Scan the QR code in the image to register "Seventy percent welfare, thirty percent show." Pangdonglai, a retail brand in Xuchang, Henan, is somewhat like and unlike Wuling Hongguang. It is closest in two ways: one, like Wuling Hongguang, it easily makes strangers feel close, and after getting close, they are willing to stay; a person with great interpersonal skills can achieve this. Two, the value it radiates is greater than its actual strength, like a 30,000-yuan car that makes you feel it can earn you 300,000 yuan in wealth. The former is Pangdonglai's most praised operational feature: the company treats employees well, and employees treat customers well. This is unique in the industry, and it was once called the Haidilao of retail. The latter is Pangdonglai's recent move to directly label the purchase price and retail price on shelves, giving the feeling that "I earn this much per item; whether I'm cheating you or not, I don't need to say a word; you know it clearly yourself." This is a local retail leader that has expanded the small-business sentiment of neighborhood shops to an annual sales scale of over 7 billion yuan (to be verified). To exaggerate, Pangdonglai's business philosophy also has a bit of Japan's so-called "craftsman spirit," where details matter more than anything. But Pangdonglai's greatest operational charm is also its greatest operational shortcoming. To this day, Pangdonglai has not left Henan, or rather, it has not even covered the entire province. It embodies the ultimate achievements of an old era and small local enterprises, but it has completely lost opportunities in the wave of commercial iteration. In 2021 and beyond, the greatest operational capability this company can demonstrate is how to continuously maintain its existing strength. Or rather, this company exudes the personality traits of its founder, Yu Donglai, and can only last as long as Yu Donglai's personal capabilities continue. We cannot directly say whether this company is good or bad, just as its operational characteristics have not been replicated by other companies. At most, we can only discover and see what kind of company a very special—or very strange—retail enterprise is. He is generous to his employees, which is not fake, but he lacks funds for expansion. He was too aggressive in an era of low-end commercial civilization and heavy local protectionism. He is like the king of an idealistic kingdom he built himself. -01- Pangdonglai, Very Special Pangdonglai in Henan may be rarely or never heard of by people outside Henan. But among residents of Xuchang and Xinxiang, Pangdonglai has a stellar reputation and strong strength. It beat Carrefour to the south, forcing it to close; it kicked Walmart to the north, which prepared for years but dared not open. People queue for hundreds of meters to enter the store, and when it closed a store, the whole city went to petition... Last week, Pangdonglai did something that attracted industry attention: it adjusted the price tags on some shelf items, marking the cost price on products in the general apparel area, and clearly writing the product origin and supplier phone number. As soon as this happened, netizens praised Pangdonglai, which gained another wave of goodwill. But some questioned whether the "cost price" included operating costs. If it included operating costs (i.e., amortized rent, labor, etc.), then the 20% profit point is definitely high, and Pangdonglai is suspected of gimmick marketing. This company has always been strange and odd, and there are many bizarre rumors about Pangdonglai online, such as "one overtime, fine 5,000 yuan" and "no work calls after hours; one call, fine 200 yuan." In general, whether customers or employees, first contact with Pangdonglai may shock people with its contrast—the company has excellent employee and customer reputation, but it just cannot grow big. Pangdonglai has been founded for over 20 years and has never left Henan Province. Not to mention leaving the province, it has not even entered the provincial capital Zhengzhou, only in Xuchang and Xinxiang, two cities with a combined population just over 10 million. Henan's top three economic cities: Zhengzhou, Luoyang, Nanyang. Pangdonglai has not gone to any of them. One theory is that Yu Donglai, to ease competition with Henan retail peers, signed "non-aggression" agreements with local leaders in Nanyang, Xinyang, etc., each guarding their own territory. The GDP of Xuchang and Xinxiang is around 300 billion yuan each, ranking 4th and 6th in Henan. In comparison, Zhengzhou, ranked first, had a GDP of 1.2 trillion yuan in 2020, three times that of these two cities. A common external confusion is that Pangdonglai, in third- and fourth-tier cities like Xuchang, provides product quality and service far superior to peers, and should replicate this advantage in cities with larger market sizes. Let's look at Pangdonglai's core operational capabilities: First, in terms of products, its beverage and packaged food variety is not inferior to major chain supermarkets, with a large proportion of imported beverages and new internet-famous foods. The cooked and hot food section has distinctive braised pork and roast duck, and its self-operated bakery has a signature red velvet cake. Its fresh food area, from display to freshness to hygiene, can be compared to premium supermarkets in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen. Pangdonglai also emphasizes its stylish self-operated brand "DL" (abbreviation of "Donglai" in pinyin), not only on products but also on its tobacco and liquor stores, hot pot restaurants, noodle shops, and gold shops outside. This was originally a helpless move after Pangdonglai encountered boycotts from partners, but overall it is a normal performance of a good retail enterprise building its own brand. But the next service operations are somewhat baffling. A local customer in Xuchang said they saw someone buy a box