a cultural relic restorer, and consumers queuing at dawn for the viral giant mooncakes have created a billion-yuan single-product myth. These phenomenal spectacles form Pangdonglai's spiritual moat. This commercial entity, called the “Mecca of Retail,” is steeped in the value of “diseconomies of scale”: First, in an era of efficiency supremacy, firmly grasp offline experience. In the view of Huang Hai, partner of Zesheng Venture Capital, while e-commerce platforms push “more, faster, cheaper” to the extreme with algorithms, Pangdonglai redefines “good” in physical space. Compared to traditional supermarkets where shelves belong to the highest bidders for slotting fees, and e-commerce's infinite shelves are trapped in search bubbles, Pangdonglai precisely finds the best balance between essential needs and surprises—with 15,000 SKUs covering tea, tobacco, alcohol, gold jewelry, and even medicine, consumers are no longer completing shopping tasks but exploring the possibilities of a better life. Take vinegar as an example: there are over 30 SKUs, from crab vinegar, sushi vinegar, and salad vinegar to yuzu vinegar, lemon vinegar, Baoning vinegar, and Zilin vinegar. Thus, while Costco creates extreme efficiency with 4,000 SKUs, Pangdonglai has evolved from a store into a third space for the city—where grandparents chat and cool off, and parents bring children to experience cotton doll DIY. In such a commercial wonder with daily foot traffic exceeding that of a 5A scenic spot, one can't help but exclaim, “Henan people have their own Disneyland.” Second, amidst the expansion frenzy, adhere to the aesthetics of restraint. While Yonghui and others spread thousands of stores nationwide, Pangdonglai chose to double the industry's average investment intensity per store. This anti-scale strategy has forged a three-layer barrier:
  • Management efficiency The grid layout of 13 stores is the foundation for extreme supply chain and management efficiency.
  • Consumer faith It removed leeks from shelves for nearly two years because pesticide residues did not meet internal standards; it would rather pay 9 million yuan in compensation to close a problematic stall than compromise on food safety. By never compromising on products, it ultimately turned trust into consumer faith.
  • Cultural IP When consumers spontaneously become pilgrims, Pangdonglai becomes an irreplaceable urban cultural landmark—an intangible asset that no financial statement can quantify. The failure of Yonghui's million-yuan pixel-perfect replication of Pangdonglai in Xuchang in 2018 precisely confirms that Pangdonglai has already leaped from a company to a cultural symbol. Third, use humanistic care to transform a commercial organization into a spiritual community. “The connotation of Pangdonglai is not service details, but the people behind the details,” said Wang Shoucheng, vice president of Yonghui and head of the restructuring. Behind the people is the humanistic system Pangdonglai has built over 30 years: in the material dimension, employee care systems such as closing on Tuesdays, grievance awards, and unhappy leave have achieved an industry miracle of an annual turnover rate consistently below 5%. In the spiritual dimension, Yu Donglai's support and encouragement for employees' personal values are hidden in his words in “Walking on the Road of Faith”: “Individuality, freedom, sincerity, love, let life always walk on the path you like.” This resonates with the statement in the autobiography of Jack Welch, former CEO of General Electric: “The company pays them wages and fills their wallets, but as a leader, you also need to fill their souls. You must empathize with subordinates and make their work meaningful.” When a company becomes a place where “employees become better versions of themselves,” the commercial organization completes its transformation into a spiritual community. Yonghui's Reform: Can It Recombine the Genes of Success? In May 2024, when the Yonghui team visited Pangdonglai, what shocked them most was not the sales miracle of the viral giant mooncakes, but an employee who called Yu Donglai “brother” from afar and ran over to hug him. “Why is it that in Yonghui, employees who have worked together for 5 or 10 years don't have this kind of closeness?” They thus realized that this transformation was far more than a hardware renovation. “Close the stores that should be closed, improve the stores that can be improved, and stay relaxed during the process,” Yu Donglai's three maxims are reshaping this retail empire. The restructuring unfolds around three dimensions: First, have customers in mind. The “shelf hegemony” of traditional supermarkets is dissolving: Yonghui's restructured stores have removed forced-circulation displays, moved cash registers to prominent positions at the entrance, ending the maze-like experience of finding the checkout; product structure has shifted to demand orientation, with low-tier brands being phased out in batches and replaced with products previously only available online, in premium supermarkets, or at Watsons; promotions are rejected in favor of everyday low prices, freeing consumers from price comparison. Second, have the supply chain in mind. “There is only