Source | LatePost Last May, Yonghui Superstores founder Zhang Xuansong led a team of over 100 people to Xuchang to study Pangdonglai. On-site, what surprised many was not Pangdonglai's signature service or employee benefits, but the discovery that with only about a dozen stores, its prices for many goods were lower than Yonghui's—which at the time had over a thousand stores and ranked first in national supermarket sales. A food brand first received Pangdonglai's procurement staff a few years ago, when it was not yet famous, not the later commercial utopia. The contact person had never heard of the brand, but was moved by the friendly procurement terms of "no returns or exchanges, bare-price purchasing," and agreed to try entering Xuchang. The result was unexpected: their products sold in Pangdonglai even surpassed many first- and second-tier new retail supermarkets. Now they realize that entering Pangdonglai means winning an entire city. Xuchang's urban population is 2.5 million, and last year local consumer retail sales totaled 116 billion yuan, of which more than one-tenth was spent in Pangdonglai's 6 comprehensive malls and 4 medium-sized community supermarkets. Excluding big-ticket items like cars, nearly 20% of local consumer spending may occur at Pangdonglai. Across China, no other company can so deeply and thoroughly dominate a city's consumption. Xuchang urban residents' per capita annual income just exceeds 40,000 yuan. In the eyes of locals, Pangdonglai's goods are "not cheap," but it is the most bustling and enjoyable place in the city, firmly occupying the center stage of this small city's "urban life circle." Many citizens' first choice for weekend family outings is often Pangdonglai's various stores. Now, the narrative of how Pangdonglai became a super internet celebrity by aligning with the public's zeitgeist is well known. This year, we went to Xuchang and interviewed over a dozen former Pangdonglai employees, local residents, study tour lecturers, and retail practitioners who had visited Pangdonglai for study, aiming to clarify how it actually operates as a company. Success Against Retail Common Sense Building Monopolistic Trust in a Specific Era Every day in Pangdonglai's stores, visitors from across the country wear headphones, mingling with the crowded flow, listening to lecturers from various study tours share the exquisite design of operational details: All goods are weighed with a 6-gram tare deduction; each apple's stem is trimmed by 1 cm before shelving for neat display; employees wear white gloves when organizing shelves, using rulers to ensure equal distances between products for visual pleasure. Some things are rare even in first-tier city supermarkets: dozens of branded mineral waters from around the world, Thai fresh durian meat at over 100 yuan per jin, and various well-known Japanese, Korean, Hong Kong, and Taiwanese brands and internet-famous snacks. The mall area also displays jade jewelry priced at millions of yuan per piece, a Samsung TV at 899,999 yuan, and a RED Scarlet film camera at 238,000 yuan. In March this year, Pangdonglai's Beihai store sold non-seasonal fresh durian. Offline hypermarkets, with too many categories, outdated inventory management, and typically not cheap, cannot compete with e-commerce. Yonghui, Walmart, Carrefour, Henan Dennis, and others have become negative examples in today's offline retail. Successful players like Sam's Club, Costco, and Aldi all prioritize efficiency, lead with private labels, and simplify SKUs, creating a hassle-free, cost-saving shopping experience through quality and price to drive repeat purchases. But when a company succeeds, everything it does can be interpreted as the path to success. Thus, a phrase often heard on study tours is: "Pangdonglai wants to be a museum of goods, a Louvre of commerce." Specifically, over 70% of Pangdonglai's products focus on the functionality and variety of daily consumer needs, while 30% pursue personalization, high-end, and trends, including internet-famous and premium products. Pangdonglai has no miracles either. A mid-level manager from Yonghui's Zhengzhou region observed that Pangdonglai's product prices are not low, with few promotions except for near-expiry food and drinks, and many novel items on shelves suffer from slow movement and damage, making accounting difficult. Pangdonglai's product selection is unrelated to efficiency, and it lacks a supply chain story like Sam's or Costco. Before 2022, except for bakery and deli, Pangdonglai did not emphasize private label development. Even today, its supply chain capabilities—whether logistics centers or central factories—are "relatively limited" in the eyes of many peers. Pangdonglai's private label shelves, with customers required to follow purchase limits due to supply shortage. Only when placed back in Xuchang, no matter how inefficient, it remains the Pangdonglai that consumers recognize. "It's the reputation earned through over 20 years of service, always thinking a few steps ahead for customers," said a local who transitioned from education to Pangdonglai study tours, perhaps closer to the essence of its success. Today, we