How can a fruit chain giant resist internet giants? Pagoda plans to go public. Working for others is not a lifelong option; many founders conceive entrepreneurial ideas while employed, eventually building brands. Today's protagonist is Pagoda, the world's largest fruit retail chain, whose founder was also an employee. Let's look at Pagoda's latest data: as of 2020, Pagoda's store count exceeded 4,500. On the revenue side, Pagoda achieved 10 billion yuan in sales in 2018 and 12 billion yuan in 2019. Meanwhile, according to multiple media reports, Pagoda recently signed a listing guidance agreement with Minsheng Securities, planning to list on a domestic exchange. Will Pagoda become the first fruit retail stock? Before drawing conclusions, let's understand Pagoda, which holds multiple firsts in the industry.
-01- The Expansion Path of the World's Largest Fruit Chain Pagoda's founder, Yu Huiyong, established the world's first true fruit specialty store in 2002, pioneering the global fruit specialty chain model. Pagoda's first store, Fuhua, achieved sales of over 19,000 yuan on its opening day, with foot traffic per unit area exceeding that of McDonald's and KFC. A month later, Pagoda's second store, Hongbao, opened with first-day revenue of 22,000 yuan, setting a new single-day sales record for fruit retail stores. Since then, Pagoda has ridden the waves, adopting a franchise model, opening a new branch every ten days. Pagoda has the most fruit specialty chain stores globally, with locations primarily in residential areas and streets. Pagoda grew rapidly, with store count increasing more than sevenfold from 2010 to 2015. Currently, Pagoda has over 4,500 chain stores, spread across Shenzhen, Hainan, Wuhan, Shanghai, and other cities, covering 10 provinces and more than 20 large and medium-sized cities. Pagoda's stronghold is South China, mainly Guangdong, which accounts for about 50% of its stores, followed by East China, centered on Shanghai and radiating to surrounding cities. Pagoda stores are often located in residential communities and streets, serving community residents and becoming a vibrant part of urban life. Each store covers about 40-60 square meters, serving 4-5 residential communities, with a potential customer base of approximately 20,000-40,000 people. Because fruit chain stores address market pain points such as limited variety at street stalls, poor shopping environments, and long distances to supermarkets, they have become a household brand. Previously, the lack of large fruit chains worldwide was due to the contradiction between chain standardization and fruit non-standardization. To solve the challenge of rapid replication, Pagoda classifies products according to the "Four Degrees, One Flavor, One Safety" standard, establishing standardized quality control. Additionally, through continuous exploration, Pagoda has built a standardized system covering the entire fruit industry chain, from cultivation, logistics, preservation, and quality control to retail display. After establishing this system, Pagoda's annual new store openings have increased year by year. How does Pagoda implement its standardization? Let's break it down.
-02- Pagoda Sets Industry Standards for Fruit Chains 1. Product Grading Standards - Meeting Diverse Consumer Needs In fact, Pagoda targets customers beyond those who shop at farmers' markets, street stalls, and large supermarkets. These customers share a common trait: they have at least some pursuit of fruit quality. They have higher spending power and a stronger willingness to buy mid-to-high-end fruits. In terms of product grades, Pagoda has established its own fruit standards, classifying fruits into Rare, Signature, A, B, and C grades based on "Four Degrees, One Flavor, One Safety," and further categorizing by size (large, medium, small). Different grades differ in sourcing, pricing, transportation, packaging, and marketing. For example, Shandong Red Fuji apples are divided into Crystal Fuji and Regular Fuji based on whether they are bagged, then further into 9 grades by size and overall quality (A, B, C), resulting in 18 grades for Shandong Red Fuji alone. Prices vary by classification and grade; for instance, Red Fuji apples range from 18 yuan at the highest to 3.9 yuan at the lowest. Since the company primarily targets mid-to-high-end customers, Pagoda generally does not sell C-grade fruits, mainly A-grade, with a small portion of B-grade. Detailed grading meets the needs of consumers at different levels, expanding the customer base.
