In 2024, amidst the lamentations of the offline retail sector, Pang Donglai seemed to have become the secret code of China's retail industry, simultaneously transforming into a consulting firm for major retail enterprises, helping "peer companies" to extinguish fires everywhere. Even the once-renowned Yonghui Supermarket became a target for assistance.
As the "pillar" of China's fresh food supermarkets, Yonghui Supermarket has not been faring well in recent years. It has not only suffered consecutive years of losses and a series of store closures but has also been plagued by various negative news, significantly damaging its market image and brand strength, with its stock price plummeting. Faced with this critical situation, Yonghui had to confront reality, lower its once-lofty head, and begin to humbly seek advice from Pang Donglai.
With a staggering loss of 9 billion, Yonghui lowered its once-lofty head.
Wind data shows that from 2021 to 2023, Yonghui Supermarket's operating income was 91.062 billion yuan, 90.091 billion yuan, and 78.642 billion yuan, respectively, with net profits of -4.495 billion yuan, -3 billion yuan, and -1.465 billion yuan for the same periods. Over the past three years, Yonghui Supermarket not only suffered a massive loss of nearly 9 billion but also experienced its first "three-peat drop" in revenue since going public, a stark contrast to its previous booming state. According to publicly available information, the significant "contrast" in Yonghui Supermarket's performance is closely related to a series of internal and external environmental changes it has faced in recent years.
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Firstly, the new retail experiments initiated within Yonghui not only subjected it to tremendous operational pressure but also exacerbated disagreements within the management. According to public records, when Yonghui Supermarket went public in 2010, its revenue was only 12.318 billion yuan; by 2013, it had soared to 30.543 billion yuan, tripling in just three years. From 2017 to 2020, it doubled its revenue again in just four years, showing a very rapid development. However, after 2021, its revenue began to plummet.
Tracing back to the root, the accelerated offline new retail that Yonghui Supermarket promoted in those years was the core factor dragging down its performance. After Hema introduced Hema Fresh, Yonghui followed suit by launching its corresponding offline retail supermarkets. After several years of vigorously promoting retail digitization, although Yonghui's online presence finally showed signs of improvement, its offline operations suffered severe losses, which continued to worsen. Furthermore, after 2020, the "internet vegetable selling" war initiated by Chinese internet giants further increased Yonghui's market investment and marketing expenses, exacerbating its already "frail" performance.
Under immense pressure, disagreements also arose within Yonghui's management regarding strategic decisions for Yonghui Supermarket and Yonghui New Retail.
As early as 2017, there were media reports of disagreements between the Zhang brothers, and the conflict officially erupted in 2018 when Yonghui Supermarket announced the dissolution of their joint action relationship. Brother Zhang Xuanning took the lead in Yonghui's new retail business, while Zhang Xuansong steered the supermarket. This strategic divergence undoubtedly brought many adverse effects to Yonghui Supermarket.
Secondly, the recent downturn in China's retail industry has also affected Yonghui Supermarket, adversely impacting its operations. From an industry perspective, over the past three years, the entire supermarket sector has entered a "cold winter." With reduced demand and the dual impact of live-streaming sales, the supermarket industry has experienced a "wave of closures."Taking 2022 as an example, according to the statistical data from the Retail Research Center of Lianshang Network, 12 supermarket listed companies opened 481 new stores in 2022, but closed 646 stores, resulting in an overall decrease in the number of stores. Even industry giants like RT-Mart were not immune to the fate of store closures. As the industry leader, Yonghui Supermarket is naturally no exception. Based on public information, Yonghui Supermarket has closed more than 400 stores in the past three years, and the actual operating situation is not optimistic. In summary, under the influence of a series of unfavorable factors both internally and externally, Yonghui Supermarket, which is suffering from "huge losses," has to bow its once high head in the face of reality.
Explosive Transformation for Survival
In order to emerge from the predicament as soon as possible, Yonghui Supermarket, which is suffering from huge losses, has chosen to join hands with the industry leader, Pang Donglai, in an attempt to seek a glimmer of hope through "explosive transformation." On June 19th, after a 19-day store closure and adjustment from May 31st to June 18th, the Yonghui Supermarket in Zhengzhou Xinwan Plaza, which was "explosively transformed" by Pang Donglai, officially opened. About 20 minutes after the official opening, the supermarket began to implement traffic control measures. So, what exactly has Pang Donglai brought to Yonghui Supermarket that allows it to change so much in a short period of time?
Firstly, it is the optimization of the product category structure, reshaping product competitiveness, and enhancing the service attributes of the supermarket sales floor. Pang Donglai's breakout, to some extent, stems from its service attributes and its high-quality product categories. After getting involved with Yonghui Supermarket, this approach of Pang Donglai has also been replicated in Yonghui. For example, in the adjustment of the Zhengzhou Xinwan Plaza store, Yonghui Supermarket successively phased out more than 81.3% of the original products and introduced 10,110 new items, among which the store's product structure reached more than 90% of Pang Donglai's product structure.