are accustomed to buying reliable quality products, never getting expired or defective items. Even on e-commerce platforms, unless you're specifically after a 1,000-yuan LV or 200-yuan Lululemon, it's not easy to buy fakes. Thirty years ago, it wasn't like this. In many Xuchang consumers' memories and past media reports, during an era rife with counterfeit cigarettes and alcohol, Pangdonglai allowed customers to open and taste cigarettes and alcohol on the spot, with on-site returns if unsatisfied. Over the years, Pangdonglai's services have expanded from early returns and exchanges to over 100 free services today, from the moment customers enter the mall to the end of a product's lifecycle. Sometimes, consumers bring identical products purchased elsewhere to Pangdonglai for returns, and employees process them. In most parts of China, improved product quality and shopping experiences are results of intense competition over one or two decades. But in Xuchang, where the core urban area has a radius of just 10 kilometers, one person's strong preference has given locals a surreal shopping experience. Long-time Pangdonglai shoppers shared legendary consumption stories with us: A TV bought years ago broke; when the technician took it for repair, they brought a new TV so the customer could watch without interruption; if waiting too long in line for cake, staff would give away a cake priced at several hundred yuan for free; if a box of fruit was found damaged at home, staff would bring new fruit to replace it and refund the full amount; if a niche product wasn't found at Pangdonglai, after registration, Pangdonglai would specially procure it for the customer. Everything Pangdonglai does is to win local trust, and it has persisted for 30 years. Doing anything well for 30 years is hard, and once achieved, the results are astonishing. While first- and second-tier city supermarkets feature price transparency and lower prices due to full competition, Pangdonglai enjoys the closed effects of regional monopoly. Many locals tell us, "In Xuchang, no one says Pangdonglai's service is bad," and "Other supermarkets usually have little business; they only get some foot traffic when Pangdonglai is closed." An investor who once researched Pangdonglai in Xuchang said locals' trust is so deep that they wish it would open hospitals and property management companies. In June this year, Pangdonglai founder Yu Donglai stated on his personal social account that this year Pangdonglai expects a net profit of 1.5 billion yuan, with an average distribution of 100,000 yuan per employee, and an average of 700,000 yuan for management and technical staff. This means in Xuchang, Pangdonglai's security guards and cleaners earn 2-3 times the local salary for similar positions, and over 1.5 times that of ordinary civil servants. Such profit-sharing is enough for Pangdonglai to attract the best people in a small city where everyone knows everyone, forming a talent monopoly. We also learned that last August, Pangdonglai publicly recruited 30 employees and received over 300,000 resumes from across the country, including graduates from Peking University and Tsinghua University hoping to apply for warehouse keeper positions. Helplessly, Pangdonglai first used AI tools to shortlist 20,000 resumes, then used over 300 administrative staff to spend nearly a week screening out several thousand candidates for interviews. But ultimately, the recruitment failed to fill all 30 positions, and Pangdonglai was disappointed, finding that most applicants were just chasing the hype, with some even falsifying their resumes. A 188-Page Cleaning Manual Employee Handbook Updated with Over 10 Million Characters Plus Decentralized Autonomy If excellent service scores 100 points, consumers might be satisfied with 80, but Pangdonglai aims for 120, exceeding expectations as much as possible. In the early days, Pangdonglai couldn't afford above-market salaries, so to make ordinary employees with low education and average experience deliver service far beyond peers, it resorted to extreme job segmentation, breaking down every step, requiring employees to follow standards while continuously updating them. For cleaning positions, by 2023, the standard manual had been updated to 188 pages, with seven chapters covering 10 scenarios: store, warehouse, elevator, restroom, sink, floor mat, between employees, nursing room, mop, and trash bin. People close to Pangdonglai told us that the employee handbook covers over a hundred positions. Over the years, the company's work manuals have been updated with over 10 million characters. Before ERP systems were introduced, Pangdonglai's procurement team managed tens of thousands of products on paper. Pangdonglai's internal digitalization came late; it only adopted ERP and other management software around 2019, and at one point used over a dozen different software systems until 2023 when it adopted Feishu. Pangdonglai grants employees significant autonomy, encouraging them to propose various upgrades to store management and service. The company has set up awards like "Happiness Suggestion Award," "Innovation and Creation