of cut fruit at Pangdonglai, eat it down to the last piece, bring it to the front desk saying it didn't taste good and wanted a refund, and the front desk actually refunded it directly. Indeed, Pangdonglai's special focus is unconditional service before and after customer purchases. Not only can products be returned without reason, but if customers want something the supermarket doesn't sell, they can tell the staff, and Pangdonglai will purchase it specifically for that customer. These methods naturally make customers feel extremely secure with Pangdonglai. With its service reputation accumulated among the local population, Pangdonglai's business in the two cities has always been good. Pangdonglai's employee welfare has always been excellent. Employee wages were higher than the local average 10 years ago, and year-end bonuses exceed the general retail level. Employees' daily work hours, vacations, and care guarantees, as well as major expenses affecting personal state like family difficulties, buying houses, and medical treatment, Pangdonglai provides care that other companies do not or rarely do. The overall mental state of Pangdonglai employees is indeed better than that of general retail enterprises. They look like they are in an environment where the company cares and treats employees as people, with a comfortable and joyful appearance. This feeling of simply saying the company is good is no longer rare. What is rare is that the driving force behind maintaining this situation must be Yu Donglai's overly personalized and individualistic personality. If you open Pangdonglai's official website, you will be shocked by two things: it is a website so ugly that even African UED would collapse, and it is a website with "Love Welfare" written at the top. Since Pangdonglai's model is so powerful, why doesn't it expand aggressively? Even if founder Yu Donglai says he doesn't do it for money, with such good service and products, even for the sake of benefiting consumption upgrades for residents in surrounding cities, there should be expansion plans! The essential reason is that Pangdonglai's extreme customer reputation and employee loyalty are not backed by strong business-level competitiveness. In other words, it may simply be impossible. Pangdonglai has never built the core capabilities to grow the company: including daily operating cash flow revenue scale, cash reserves for strategic investment and expansion, talent reserves and recruitment based on market expansion, management loss of control due to organizational expansion, and Pangdonglai's competitiveness is not a scarce competitiveness that can go anywhere. First, the no-reason return and exchange mentioned above creates a psychological goodwill for customers that far exceeds its actual financial gain or loss. In fact, without real problems, consumers who casually return goods are still a minority. Stores and supermarkets do not lose much, but customers' psychological reassurance increases their willingness to shop in-store. Second, Pangdonglai's extreme service reputation brings customers great shopping security and psychological perception, and in the short term brings great competitive pressure and customer loss to surrounding peers. Pangdonglai caught up early in good times, unlike current community group buying, where squeezing peers' business is criticized as "monopolize first, squeeze peers to death, then conspire to raise prices" or "American Tesla is exploring the universe, Chinese internet is thinking about a bunch of cabbage and a scallion." Anyway, Pangdonglai's practice of squeezing peers' business has always been well received. Normally, since Pangdonglai chose to stand out, it should continue to take this path to the extreme, to the point of changing local industry relations and supply chain rules, and elevating the commercial civilization level of the entire Xuchang and Xinxiang region. However, Pangdonglai chose fear and sulking. Peers joined forces with other merchants to refuse to supply Pangdonglai, and Pangdonglai chose to compromise. Or rather, before compromising, Pangdonglai sulked and once announced it would close most of its stores. This left company executives and customers confused. Third, Yu Donglai treats employees really well, so well that Haidilao is far inferior. Here's a side note: Haidilao's core competitiveness is not the often-mentioned "company treats employees well, employees provide perverted service to customers." Haidilao's core competitiveness, like other chain catering, is supply chain to the source, efficiency in every detail, and batch replication of highly refined store operations. Understanding Haidilao, looking back at Pangdonglai under Yu Donglai's leadership, apart from the surface reputation of employees and customers, there has not been much innovation or upgrade in its hard supply chain strength as a retailer, or in operating real estate commercial transformation like Tianhong Department Store. Moreover, Yu Donglai's overly distinctive management has the advantage that his generous personality and magnanimity truly transmit to every corner of the company; the disadvantage is that this company is Yu Donglai's one-man company. A company that is one person's company cannot be too big; if it gets too big, the company's temperament will change whether it wants to or not. Because of his overly personality-driven style, his team not only lacks experts, but also does not need experts, and this prevents the company from growing. Once it grows, it will lose control. Yu Donglai probably cannot accept that his company will really change and lose control. Fourth, Yu Donglai's one-man company means his team has no experts. It is acknowledged that the company's executives have low academic qualifications, but the fundamental problem is that when the company's temperament is too boss-personalized, the company's decision-making will and thinking habits cannot accommodate