---
title: "Pangdonglai Is Seriously Deified"
description: "After visiting Pangdonglai twice in the past month, the author concludes that Pangdonglai is seriously deified, which highlights the incompetence and tragedy of China's retail industry, especially the supermarket sector. Despite its relatively small scale, Pangdonglai's influence is immense, but the author argues that its success lies in returning to retail fundamentals: offering good products at fair prices."
author: "任文青Andy"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-11-28"
language: "en"
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# Pangdonglai Is Seriously Deified

> After visiting Pangdonglai twice in the past month, the author concludes that Pangdonglai is seriously deified, which highlights the incompetence and tragedy of China's retail industry, especially the supermarket sector. Despite its relatively small scale, Pangdonglai's influence is immense, but the author argues that its success lies in returning to retail fundamentals: offering good products at fair prices.

I visited Pangdonglai twice in the past month, and after shopping there, my feeling is: **Pangdonglai is seriously deified.** Behind this deification lies the incompetence and tragedy of China's retail industry, especially the supermarket sector! Pangdonglai currently has stores only in Xuchang and Xinxiang. According to the "2023 China Supermarket TOP100" list released by the China Chain Store & Franchise Association, Pangdonglai ranks 31st with 12 stores and revenue of 4.6 billion yuan (supermarket segment). Pangdonglai's scale is not among the top, but at a time when physical retail is in trouble, its influence among local supermarkets is definitely the greatest. In April this year, Pangdonglai helped adjust and reform Bubugao, followed by supermarkets like Yonghui, and then a wave of adjustment and reform swept through China's supermarket industry. This supermarket system, founded in 1995 and deeply rooted in a third- and fourth-tier small city like Xuchang, has really become incredibly popular. In fact, Pangdonglai has always been a phenomenal presence, and there has always been debate in the industry about whether Pangdonglai can be learned from and whether it should be learned from. But being elevated to such a high position as it is today, with founder Yu Donglai not only becoming an industry top influencer but also an internet sensation, is worth pondering. To find out why, I made two trips to Xuchang within a month, visiting both the Angel City and Times Square stores. The Angel City store is relatively new, not large, and feels like an internet-famous check-in spot. Locals told me that a considerable number of visitors to this store are from out of town. The Times Square store is larger, less crowded than Angel City, and feels more like a normal supermarket. **Pangdonglai is seriously deified; in a normal business ecosystem, it would not be deified like this.** This is my feeling after two visits and exchanges with various people. Saying this does not mean Pangdonglai is not excellent or not worth learning from, but rather there are some thoughts behind the phenomenon.
In the early years, there was a very popular book called "Haidilao You Can't Learn," and people also say "Pangdonglai You Can't Learn Either." One is a hot pot restaurant, the other is a supermarket. The reason they are linked is that **both companies are known for exceptionally good service.** Many people tell me that Haidilao's food is not actually delicious. Interestingly, some of these people are regular Haidilao customers themselves. I have no research on ingredients and taste, but as a frequent Haidilao customer, I believe Haidilao's ingredients and taste are definitely not bad in the industry, at least surpassing the vast majority of peers. I think it's because Haidilao's service is so famous that the public forgets its basic capability is ingredients and taste. If a hot pot restaurant is not delicious, can it win customers solely through so-called service? That doesn't align with business logic. Chinese people seem to particularly care about service. If a company's service exceeds people's expectations, anecdotes and stories about that service will be relished and spread easily. Pangdonglai is exactly such a case.
A quick search online reveals countless stories and anecdotes about Pangdonglai's service exceeding expectations. Pangdonglai's service indeed exceeds your expectations. A personal example: I bought an item at the Times Square store but didn't take a bag. After checking out, I walked to the door and had barely stopped for a minute when a staff member proactively came up, gave me a free bag, and helped me pack it. But just as Haidilao is a hot pot restaurant where even with great service, if ingredients are subpar and taste is bad, business can't be good; similarly, even if Pangdonglai's service is excellent, if its products are bad, how could it achieve today's success? With annual sales of 4.6 billion yuan, how much of that is buying its service? As a retail enterprise, its core is definitely **products**. So, how are Pangdonglai's products?
Setting aside Pangdonglai's tea, gold jewelry, and other non-supermarket formats, let me talk about my experience shopping at Pangdonglai's supermarket. A friend accompanying me said, "Pangdonglai's products are not cheap!" Indeed, Pangdonglai's products are not cheap. But are they expensive? **I compared prices of many products, whether branded standard items or its own private label products. You wouldn't describe them as 'high' or 'low'; you could use the word 'fair.'** In that context, you feel it's reasonable, you're willing to accept it, and you don't feel ripped off. My impression of Pangdonglai is **"good products at fair prices."** Let's start with **"fair prices."** Through Pangdonglai suppliers, I learned that for standard FMCG products, Pangdonglai requires its own profit margin to not exceed 30%. Pangdonglai's prices are definitely not the lowest. It compares the retail prices of products in the market and sets as low a price as possible, but it doesn't particularly emphasize being the lowest online, nor does it require suppliers to provide the absolute lowest price. In practice, Pangdonglai doesn't particularly emphasize removing middlemen or direct sourcing from manufacturers. However, Pangdonglai requires suppliers to provide a bare price. Many people see "bare price" and think it means squeezing the supplier's supply price to the extreme. In fact, Pangdonglai's requirement for bare prices is actually about **joining with suppliers to abandon the High-Low pricing method and instead present products to consumers with EDLP (Every Day Low Pricing).** So, in ordinary supermarkets, almost all products have promotions like 20% or 40% off, and yellow price tags are everywhere, but Pangdonglai doesn't have that (of course, there are promotions for specific products at specific times). Moreover, Pangdonglai also doesn't have the various backend fees common in domestic supermarkets, such as slotting fees, barcode fees, festival fees, etc. **Not particularly pursuing low prices, but not selling expensive either; reasonable and fair—that's my feeling about Pangdonglai's product prices.** That's "fair prices." Now, what about "good products"?
