Chongqing - "The Yonghui I remember was dimly lit, just like when I used to shop here with my mother," said Ms. Chen on August 26 at Yonghui's Chongqing Nanan District Wanda Plaza store. "Now it's completely different - bright lights, spotless floors, with staff cleaning all the time. Everything, from the environment to the service, feels upgraded."

Yonghui Supermarket's Nanan District Wanda Plaza store. (Photo/Zheng Ran)

The Nanan District Wanda Plaza store is the first Yonghui branch in Chongqing to be remodeled by adopting management practices from Pangdonglai, a well-known supermarket chain in China's Henan province.

The Pangdonglai model is a Chinese management model that focuses on treating employees exceptionally well with high wages and benefits. This creates a motivated workforce that delivers legendary customer service.

A representative from Yonghui Supermarket in Chongqing said the store overhaul is centered on product selection, supply chain, and service, aiming to strengthen the store's long-term competitiveness. More than 60% of low-demand items have been removed, while over half of the products are now new and positioned as higher value. Bakery and ready-to-eat foods have doubled their share. Upgrades also include rest areas for shoppers, seafood counters that provide cleaning and packaging, and fruit assortments labeled with a recommended eating order based on sweetness.

The service area at Yonghui Supermarket's Nanan District Wanda Plaza store offers tea, weighing, and ice packs to shoppers. (Photo/Zheng Ran)

In its first three days, the newly branded "Pang-style Yonghui" attracted 180,000 visitors, with nearly 48,000 making purchases, receiving generally positive feedbacks from customers. Shopper Wang Hai said the bakery and ready-to-eat sections kept him buying more than expected, while another customer, Wu Min, praised the seafood counter for offering tips and recipes that made cooking easier.

Seafood section of Yonghui Supermarket's Nanan District Wanda Plaza store. (Photo/Zheng Ran)

Others expressed minor complaints. Some long-time elderly shoppers said they found the new layouts confusing, while younger customers felt the changes did not match the digital convenience offered by competitors like Alibaba's Freshippo.

The meat section of Yonghui Supermarket's Nanan District Wanda Plaza store. (Photo/Zheng Ran)

COMPANY SEEKING A TURNAROUND ON FINANCIALS

On August 20, Yonghui disclosed its 2025 interim report: revenue for the first half fell 20.73% year on year to 29.95 billion yuan ($4.2 billion). Net losses attributable to shareholders reached 241 million yuan, compared with a profit of 275 million yuan a year earlier.

With the ongoing revamp, the company is stepping up its effort to turn profit from red figures into black.

CFO Wu Kaizhi told investors that remodeled outlets showed very significant sales increases, and those that reached stable operation were already profitable. However, the company did not disclose detailed figures in its interim report.

By August 21, Yonghui had remodeled 162 stores, accounting for nearly 30% of its 552 active outlets. The company aims to complete 200 stores by the end of September.

Industry experts caution that the current 162 stores being remodeled are insufficient to achieve economies of scale, as these stores are still not the company's core base.

The cost of remodeling is also substantial. Yonghui's Vice President Wang Shoucheng has said each upgrade requires 5 million to 8 million Chinese yuan, with smaller stores needing at least 3 million yuan.

Yili's EU-standard fresh milk, custom-made for Yonghui, is priced at 7.9 yuan for 950ml. (Photo/Zheng Ran)

Founded in 2001, the Fujian-based retailer built a reputation with its "fresh produce plus low price" strategy. In 2020, the company operated more than 1,000 stores and had a market capitalization exceeding 100 billion yuan.

But its fortunes quickly soured. In 2021, Yonghui posted a record loss of 3.94 billion yuan. The company blamed falling revenue and gross margins, changes in the fair value of financial assets, and impairment charges on store assets. Total losses since 2021 have exceeded 9.5 billion yuan.

Facing mounting debt and shrinking cash reserves, Yonghui announced in May 2024 that it would remodel its stores after Pangdonglai.

Former CEO Li Songfeng said last year, "Pangdonglai has insisted on quality, serving employees and customers well, forming a positive cycle of trust. This is a path worth learning from for the retail industry."

A shopper selects fresh vegetables. (Photo/Zheng Ran)

The shift coincided with changes in ownership. In September 2024, Miniso acquired a 29.4% stake for 6.3 billion yuan, becoming Yonghui's largest shareholder. Its founder, Ye Guofu, took over as head of the reform committee and acting CEO. He has repeatedly stated that "the Pangdonglai model is the only way out for Chinese supermarkets."

Yonghui Supermarket. (Photo/Zheng Ran)

REFORMS ON MULTIPLE FRONTS

Alongside store remodeling, Yonghui has overhauled its supply chain. The company is cutting out middlemen and has halved its supplier base. While this improves transparency, it has slashed service fee income, long a high-margin revenue source from charging suppliers entry, bar code, or promotion fees. That income fell 40% in the first half to 1.44 billion yuan.

Yonghui’s online business is also undergoing changes. Online sales reached 5.49 billion yuan in the first half, accounting for 18.3% of total revenue, but the segment still reported losses, though slightly reduced. The company is investing in "front warehouses" - small storage hubs in urban areas to speed delivery - with pilots in cities like Chongqing and Xi'an.

Rivals are strengthening their lead. The 2024 Top 100 Chain Stores List from the China Chain Store & Franchise Association (CCFA) shows Freshippo's sales reached 75 billion yuan last year, surpassing Yonghui's 73.2 billion yuan for the first time. At the same time, Sam's Club is expanding quickly, with average daily sales per store around 5 million yuan - well above the roughly 1 million yuan seen at Yonghui's remodeled outlets.

More than 10 major supermarket chains in China, including Walmart, Yonghui, Bubugao, Wumart, and China Resources Vanguard, have announced store revamps, according to media tallies.

"The relatively rigid operating models of traditional supermarkets urgently need renewal," said Zhu Keli, founding director of the China Institute of New Economy. He called transformation and upgrading "an inevitable trend."

Fudan University professor Zhang Yina, who also heads the Ministry of Commerce's Consumer Market Big Data Laboratory (Shanghai), said supermarkets are tailoring reforms to their own scale, strengths, and customer base. "Early results show higher sales and foot traffic," she noted.

The sector also faces pressure. Data from the CCFA show the top 100 supermarkets posted sales of 900 billion yuan in 2024 with 25,200 outlets—up 0.3% and 5.8% year-on-year.

Zhang said supermarkets are under faster, deeper pressure to transform in China's advanced e-commerce environment. Her lab estimates the sector's size could reach 2.5 trillion yuan this year, despite slowing growth.

Zhu said the lesson on why Henan-based Pangdonglai has become a benchmark is to "go back to the fundamentals of retail." The goal, he added, is to build a consumer-centered value chain- restructuring organizations, raising employee satisfaction, and focusing on product quality to regain trust and competitiveness.

Yonghui warned that 2025 revenue will fall below last year's 78.6 billion yuan due to widespread store closures. As one industry analyst put it, Yonghui's challenge is not just to imitate Pangdonglai, but to find a path suited to its nationwide footprint.