Award," and "Professional Knowledge Contribution Award," with cash prizes. Now, employees can record and share suggestions anytime via Feishu. In the view of several people close to Pangdonglai, its good service isn't just about following standards; it's about everyone challenging existing standards in their own scenarios and innovating. This requires considerable self-drive, and the premise is that the company hires better people with high salaries. Based on frontline employees' suggestions, each Pangdonglai store establishes its own management execution standards and decision-making mechanisms. If the group observes that some suggestions work well, they may be replicated company-wide. The "Position Standard Manuals" for various jobs are continuously updated, mostly with spontaneous additions from frontline employees. A person close to Pangdonglai told us that the company grants frontline employees a budget of 1,000 yuan to autonomously handle various customer complaints, just to quickly solve problems and build a good reputation. Earlier this year, a customer developed an allergy after buying underwear at Pangdonglai and blamed it on substandard products. Pangdonglai issued an investigation report of over 50 pages, fully reconstructing the incident. An industry insider who has long studied Pangdonglai told us that whenever a store faces such major customer complaints, the final report involves dozens or even hundreds of people. This includes frontline employees who received the customer, store managers, headquarters legal, HR, finance, and rotating management members, all participating in discussing solutions. Ultimately, Pangdonglai uses this near-live-text approach to "air" its internal handling of public opinion incidents to the public, maximizing transparency. From interest alignment to goal alignment is the management core that allows Pangdonglai to continuously refine service experiences. In Xuchang, the over 10,000 Pangdonglai employees known for high salaries and benefits, along with their families, not only enjoy the greatest dignity brought by work in this small city but are also the group most capable of consuming at Pangdonglai. Then, in their daily social circles, they spread word-of-mouth about Pangdonglai's honest operations, attracting more relatives and friends to visit—this is the human touch line through which Pangdonglai achieves commercial monopoly in a city. "Big Brother" Everywhere From Work to Every Detail of Family Life The primary task of a company is to make profits, but entrepreneurs' personal fulfillment varies. Some want to leave a mark on the universe, like Jobs and Musk; others enjoy fighting battle after battle, deriving pleasure from victory, like several Chinese internet company founders. There's also a type of entrepreneur whose fulfillment comes from promoting a lifestyle they endorse. The most representative is Henry Ford, who first shortened the workweek to 40 hours, offered wages unseen in manufacturing, improved productivity and reduced turnover, and enabled Ford workers to afford the cars they built. In contrast, employees had to accept Ford's Christian values, where thrift, diligence, and family responsibility were seen as the foundation of productivity. To enforce this, he established a "Sociological Department" to monitor employees, checking for alcoholism, gambling, household cleanliness, church attendance, savings habits, and marital fidelity. Yu Donglai is similar. He forgoes exclusive company profits and doesn't pursue personal wealth maximization. Instead, as the "big brother" of all employees, he guides and educates them on how to live, continuously outputting his personal standards for a happy life, deriving satisfaction from "mission accomplished." In an early internal meeting, he summarized his past failures as emotional, narrow-minded, petty, greedy, and too eager for quick success. Based on these issues, he reinterpreted various religions and Confucian thought, establishing a corporate culture of "fairness, freedom, happiness, and fraternity." These are distilled into "Freedom·Love," now printed in Pangdonglai's malls and shopping bags, continuously influencing and teaching employees. The resulting "Happy Life State Manual" is a practical guide to employee values and life rules. Following it helps employees manage personal and family life well, and also better complete work and serve customers. In this nearly 90-page manual, the happy life state includes guidance and assessments for thought, life, and work. Life states can be subdivided into love, home, parents, finance, and other items, each with dozens of suggestions. For example, on love, the company advocates that couples refuse betrothal gifts and dowries, avoiding mental or economic pressure on families for show; couples or partners should not casually say "divorce" or "break up"; maintain a healthy sex life (reference: at least twice a week before age 45, 1-2 times per week after 45); and be able to break sexual shackles and discuss sex openly. On home life, employees at different levels should choose housing appropriate to their level, with rent or mortgage payments controlled within 