Yonghui bet on Pang Dong Lai remodels after three years and ¥8bn of losses

Yonghui, once China's top supermarket, fell into structural decline as e-commerce and membership stores ate its traffic. H1 2021 brought a ¥1.083 billion loss, its first in a decade, and market value shrank from over ¥100 billion to below ¥40 billion. The filings exposed the rot: 2023 'retail revenue' of ¥73.7 billion carried a 16.3% gross margin, while 'service revenue' — mostly fees extracted from suppliers — was ¥4.93 billion at a 94.7% margin. Productivity per square metre hit a ten-year low. Across 2021-2023, net losses totalled ¥8 billion.

In May 2024 Yonghui turned to Pang Dong Lai, the Henan retailer whose 13 stores generated ¥10.7 billion in 2023 — about ¥820 million per store, roughly ten times Yonghui's per-store average of ¥78.6 million. Pang Dong Lai rebuilt the first Zhengzhou store in 19 days: 11,000-plus products delisted, quality items and fresh food promoted, aisles widened, supplier back-end fees abolished in favour of cost-plus pricing. It reopened to ¥1.88 million of day-one sales — nearly 14 times the previous daily average — with 13,000 visitors, 5.3 times before.

The bet quickly scaled: in August 2024 Yonghui announced self-directed remodels across 11 core cities including Beijing, Shenzhen and Chengdu. The first Beijing store reopened on October 19 to nearly 50,000 visitors and ¥1.7 million of sales, six times its old daily average; 79% of its products were delisted and replaced, with imports lifted from under 10% to over 20%. Weeks later, on September 23, MINISO agreed to pay ¥6.3 billion for 29.4% of Yonghui from Dairy Farm and JD.com, becoming the largest shareholder.

Remodeled Zhengzhou store reopened after 19 days selling ¥1.88M on day one — 14x its old daily average; Beijing's first self-remodel store did ¥1.7M, 6x.

The slotting-fee model had inverted the economics: supplier fees earned 94.7% gross margins while the goods themselves sold at 16.3%, making shelf space more valuable than shoppers.

Three years of losses under digitization and cost cuts proved the problem was the product offer, not overhead — traffic would not return without a different store.

Pang Dong Lai brought proof, not theory: ¥820 million of sales per store in a fourth-tier city, an order of magnitude above Yonghui's own stores.

The remodel attacked root causes — delisting 79% of products and scrapping back-end fees changed what Yonghui bought and how it priced, not just how shelves looked.

Copy the operator, not the brochure: adopting a rival's product range, supplier terms and store craft worked where digitization had not — because the fee-based business model itself was torn out.

MINISO's ¥6.3 billion purchase of 29.4% from Dairy Farm and JD.com — announced September 23, 2024 — installed founder Ye Guofu as Yonghui's largest shareholder while explicitly stopping short of board control; MINISO's shares nonetheless fell 19.5% that night, erasing about $1 billion, as investors doubted a variety-retailer could fix a grocer. The remodels kept spreading across the 11-city program, and remodeled stores kept reporting multiples of their old sales — though sustaining the gains chain-wide, and funding Pang Dong Lai-style wages at Yonghui's scale, remained the open question.