**Pangdonglai's "good products" essentially mean differentiation, achieved through three aspects:**
**1. Bakery and prepared foods from its central kitchen**
**2. Private label products**
**3. Differentiated selection of supplier brands**
From what I saw, the most popular areas in Pangdonglai's supermarket are its bakery and prepared foods. Especially at Angel City, at the different times I visited—morning, afternoon, and evening—it was basically crowded. I tried several products myself and asked friends accompanying me; our consensus was that the products are quite good, but definitely not to the point of being amazing. After all, everyone has eaten and seen things; it's unrealistic to say that a particular company's products are absolutely top-notch. Pangdonglai built its own central kitchen, strictly controlling food health and safety. The earlier incident where they rewarded a customer with hundreds of thousands of yuan due to a food issue is also real. So, **consumers are buying taste here, but more importantly, they are buying trust!** Apart from bakery and prepared foods, the most popular items are DL (Donglai) private label products. Besides the internet-famous big mooncakes, the craft beer is also very popular, with customers limited in quantity. I roughly counted that the private label products now carrying the "DL" trademark mainly include the following categories: bakery, craft beer, drinking water, paper products, laundry detergent, juice, sesame paste, oat crisps, cod jerky, kitchen supplies, etc. Friends told me that Pangdonglai will increase investment in private label products. In terms of branded standard products, Pangdonglai is also different from other supermarkets. For example, the Times Square store initially feels more like a traditional supermarket, but if you look closely at its shelves, you'll notice differences. Besides bakery, prepared foods, and private label products, you'll find many supplier-brand products that are not easily seen elsewhere. A supplier friend of Pangdonglai told me that Pangdonglai's product selection **deliberately avoids common products that can be seen everywhere else, and this tendency is becoming more and more obvious.** "Good products at fair prices"—that's my impression after shopping at Pangdonglai. But the question is, can just "good products at fair prices" make you a top influencer?
Pangdonglai's rise to top influencer status, besides being truly excellent itself, is more about **"being set off by peers."** A supplier friend of mine who deals with various retail enterprises year-round angrily told me: "Traditional retail buyers should all be fired." Although it's a bit extreme and sweeps broadly, it does reflect an industry symptom. Buyers in KA stores are good at pressuring suppliers on prices rather than studying consumer demand changes and selecting products better. Of course, behind this symptom is the problem of the entire traditional supermarket model. Over the past few decades, China's vast supermarkets have sold shelf space, collected various channel fees, and whoever pays gets on the shelf, doing a rent-collecting business that is a sure win. What has this led to?
> **First, high product homogenization.** The branded products that appear on supermarket shelves are all selected by this model, forming a commonality.
>
> **Second, inflated prices.** Although suppliers pay various unreasonable fees, ultimately consumers bear the cost.
> **Third, high-low pricing** makes consumers lose patience. If you plan to sell at 16 yuan and eventually sell at 16 yuan, why do it through "original price 20 yuan, today 20% off"?
This is why today, from first-tier cities to township markets, when you walk into any supermarket, you can't feel any difference; they are all the same. This is also why consumers vote with their feet for Pangdonglai, warehouse membership stores, and discount stores.
**The success and prosperity of any model are compatible with the times.** When discount retail, warehouse membership stores, instant retail, and other formats have spread like wildfire and are competing with this backward model for consumers, it can be said that supermarkets accustomed to lying down and making money are finally going to play themselves to death. In April this year, Pangdonglai helped Bubugao, and later Yonghui, which is larger and more influential. When supermarket giants start turning to Pangdonglai for help, I know this model really can't continue.
Providing consumers with the products they need at reasonable prices and making money from product turnover—this is what retail should look like. Pangdonglai just adheres to this essence. What is truly unique about Pangdonglai is founder Yu Donglai's unique philosophy and personal charm, as well as the unique corporate culture he has created. **Apart from Yu Donglai's philosophy and charm, isn't "good products at fair prices" just what a retail enterprise should be?** Pangdonglai's popularity is not unrelated to self-media, especially short videos. Founder Yu Donglai's philosophy and Pangdonglai's various service experiences beyond expectations have added a halo to both him and Pangdonglai. These halos are unreplicable and unlearnable. What should domestic supermarkets really learn? **Return to the essence of retail and achieve "good products at fair prices."**
**What to do?**
> **First, study consumers and treat them with care.**
>
> **Second, improve supply chain efficiency.**
>
> **Third, enhance product differentiation.**
Amid the wailing of physical retail, besides Pangdonglai, warehouse membership stores represented by Sam's Club and Costco, and hard discount supermarkets represented by Aldi have become retail stars. Although their forms are very different, their commonality is: **carefully study consumer needs and meet them through supply chain efficiency and product differentiation.** At a time when supermarkets are actively adjusting and reforming, I want to say that China cannot have more Pangdonglais, but it can have many, many more enterprises that return to the essence of retail. **China's retail industry needs a nirvana.**
The day when Pangdonglai exists merely as an excellent enterprise, rather than being deified as it is today, will be the day China's retail industry is reborn, and China's business ecosystem enters a healthy and sustainable development stage.


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