30% of family income; homes should be equipped with fire extinguishers, smoke masks, and fire blankets; refrigerators should have clear food classification, neat placement, and ensure food safety, etc. Besides daily assessments, the company conducts unannounced home visits to observe living conditions and hear family feedback, and requires employees to periodically upload photos of their home environment and refrigerator interiors on Feishu. In daily group meetings, employees self-assess and peer-review, discussing whether they are in a happy life state. The wealth distribution mechanism is the lubricant for Yu Donglai's patriarchal management—all requirements for employees are tied to incentives. Employees can either advance upward to store manager or develop horizontally in their positions. A person close to Pangdonglai told us that about 4% of cleaners can reach the highest salary for cleaning positions, earning 20,000-30,000 yuan per month. Pangdonglai's middle and senior management can earn annual salaries of hundreds of thousands or even millions of yuan. Various benefits are realized not only through salaries but also in daily assessments. When employees post photos of their home furnishings or refrigerator interiors in internal groups, leaders who see an empty fridge or missing items will proactively order and send items to employees' homes; some employees have received food, appliances, and other gifts. Pangdonglai encourages sharing insights on life and learning. On the internal network "Egg Paradise," many employees post chicken-soup-for-the-soul reflections. One employee wrote: "I'm smiling at work; a customer pats my shoulder and asks if I'm happy. I say I'm working with happiness. When I said that, I seemed to understand the meaning of freedom and love." In earlier years, Yu Donglai had more unconventional shares. He repeatedly posted censored nude photos in different scenarios on the internal network, with captions about his understanding of freedom and love. "Keep yourself in a state of individuality, freedom, and kindness... I know this is the best me!" An industry insider told us he once doubted Pangdonglai's culture until he met and interacted with more employees, feeling the warmth between people and their happiness, and eventually was infected and began to believe in these values. Pangdonglai employs over 10,000 full-time staff, with a 2024 turnover rate of 2.01%, far lower than most service companies. Among the "minority" who voluntarily left, some indeed couldn't adapt to "the company managing too much." After leaving, they often try to downplay their "once worked at Pangdonglai" label, seeking to quietly blend back into the small city's personal network society. "Too many people praise Pangdonglai, so no one is willing to say what's wrong with it. Xuchang is a small city with complex kinship ties," a former employee told us. She left her hometown for a lower-paying job in Zhengzhou because she couldn't stand the company's interference in personal life, "It's like waking up at midnight to find a group of strangers sitting by your bed, each telling you how to live." The Real Dilemmas of Pangdonglai's Apprentices In 2011, 45-year-old Yu Donglai said in a media interview that he wanted to become a preacher at 50. In June 2023, Yu announced his "retirement" to formally devote himself to "education." The initial plan was the "Lianshang Donglai CEO Class," with 100 spots per session and a tuition of 100,000 yuan. Later, the CEO class was upgraded to the "Business Research Institute," recruiting 12 supermarket companies from different regions, with an annual fee of 500,000 yuan. Accepted companies receive one-on-one coaching from Yu Donglai and support from Pangdonglai's professional team. In the CEO class, owners of 12 small and medium-sized retail enterprises from Xinjiang, Qinghai, and other regions lived, ate, and played with Yu Donglai, listening to his sharing and advice. One owner recalled in an interview with Lianshang.com that Yu never discussed operational details; he only shared about freedom, love, and happiness. One owner asked Yu what to do if they followed the class and still lost money. His answer: "Then you've gained spiritual freedom, liberation, and joy." A corner of Pangdonglai's bottled water shelves, with products from Italy, France, and other countries. In 2024, after receiving Yonghui's first study group, Pangdonglai quickly sent 200-300 people to Zhengzhou to assist Yonghui in store adjustments, with all costs borne by Pangdonglai. Additionally, Pangdonglai's private label products entered Yonghui to help attract customers. In many adjusted cities, Yonghui has fully learned from Pangdonglai in product structure, with 90% similarity. Many Yonghui stores have switched deli and bakery processing from outsourcing to self-operation, with sales share rising from "low single digits" to 20-30%, and a central bakery factory in Fujian is under accelerated construction. But emphasizing bakery and deli, and building central kitchens, is something top global retailers have done for decades. Sam's Club, Costco, Whole Foods in the US, Aldi, Coop, Migros in Europe—almost