Can Pantoulai's "Miracle" Be Replicated?

Tech 2024-08-24 18:05:26 Source: Network

Can Pantoulai's "Miracle" Be Replicated? Pantoulai, known for its unique business model and viral success, has been making headlines again this year by "revamping" offline supermarkets like Bubugao and Yonghui. While traditional supermarkets are struggling with closures, with at least 31 stores shutting down in the first quarter of this year across brands like Walmart, RT-Mart, Yonghui, Wumart, Tianhong Supermarket, Hema Fresh, and B&G Foods, Yonghui alone losing 10 stores, Pantoulai is experiencing remarkable growth

Can Pantoulai's "Miracle" Be Replicated?

Pantoulai, known for its unique business model and viral success, has been making headlines again this year by "revamping" offline supermarkets like Bubugao and Yonghui. While traditional supermarkets are struggling with closures, with at least 31 stores shutting down in the first quarter of this year across brands like Walmart, RT-Mart, Yonghui, Wumart, Tianhong Supermarket, Hema Fresh, and B&G Foods, Yonghui alone losing 10 stores, Pantoulai is experiencing remarkable growth. In April, founder Yu Donglai revealed that Pantoulai, which aimed to earn 20 million yuan last year, actually ended up making 140 million yuan. At the end of last year, Yu Donglai predicted that Pantoulai's annual revenue would reach around 10 billion yuan, with a profit margin exceeding that of Yonghui, Jiajiayue, and Gao Xin Retail.

Yonghui's desperate plea for help from Pantoulai highlights their urgent need for survival. However, can Yonghui truly escape its predicament by replicating Pantoulai's completely different business philosophy?

Can Pantoulai

A Tale of Two Supermarkets: Pantoulai vs. Yonghui

In terms of store count and revenue, Pantoulai is dwarfed by Yonghui Supermarket. Yonghui, founded in 2000 in Fuzhou, the capital of Fujian province, went public in 2010. At its peak, it operated 1440 stores nationwide, but has shut down over 400 stores in recent years, leaving it with 975 stores. Its revenue last year reached 78.642 billion yuan. Pantoulai, established in 1995 in Xuchang, a third-tier city in Henan, remains unlisted. It once had 30 stores but voluntarily closed down over a dozen profitable stores, leaving it with 13 stores today 11 in Xuchang and 2 in Xinxiang. Despite its smaller scale, it generated 10 billion yuan in revenue last year.

Can Pantoulai

However, Yonghui's aggressive attempt to enter Pantoulai's home turf of Xuchang met with failure. In 2018, Yonghui entered the city alongside Wanda, opening a 3000-square-meter supermarket just under 3 kilometers from Pantoulai's Times Square. Determined to grab market share from Pantoulai, Yonghui initially offered prices 20-30% lower, even pricing some goods below Pantoulai's. They later mimicked Pantoulai's decor, but local customers remained unconvinced, and the store has never been profitable since its opening.

Yonghui's losses are not confined to Xuchang but extend across the nation. They posted losses of 13.29 billion yuan last year, 27.63 billion yuan the year before, and 39.44 billion yuan two years prior, totaling nearly 80 billion yuan in losses over three years. In contrast, Pantoulai earned 140 million yuan last year. If Yonghui could achieve the same single-store profitability as Pantoulai, its sheer size would allow it to generate 9 billion yuan annually.

Can Pantoulai

Pantoulai's "Revamp" of Yonghui: Initial Success

Desperate and envious, Yonghui humbly sought advice from Pantoulai. The generous Pantoulai selected Yonghui's Xinwan Plaza store in Zhengzhou for a "revamp." After 19 days of closure for renovations, the store reopened to crowds, with customer traffic increasing fivefold and sales reaching 13.9 times their previous level. The stock price rose 20% over three trading days.

Can Pantoulai

In May, Pantoulai had also assisted Bubugao in Changsha, boosting traffic at its Meixihu store by sevenfold and average daily sales by eightfold. The stock price rose for four consecutive days, repeatedly hitting the daily limit. Besides these two cases, Pantoulai has helped 12 other companies, including Shangrao Jiabai Le, Xinle Supermarket, Hubei Yasi Supermarket, and Qinghai Yijiaqin Supermarket, all of which have realized positive growth, with five achieving double-digit growth.