2. Product Variety - Building Customer Stickiness Pagoda offers a wide range of fruit products, from high-end to mass-market items. Among them, Jiangxi organic navel oranges and Hainan rock sugar melons are signature products. Additionally, 20% of products sold in stores are exclusive to Pagoda, or only available as substandard elsewhere. This differentiates Pagoda from farmers' markets and supermarket fresh sections that mainly sell common fruits. By cultivating consumer habits, Pagoda increases rigid demand for specialty products. Products are also adjusted seasonally and regionally to provide fresh, in-season, and origin-specific fruits. Compared to retailers with unstable foot traffic, small fruit supply, and limited product range, Pagoda leverages its large customer base and broad consumer group to meet diverse needs through a wide variety of fruits, enhancing customer stickiness.
3. Self-Built Bases - The Foundation for Great Taste Most fruit retail enterprises' supply chains only include circulation, sales, and consumption, without penetrating production. However, Pagoda, as a fruit specialty retail chain, differs by including production in its supply chain. Pagoda sources 90% of its domestic fruits directly from planting bases. Since its inception, Pagoda has gradually invested in and expanded its production bases. Currently, it has over 200 direct sourcing bases in China, with numbers still growing. Key bases include a 10,000-mu mango base in Myanmar, an 8,000-mu Cuiguan pear base in Anhui, a 5,000-mu Qilin watermelon base in Yunnan, a 10-mu pineapple base and a 2,000-mu rock sugar melon base in Hainan, a fruit base company in Jiangxi, and the Shenzhen Shuanglong Fruit Ecological Manor Base. Each base has a team of planting experts and production service teams to guide production according to Pagoda's requirements, ensuring products meet standards. Direct sourcing from bases not only guarantees fruit quality but also reduces intermediate links, ensuring freshness and controlling costs. Pagoda's spoilage rate Pagoda's spoilage rate dropped from 13% in 2003 to 6%, well below the industry average.
-03- Building a Training System and Creating a "Three-No" Return Service Experience 1. Employee Training - Building a Professional Service Team After confirming franchise agreements and signing contracts, franchisees, store managers, and new employees undergo theoretical training and in-store internships. Pagoda currently has about 10,000 employees, with an average of 6-7 staff per store, adjusted based on store performance. Pagoda places great emphasis on employee care and education. Each month, the company invites fruit industry experts to give lectures, enhancing employees' knowledge of fruit products and continuously improving professionalism. Pagoda also has central trainers. Every new employee receives onboarding training, and each promotion requires corresponding training based on performance and tenure, such as salesperson, squad leader, assistant store manager, deputy store manager, store manager (junior, intermediate, senior), assistant manager, area manager, assistant operations manager, and operations manager. Trained employees possess professional fruit knowledge, enthusiastic service attitudes, and professional sales techniques. Staff often introduce fruit knowledge in a conversational manner and recommend fruits based on customer needs. Many Pagoda staff have become friends with community customers.
2. Increasing Customer Loyalty Through "Three-No" Returns Pagoda's biggest feature is its promise of "Three-No" returns (no receipt, no product, no reason) if the fruit isn't tasty. Traditional return processes are lengthy and complex, often putting consumers at a disadvantage. They must bring receipts and goods, get merchant confirmation, and go through layers of approval, which is time-consuming and costly. Pagoda is different. If customers are dissatisfied, they simply call the store or request a return via Pagoda's terminal. Pagoda will refund within one minute without asking any questions. The loss from returns is shared equally between the headquarters and the store. With the "Three-No" return policy, what if customers eat the fruit and return it without reason? Wouldn't Pagoda face pressure? However, a series of data shows that the return policy not only didn't cause huge product losses but actually led to a sales explosion. The establishment of "Three-No" returns marked a period of rapid growth for Pagoda, moving from 100 stores in the first 7 years to 1,000 stores in the second 7 years, and now nearly 4,500 stores across over 70 cities nationwide. In 2017, Pagoda's sales were 6.8 billion yuan, with a "Three-No" return rate of 0.59%; in 2018, sales reached 10 billion yuan, with a return rate of 0.62%; in 2019, sales were 12 billion yuan, with a return rate of 0.53%. Over the past decade, the proportion of return amounts has always been below 1%. "Three-No" returns may seem like a gamble, but in reality, it successfully leverages the brand as a trump card. Through the "Three-No" return rate, Pagoda has built an image in consumers' minds, establishing trust and increasing loyalty through emotional marketing. Where does the confidence for "Three-No" come from? From the product introductions above, we can see Pagoda's strength and quality. "Three-No" returns reflect both the company's confidence in its products and its trust in consumers.