all retail giants do this. Even before seeking external help, Yonghui had imitated Hema eight years ago with "Super Species," making a large number of private label fresh products. We learned that during adjustments, Yonghui also hopes to renegotiate with brands, proposing supply prices equal to those of first-tier distributors or provincial agents. To this end, Yonghui offers to waive various front- and back-end fees and provide shorter payment terms in exchange for lower purchase prices than e-commerce platforms. Adjusting supply across stores in over 500 cities is no easy task. Traditional hypermarkets have always "sold shelf space," considering not only quality but also advertising fees, with many opaque charges at every step. Especially in first- and second-tier cities, hypermarkets have long underperformed, continuously losing share to innovative retail formats, and consumers have formed new habits. Yonghui once set its long-term goal for adjustments as "learning Pangdonglai's culture." Previously, some Yonghui positions placed heavy weight on sales assessments; after adjustments, this has been significantly relaxed, with the most important indicator changed to customer satisfaction. Yu Donglai told Yonghui's managers that if they fear employees' spirits declining, the company should distribute 70% or 60% of monthly profits as bonuses to consolidate achievements. The first lesson early CEO class participants learned was also about sharing profits. A Qinghai supermarket owner felt that after sharing profits and delegating authority, he traveled for 8 months a year while annual revenue rose 30%. Another Xinjiang supermarket owner found that his adjusted store caused a sensation in the county, with peers rushing to learn. Previously, his plan was to expand stores across Xinjiang; now his dream is to create his own Pangdonglai. However, the larger the company and market, the harder it is to replicate Pangdonglai's logic of using profit-sharing to motivate employees' conscious service awareness. Currently, overall salary increases at adjusted Yonghui stores range from 20-50%, with minimum wages in new first-tier cities like Chengdu and Xi'an generally above 4,500 yuan. In Zhengzhou, ordinary Yonghui employees' wages rose from around 3,000 yuan by about 1,000 yuan. In Beijing, monthly salaries increased from 4,000 to over 6,000 yuan. After adjustments, Yonghui's salaries are not higher than all blue-collar jobs, let alone comparable to many demanding positions in these cities. Even if Yonghui kept no profits, it couldn't, at its current scale, compete for the best local talent with salaries double those of civil servants like Pangdonglai, nor require them to follow 188-page cleaning procedures and report on family life. Essentially, Pangdonglai's corporate culture is based on high employee returns—high relative to local Xuchang income—to capture the best local talent. High returns are possible because of Pangdonglai's unchallenged dominance in Xuchang's consumer life. In today's highly competitive environment, no retail company can achieve the same share in China's large and medium-sized cities. We learned that after nearly a year of studying Pangdonglai, Yonghui adjusted its learning strategy around April this year, continuing to follow Pangdonglai in supply chain and store display, but abandoning the imitation of Pangdonglai's "good service." A person close to Yonghui told us this is mainly due to cost considerations; maintaining similar service would require adding one-third more staff per store, costing millions of yuan annually. After the strategy adjustment, staff from adjusted stores will be transferred to other stores to continue supporting adjustments, reducing Yonghui's operational pressure. A corner of Pangdonglai's wine cabinet, featuring representative wines from 10 French wineries. In recent years, the most successful case of learning from Pangdonglai is Bubugao (unrelated to Duan Yongping's BBK brand). At the end of 2023, Bubugao chairman Wang Tian went to Xuchang for help, after which Pangdonglai sent a team of over 100 people to fully take over Bubugao, replicating Pangdonglai in products, salaries, supply chain, and culture. Wang Tian almost stopped participating in business management. To this day, a team of dozens from Pangdonglai remains at Bubugao to continue the transformation and prevent deviation. All costs during the adjustment are borne by Pangdonglai, with no fees charged to Bubugao. This Hunan supermarket leader once had over 300 stores at its peak, but later closed many due to poor management and filed for bankruptcy restructuring, with sales at 30% of previous levels. Now it has closed 90% of its stores to focus on learning from Pangdonglai—making operations healthier but abandoning scale and growth. This may be why Pangdonglai's model is hard to replicate. A necessary condition for its success is voluntarily giving up scale expansion and investing long-term and infinitely in a small market. Most entrepreneurs who imitate it, and even their investors, lack such determination. But as the environment changes, more companies may be forced to make such decisions.