At the same time, on the basis of setting up new product sales areas, Yonghui Supermarket has also added a tobacco and liquor counter, customer rest area, and expanded the bakery area, on-site processing area, and cooked food area, updated the store's hardware facilities, and enhanced the entire store's service functions, making the store's appearance completely renewed. By directly connecting Pang Donglai's supply chain to Yonghui Supermarket, it quickly drove the adjustment of Yonghui Supermarket's product structure. Subsequently, with the completion of the transformation of various service consumer functional areas, the sales floor service function of Yonghui Supermarket has been further improved.
Secondly, it revolves around the business philosophy, reshaping the business environment of Yonghui Supermarket, and stimulating the enthusiasm of consumers and employees. Complementing the product transformation is the implementation of a set of Pang Donglai's business philosophy centered on the "heart." It specifically includes improving employee welfare, adjusting the traffic environment (customer flow routes), equipment facilities, professional capabilities, and many other matters, creating a consumer environment that respects consumers, respects employees, and respects the market.
Specifically, Pang Donglai first raised the salary of the employees in the stores to be transformed from an average of 2,600 to 3,000 yuan to an average of more than 4,000 yuan, and proposed that the company's profit growth should keep pace with the growth of employee wages, implementing a ten-day annual leave system, etc., to fully mobilize the enthusiasm of employees to participate in the business. On this basis, the service standards and requirements of the entire sales floor are improved to boost the overall business level of the sales floor.
Just looking at the effect of the single store after Pang Donglai's transformation, the newly transformed Yonghui Supermarket in Zhengzhou achieved a single-day revenue of 1.86 million yuan, which is 5.3 times that of before the transformation, and the effect far exceeds expectations. However, whether this store model can enable Yonghui Supermarket to successfully continue its life is still to be verified.
Hard to Become the Next Pang Donglai?
From Better Life to Yonghui, as a regional "small" enterprise, Pang Donglai's explosive transformation of listed "large" companies naturally has communicability and indeed easily attracts external attention. But for many "explosive transformation" companies, is such a transformation a unique "orphan" or a model worth promoting on a large scale? At present, it is still uncertain.Firstly, the Chinese market is vast and distinctive, with each region having its own leading enterprises. The success of adjusting one or two stores cannot be compared to the promotion on a large scale. Industry insiders believe that the adjustment of existing retail stores should not be based on a "take-and-use" attitude, but should be based on reality and needs, taking into account both survival and development. It is necessary to consider various convenient conditions and successful factors, adopt different models and channels, and ensure that the transformation can truly maximize the benefits for the enterprise. Moreover, if all stores adopt the unified Pang Donglai model, it may also lead to new issues of homogenization.
At present, the store transformation of BBK and Yonghui Supermarket by Pang Donglai has had a certain promotional effect. However, it is still uncertain whether it can be promoted nationwide, allowing Yonghui Supermarket's stores across the country to run through this model, because even Pang Donglai itself has not stepped out of Henan, so it is difficult to evaluate the effect of its large-scale promotion.
Secondly, the adjustment of goods may cause the adjusted supermarket to lose the entry fee of the original suppliers. Public information shows that after the adjustment of BBK, the product structure reached 90% of Pang Donglai's. This means that the original suppliers of BBK have been temporarily shelved. For enterprises including BBK and Yonghui Supermarket, they still need to weigh in the future whether the new profits generated by the business side can cover the profits lost by the original suppliers.
Finally, the equity relationship of Pang Donglai is different from other listed companies, and many public companies find it difficult to fully build enterprises in the Pang Donglai model. It is not difficult to find through online public information that Pang Donglai is essentially a family business. The Yu family, represented by Yu Donglai, holds an absolute controlling position. This equity relationship determines that Yu Donglai can independently decide the development path and business philosophy of the enterprise. The fact that Pang Donglai can distribute 90% of the profits to employees is also greatly related to this system. In contrast, the equity relationship of Yonghui Supermarket is relatively complex, involving many interest groups. It is basically unrealistic to distribute most of the profits to employees according to the Pang Donglai model.
Because of this, Yonghui Supermarket will inevitably face great challenges in copying the Pang Donglai model in practice. In Yu Donglai's view, there have been many companies in the past that wanted to copy Pang Donglai, changing everything but not adjusting personnel treatment, and they all basically failed. Therefore, in Yu Donglai's view, "willing to share benefits" will be the key to the successful replication of Pang Donglai.
In summary, whether based on its own situation or the mechanism, as a public company, Yonghui Supermarket may find it difficult to become the next Pang Donglai.