Pang Dong Lai (胖东来) is a retail store chain founded in March 1995 by Yu Donglai. It is headquartered in Henan, China, with a total of 13 stores in Xuchang and Xinxiang. In 2024, they reported a total sale of RMB 17 billion, with a profit of over RMB 800 million. On average, the profit of a single Pang Dong Lai store would be around RMB 61 million annually, compared with Aldi China, which generated around RMB 36 million in 2024 per store. This supermarket has expanded its influence over the entire retail market. The reason for Pang Dong Lai’s (PDL) success lies in its customer service experience, supply chain management, and employee well-being/benefits.
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The unique business philosophy at Pang Dong Lai
One of the reasons for PDL’s success is the business philosophy that Yu created. It is centered around “freedom and love”, while also prioritizing its employees’ well-being and customer satisfaction.
Employee benefits & “unhappy leave”
During China Supermarket Week in late March 2024, Yu stated that employees would be eligible to request 10 days of additional leave at their discretion. Yu wants employees and staff members to freely determine their own rest time and encourages everyone to relax outside of work. “I want every staff member to have freedom. Everyone has times when they’re not happy, so if you’re not happy, do not come to work,” Yu said in an interview. PDL has over 7,000 employees, and the average monthly income is more than RMB 9,000 in 2024. This is higher compared to other grocery store workers who earn around RMB 3,700 to RMB 6,000 monthly, depending on the city.
PDL’s employment policies require employees to work only eight hours a day, take weekends off, and receive 30 to 40 days of annual leave plus days off during the Chinese New Year. Additionally, “unhappy leave” also allows employees to take time off if they feel emotionally unwell. If management denies such a request, it’s considered a violation by the company. These initiatives reflect deep care for employees’ mental well-being and PDL’s commitment to humane working conditions. The concept of the “unhappy leave” has attracted a lot of attention and support online, but it’s also aligned with PDL’s business strategy.
Pang Dong Lai has fostered a highly motivated, loyal, and customer-focused workspace in an industry known for high turnover and burnout. PDL’s approach builds a stable team culture. This translates to the high service standards and long-term brand loyalty of its consumers.
Pang Dong Lai’s focus on customer satisfaction
The store is carefully designed to fit every customer’s needs, starting from the shopping carts at the entrance. There are ordinary shopping carts, special carts for the elderly with seats and armrests, and strollers for families shopping with babies. All products are arranged neatly on shelves, and produce is classified and displayed according to type, origin, and picking time. Pang Dong Lai’s emphasis on food hygiene is apparent, for example, seafood has extremely strict standards from purchasing to inventory, sales, and after-sales. They also test vegetables for pesticide residues daily and display the results, and meat is cleared out the same day, with none left overnight.
The Pang Dong Lai supermarket is equipped with pet cabinets at the entrance, along with dedicated pet water stations and cooling devices. They also offer around 100 free services for customers, such as free blood pressure measurements, air conditioning cleaning, and handbag maintenance. The services also extend beyond just inside the store: when it rains, PDL employees will stand at the entrance and give out umbrellas to customers coming out of the shop, as well as escort them to their cars. If a customer is seen walking towards the parking lot carrying a lot of bags, a security guard will come forward to ask if they need help and carefully put the customer’s goods into their car.
Approach to after-sales services
If consumers are not satisfied with the product, they can return or exchange it with no additional questions asked. This creates strong trust between the consumer and the brand, as they can shop without worrying about product quality. The “complaint reward program” launched by the company is also very unique: as long as customers have complaints about their service experience and actively file a complaint, they can receive a reward of RMB 500.
Continuing to thrive despite the sluggish consumer market
Pang Dong Lai has very strict standards, and they always adhere to their business philosophy of “affordable price and quality assurance”, while serving the consumers as “gods”. PDL caps its profit margin at 30%, while offering “Every Day Low Price” (EDLP), which offers fair pricing without needing to constantly put up promotions. The chain also eliminates any backstage fees to be able to price its products consistently.
Moreover, PDL differentiates itself from other grocery chains. It offers a curated selection and its own branded products. There is also a central kitchen where they produce food products in-house that attract customer repurchases. These are the reasons why PDL is able to be so successful in the retail space and set a benchmark for other enterprises.
The company has a strict screening process for food suppliers, ensuring food safety from the source. If a new food company wants to apply to be a supplier, PDL will strictly review their business licenses and check various categories to make sure they meet the national good and safety standards. The purchasing team will conduct on-site inspections in the production factories to ensure the quality straight from the source. Even in the physical stores, signs are placed very carefully next to products with information about production date, shelf life, and other key information.
Despite the seemingly high operational costs, PDL remains successful by converting these investments into advantages. The company’s attention to detail, from product quality and hygiene to the thoughtful customer experiences, builds loyal returning customers, which drives repeat visits. Its ability to differentiate itself from other stores has also attracted a lot of visitors, that’s not from Xuchang, to purchase from the store and post about it on social media.
Becoming a local attraction
Before Pang Dong Lai’s popularity boom, Xuchang was known for its wig production. But after PDL went viral on social media, it’s been labeled by netizens as a tourist attraction with no off-season. During the eight-day Spring Festival holiday in 2024, three PDL supermarkets had around 1.1 million shoppers in just three days. According to a visitor, the hotel they stayed at had a guide for shopping at Pang Dong Lai on the TV, due to numerous hotel guests’ inquiries about the supermarket.
The future of Pang Dong Lai: Difficulties with expansion
Despite the current success, there are difficulties in expanding beyond Henan. Pang Dong Lai’s advantages are grounded in the fact that it’s based in a fourth-tier city. If it opened in a first-tier city such as Shanghai, it would face extreme competition from the major supermarkets there, leading to a dilution of its customer base. In the 30 years since PDL was founded, its stores have always been rooted in Xuchang. They only went as far as Xinxiang and did not even venture into the capital of Henan yet. With China’s current economic climate, people are hesitant to spend money. Therefore, PDL’s model is struggling to be replicated in other cities due to pricing and sourcing differences.
Many of China’s large retail chains are starting to take notice of Pang Dong Lai. For instance, Walmart is studying its business model. Moreover, the second biggest supermarket chain in China, Yonghui, is remodeling its stores based on PDL’s model. One Yonghui supermarket in Zhengzhou that has adapted PDL’s standards and business strategy saw its average daily sales grow by 12% within a month of reopening.
The success of Pang Dong Lai and its impact on the retail industry in China:
- Pang Dong Lai is a retail store founded in March 1995. It became viral online for its amazing employee benefits and customer service.
- PDL’s success lies in the founder Yu Donglai’s business philosophy: “freedom and love”. Employees can request 10 days of additional leave at their discretion and work 8 hours a day with no overtime allowed.
- PDL stores are designed carefully to fit every aspect of customer needs, from special carts for the elderly to the company’s strict standards for food hygiene.
- PDL has gone on to set a benchmark for other retail companies. As such, brands like Walmart have started studying PDL’s business model.
- Despite PDL’s current success, there are difficulties for expansion outside of Henan to higher-tier cities due to competition and China’s current economic climate.