-03- Franchise Brake From the beginning to now, Pagoda has achieved a layout of over 4,000 stores. How does Pagoda manage its franchisees? Here, we must mention Pagoda's past franchise crisis. After its establishment in 2001, Pagoda expanded aggressively, reaching over 40 franchise stores by 2004. It continued to expand, with the slogan "All brothers, come and join quickly," leading to continuous growth in franchise stores, exceeding 100 by 2007. However, due to overly rapid expansion in the early days, Pagoda fell into management disorder and severe operational loss of control. To correct the imbalance between management and operations, Pagoda adjusted its franchise system. In 2008, Pagoda stopped accepting new franchises and bought back existing franchise stores, becoming the actual controlling shareholder of all stores. It then began encouraging employee shareholding, allowing experienced and sales-savvy employees to become store managers for new openings and hold a moderate share of store equity. The investment ratio is that franchisees hold 20% to 40% of the store's shares, while Pagoda holds 60% to 80%. The co-ownership model ensures the company maintains control over stores while motivating employees, improving operational efficiency, and breaking through the talent and management bottlenecks of the chain model. Additionally, employee shareholding alleviates the capital needed for store openings, reducing the financial pressure from Pagoda's large-scale expansion in recent years. However, the problems of direct-operated stores cannot be ignored: heavy capital, heavy operations, and difficult management. In 2018, Pagoda restarted its social franchise model, completed a 1.5 billion yuan Series B financing, and continued expanding to over 4,000 stores by the end of 2019. Pagoda's path is still the traditional retail chain route: securing investment, rapid expansion, seizing market share, and building brand awareness. In summary, in supply chain management, Pagoda uses unified procurement plus a high proportion of direct sourcing to enhance bargaining power, while also investing in upstream production. The company has built its own logistics centers and reduces spoilage through classified storage and pre-packaged sales, controlling the spoilage rate at around 5%, half the industry average. In terms of standardized replication, Pagoda expands through a cooperative franchise model, which on one hand motivates employees and on the other reduces capital pressure during expansion. Furthermore, Pagoda pioneered the "Four Degrees, One Flavor, One Safety" quality control standard in China, providing scientific guidance for stores in procurement, quality control, acceptance, and store standards. Today, Pagoda has become the world's leading fruit chain store.
-04- Community Group Buying Overwhelms Pagoda In terms of products and services, Pagoda excels. But now, Pagoda faces a new challenge: the sniper of community group buying. Entering 2020, the community environment changed dramatically, and Pagoda faced an unprecedented community group buying siege. On one side, Xingsheng Youxuan stands as a unicorn; on the other, Alibaba, JD.com, Pinduoduo, and Meituan are eyeing the market. These internet giants enter with hundreds of millions of daily active users, and their capital and control over online business far surpass Pagoda's. Although the outcome of the giant battle is still undecided, it is foreseeable that Pagoda's business territory will be eroded, because fruit, as a high-frequency consumption item, is often a loss leader for community group buying. Combined with the giants' cash-burning tactics, it's easy to shift consumers' recognition from Pagoda to new platforms. Pagoda's planned IPO may not be to solve problems but rather forced by these issues.
This is not a simple territorial dispute but a battle for survival: if Pagoda does not go public, replenish its ammunition, and confront the giants on the track, it will face existential threats. Additionally, Pagoda faces the issue that while consumers trust Pagoda, loyalty is hard to maintain. There's a saying in the industry: in fresh produce, origin > variety > company. That is, consumers recognize the origin of fruit more than the company. Once other platforms catch up on origin advantages, Pagoda's advantages will naturally be reshuffled. Pagoda's fruit is tasty, but when other tasty fruits are available with price support, consumers become rational in their choices. Moreover, once consumption habits change, it becomes difficult for Pagoda to reacquire customers. Whether or not Pagoda becomes the first fruit stock, in today's environment, it is not a choice that can fully resist risks. After all, this community war is in full swing, and the future trend is hard to predict. Although Pagoda has been laying out online business for three years, facing the onslaught of internet giants, the survival of the fruit giant is still uncertain.
Source: Consumption Circle (ID: xiaofeijie315), Author: Zhishui Tips will be paid 400-2000 yuan upon adoption.