How a lower-tier grocer Pangdonglai is rewriting Chinese retail rules

One of the most talked-about phenomena in China’s contested retail segment is seeing executives from across the country travelling to its stores to learn from its successes. It isn’t a glitzy new experience centre based in one of China’s megacities, but a 29-year old supermarket chain, Pangdonglai (PDL). It started in a fourth tier city and has just 13 stores, all in central China’s Henan province.

Many of China’s largest retail chains are taking notice. Walmart is studying it, and no. 2 supermarket chain, Yonghui, is remodelling its stores based on PDL’s model. A Yonghui supermarket in Zhengzhou refreshed with help from PDL saw average daily sales soar 12-times higher within a month of reopening.

As traditional brick & mortar retailers continue to be outgrown by the dynamic, convenient and cheap online shopping platforms, PDL is “rewriting the rules of retail in China”. It isn’t winning by incorporating shiny, pioneering tech; but by offering things that can’t be replicated when shopping online.

PDL’s secret sauce is about doing the good old fashioned basics really well. It is highly regarded for its integrity, trust and fabulously authentic customer service.

At the heart of providing exceptional customer service, PDL ensures that its staff are genuinely happy, which permeates through to every contact with customers. It has recognised the trend of China’s growing mental health concerns, driven by China’s all-too-common 996-type work culture (9am-9pm-6 days a week). 39% of employees in China reportedly have a high risk of developing mental health issues.

Staff at PDL work 7-hour days, have weekends off, get a string of perks and are entitled to 30-40 days of annual leave. PDL’s average salary is ¥7,000 ($970) a month, versus China’s average retail salary of ¥3,566 in 2019. The company became famous in March for giving staff 10 days of ‘unhappy leave’ to support emotional wellness, a policy that resonated with many urban professionals and went viral across the country.

The policies have created an authentically happy workplace, which rubs off with every contact that shoppers have with staff. They have also helped bolster PDL’s reputation for its integrity.

In addition to mental health, PDL has adapted to other trends such as Chinese consumers’ love for their pets, providing rest areas for furry friends, dedicated pet water and cooling devices. China’s ballooning elderly opportunity is supported with magnifying glasses on shopping carts to help them read labels. Not to leave out the mobile-crazy youth, all stores provide free smartphone chargers.

In its spacious isles, PDL offers exclusive products, such as its Internet-famous own-branded craft beers and desserts. Its groceries have a reputation for being good quality, safe and hygienic, which are symbolized in its crystal-clear fish tanks. It doesn’t run for cover if it gets caught out for its products not being up to scratch. After a shopper posted about the unsanitary production of its rolling dough dish on Douyin, they were rewarded ¥100,000 yuan ($14K), and every customer who bought the dish was given ¥1,000 ($140) – a noticeably generous compensation which turned a would-be crisis into a brand building event, albeit an expensive one.

Pangdonglai’s success is a classic example of China’s tribal shopping traits. Its customer service, quality and integrity are the talk of the town online, which further enhances its allure as everyone wants to be a part of it.

As many brands’ marketing strategies in China are focused around price wars, PDL is charging a premium for higher quality products and a nicer experience in stores, and doing very well as a result. Although the model hasn’t yet been stress-tested on scale, it is a nice reminder that good old fashioned retail can be lucrative when the basics are done well, and relevant trends are supported.