Superficially, Pantoulai seems to possess a revitalizing touch, transforming struggling stores into flourishing ventures. But is the reality truly this idealistic?

Can Pantoulai

The Paradox of Organizational Reform: Copying Models Is Not a Panacea

In reality, "revamping" a single store out of Yonghui's 900+ locations does not address the fundamental issues of the vast organization. For Yonghui to overcome its decline, it needs to leverage its strengths while seeking opportunities in emerging markets, not blindly transform itself into another entity.

Can Pantoulai

Many successful organizations have faced their darkest moments. Their rise is not about abandoning the past entirely but about finding their enduring core. Satya Nadella, the current CEO of Microsoft, took over a troubled company. Its core PC Windows system had stagnated, and it had missed vital trends like mobile phones, search engines, and social networks. Internal bureaucracy reigned supreme, with colleagues engaging in office politics, neglecting innovation.

Nadella contemplated why Microsoft existed. What set it apart? What would the world lose if Microsoft disappeared? Microsoft's initial purpose was to "put a computer on every desk and in every home." This goal was largely achieved, leading Nadella to refresh the company's mission. He led his team through extensive deliberation, culminating in a redefined Microsoft mission: "Empower every person and every organization on the planet to achieve more." The key terms became "empower" and "help."

Can Pantoulai

Nadella understood that resurgence required shedding the attachment to past glory and resolutely embracing the future. He no longer considered Windows the core engine, abandoning the $7.1 billion investment in mobile systems, and instead led the team towards becoming a cloud-based enterprise, increasing investment in artificial intelligence. Under Nadella's guidance, Microsoft has achieved new heights.

However, reform is not easy. Historical experience shows that 75% of organizational reforms fail. This seems paradoxical, but it becomes clearer when applying it to political science. There are two terms in political science: reform and revolution. Throughout history, reforms, improvements, and transformations have frequently failed. Their reliance for success rests upon the very elements they aim to change. This is known as the reform paradox. To profoundly alter a social system, revolution is often the only option. The same applies to organizations.

Can Pantoulai

For any longstanding company, its corporate culture, values, and survival network have become deeply ingrained, with vested interests solidifying. Without a complete internal revolution, it becomes extremely difficult to change the status quo.

Nadella's reform began with the corporate culture. Facing a behemoth with over 100,000 employees and branches in 190 countries, establishing consensus was daunting. To ensure the new vision seamlessly integrated with the organization, Nadella simplified the process, defining the new mission, worldview, vision, and culture on a single page. In the initial years, Nadella acted like a preacher, regularly communicating with employees, repeatedly emphasizing these concepts. Whenever he contemplated changing a word or two or a line or two, he reminded himself that "consistency trumps perfection," curbing the urge to make arbitrary changes.

The value network refers to the combination of technology, products, markets, capital, and organization that forms a company's lifeline. Many business giants have fallen not to up-and-coming challengers but to their own vested interests and ingrained mindsets. Google is a case in point. Google's research progress in generative AI and large language models was not behind OpenAI's, but before ChatGPT, it never released any influential products. This was because products like ChatGPT, providing personalized answers through conversations, threatened Google's core search business. Google's reliance on search advertising revenue made it difficult to invest heavily in innovation, especially when it conflicted with its existing strengths. This echoes the story of Kodak, the film giant that held back its digital camera invention, leading to its ultimate downfall at the hands of digital photography.

Pantoulai's Path of Self-Revolution

Pantoulai's success today stems from its painful self-awareness and thorough internal revolution. Pantoulai has never held any secrets. Its entire management philosophy, regulations, and rules are openly available on its website. A steady stream of visitors come to Pantoulai for observation and learning. Why is there still only one Pantoulai? Because both Yu Donglai and Pantoulai have experienced life-or-death situations. This profound enlightenment behind their business model is only partially transferable; complete replication is impossible.

Yu Donglai comes from a poor family and dropped out of school in middle school. He worked on construction sites and in rubber factories before entering the retail sector with his brother and sister-in-law, selling cigarettes and liquor. As a young man, Yu Donglai was a risk-taker. To quickly earn money, he smuggled cigarettes from other provinces, resulting in three arrests in three separate instances. Within a year, he went from making over 100,000 yuan in profit to being in debt for 300,000 yuan. These experiences taught Yu Donglai that success doesn't come from shortcuts

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