business-focused upgrades and innovations that follow market changes. Simply put, the expert thinking that follows industry laws and respects professionalism has no soil in this company. Fifth, this leads to the practice of labeling cost prices mentioned above. This practice does not optimize the supply chain, reduce inventory backlog or loss, or substantially improve supply chain efficiency to transform retail price competitiveness; prices have not changed because of these actions. This practice is still under Pangdonglai's mindset of wholeheartedly thinking for customers, giving a customer psychological feeling of "Look, I've taken off my underwear; what secrets can I have?" This feeling is very intangible. In fact, Pangdonglai's reputation in Xuchang and Xinxiang has never had a "low price, good goods" price advantage. It is not more expensive than others, but not much cheaper either. This is an intangible method, landing on intangible benefits, bringing customers deep perception and easy word-of-mouth fission. Why don't peer retailers copy it, or even appreciate it? Because anyone who knows a bit knows that if a company wants to maintain Pangdonglai's customer experience that goes down to each employee and service detail, the company's resource consumption and management mechanism cannot do anything else. -02- Pangdonglai Employees Are Surprised To exaggerate, Pangdonglai's intangible approach is a bit flashy. This is also reflected in the promotion of employee welfare mentioned earlier. From Yu Donglai's perspective in managing Pangdonglai, employee welfare is more important than customer reputation building. Because any customer reputation implementation requires employees who are truly willing to practice it. This causal order should be emphasized. Of course, it is only to shape the public image, so the promotion is slightly exaggerated. Lei Jun admires this company, and employee welfare is indeed very good. It is said that Pangdonglai's entry-level employees start with a salary of 3,000 yuan, while other local enterprises pay about 1,500 yuan (wages have risen in recent years); in addition, Pangdonglai distributes 95% of the company's shares to employees. Calculated, more than half of the profits go to employees. Also, Pangdonglai has annual leave of up to 40 days, and for each additional year of service, annual leave increases by 10 days (unknown if there is a cap), which makes people envious. So the question arises: why does Pangdonglai treat employees so well? Retail industry treatment has two characteristics: retail is not a high-profit industry, so there is not enough profit to provide employees with high income comparable to other industries; traditional retail still has many grassroots positions, and the requirements for personnel are not high, nor do they meet the standards for high wages. However, retail is an industry that strongly pursues employee stability; the more experienced employees are, the more they can settle down. Therefore, the best way to solve this contradiction in the industry is "transfer welfare." The lifetime employment system commonly adopted by Japanese companies is actually an extreme practice of this transfer welfare. I can't guarantee your rapid wealth, but I can guarantee you won't worry about food and clothing for life. In contrast, Huawei once implemented reverse elimination for employees over 35, or similar high salaries in internet companies. Besides the high-profit margins from their business models, these companies advocate this rule: "I give you 10 years of salary in 5 years, but you must finish the work in 3 years." The principle of transfer welfare is like working in some public institutions: direct welfare like salary is not high, but the company can use the long-term cash flow characteristics of retail and solid fixed assets, through delaying payment terms and year-end total profit calculation, to give employees other welfare besides high wages and bonuses. For example, personal medical treatment, housing purchase subsidies, children's education subsidies, and certification support that exceed general social standards. Those who pay attention to details will see that this kind of protection brings little short-term cash pressure to the company, and it also involves care for more significant life affairs beyond work and daily life. Many people always cannot distinguish whether work or life is more important. In fact, a company like Pangdonglai is smart: besides daily work and life, the protection of a person's entire life interests is more important. These benefits accumulate higher for employees who stay longer. This way of providing care, education, and material rewards in one package makes employees feel that here, besides the book salary, everything they get is high-yield. In this way, retail companies can provide welfare that does not directly create cash pressure, thereby maintaining the stability of excellent employees. This practice is common in retail, such as RT-Mart's eTBS plan, an employee stock ownership plan that can be joined after six months of employment, making them temporary shareholders. Moreover, Yu Donglai is indeed very generous, and Pangdonglai also provides somewhat competitive but not excessive salaries in addition to these transfer benefits. Employees who encounter a boss like Yu Donglai are fortunate. Some call Pangdonglai a "local tyrant entrenched in fourth-tier cities." But Pangdonglai has never been on the list of China's top 100 supermarkets. The last place on that list is an enterprise with annual revenue of less than 600 million yuan. However, public information mentions Pangdonglai's annual revenue as 7 billion yuan multiple times. It's a bit strange, isn't it? In any case, Pangdonglai is still an excellent enterprise in its own territory. It's just that it will likely forever be a local excellent enterprise in Xuchang and Xinxiang. 36Kr - Future Consumption (WeChat ID: lslb168)