one principle for suppliers: help others succeed. Think about how to create value with suppliers, not how to negotiate,” Yu Donglai's supply chain philosophy is rewriting Yonghui's procurement standards. When “quality first” replaces “low price first,” subtle changes emerge across the upstream and downstream of the industry chain: farmers begin to reduce fertilizer use to pursue flavor, and suppliers voluntarily improve quality control standards. “Restructuring is not about being a lone wolf, but about driving the entire ecosystem to evolve.” Third, have employees in mind. Yonghui also fell into a dilemma: it copied Pangdonglai's practice of providing plastic stools for weighing-area employees, but due to the lack of an organizational culture to support it, no one dared to sit, and the stools eventually became decorations. “Because you never thought for your employees, only from a management perspective,” the management structure of national managing provinces, provinces managing regions, and regions managing stores compressed frontline employees into KPI executors. The real change is not “providing stools” but making employees “dare to sit,” Wang Shoucheng reflected. When Yonghui prioritizes employee happiness over revenue, seemingly anti-efficiency measures like controlling customer flow and closing early actually allow the warmth once compressed by algorithms to grow back from the shelves—when customers weigh chocolate by the jin and often can't gauge the amount, employees post a note saying “1 jin ≈ 44 chocolates.” As the Yangming philosophy says: “When first planting roots, only cultivate and water; don't think about branches, leaves, flowers, or fruits.” The cultivation of cultural genes is more critical than institutional transplantation. However, the rejection reaction of this gene transplant is also ever-present: First, the grafting of Pangdonglai's genes hangs like the Sword of Damocles over Yonghui. When consumers flock to restructured stores to snap up Pangdonglai's private-label products, it is spiritual pilgrimage rather than value recognition. When customers admit they came “for Pangdonglai's private-label products,” Yonghui faces a fatal question: is it using another's stone to polish its own jade, or is it becoming a distributor for Pangdonglai? The blurring of brand identity could even erode the trust foundation for Yonghui to build its own private brands. How to integrate with the Pangdonglai model and cultivate new organizational cultural genes for Yonghui is clearly its core challenge for the future. Second, the shackles of the scale curse. Pangdonglai's regional focus model conflicts naturally with Yonghui's national footprint. Hou Yi has publicly stated that Pangdonglai's high employee welfare is supported by relatively monopolistic high profits in Xuchang, which would be unsustainable in a fully competitive market. A deeper dilemma comes from the management radius: while regional directors are still studying PPTs in meeting rooms, Yu Donglai is personally teaching employees how to wipe shelves. Wang Shoucheng also admitted: “Our once-proud scale of a thousand stores and a hundred billion in sales now requires more time and effort to correct.” Yonghui's cumbersome organizational structure means any reform requires more resources and a longer adjustment period. Third, the risk of customer migration. The restructured Yonghui is undergoing a dramatic shift in customer composition: national supermarkets typically cover a larger base of price-sensitive consumers, but the relatively higher prices after “Pang-ification” are loosening the core base of budget-conscious seniors, while young people keen on check-ins continue to flood in. The outcry on Xiaohongshu about Yonghui “abandoning bulk sales and using fixed packaging = disguised price increases” is clearly a projection of this structural contradiction. How to find a new balance between quality upgrade and the original affordable value-for-money is crucial to the sustainability of the restructuring. Endgame Speculation: Finding a Fulcrum in the Impossible Triangle Four months after the restructuring, Miniso strategically invested HK$6.27 billion in Yonghui, betting on the vision of “creating a Chinese version of Costco.” Clearly, this marriage aligns with the ultimate proposition of retail: how to establish a new order in the impossible triangle of scale, efficiency, and experience? Toshifumi Suzuki's “hypothesis-verification” principle may offer insight: “There is no static single-store model; the optimal single-store model is tested, not designed, and is continuously iterated and optimized.” Yonghui's adventure lies in grafting a retail cultural gene honed regionally over the long term onto the massive body of a national retail system. This may be the most moving paradox of business: Sometimes, you have to become someone else to find yourself. When the slogan at Pangdonglai's Angel City, captured by countless lenses, emerges—“Only with freedom of thought can there be infinite imagination and creativity”—this revolution that began on the shelves will ultimately test another possibility for Chinese retail. 【New Order · Symbiosis】 The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China