Lunar New Year, arguably China’s biggest annual holiday, can be seen as a barometer for the country’s economy. As more than a billion people travel, shop, eat and give gifts to family and friends, their preferences and habits paint a picture of the nation’s consumption over a few festive weeks.
It is a bitterly cold afternoon in Xuchang, a small city in northern China’s Henan province. A persistent wind swirls around the street, bringing shivers from the bundled figures hunched on the pavement.
But the shoppers refuse to be put off by the wintry conditions. There are dozens of them lined up outside the mall – and they are prepared for a long wait. A nearby sign states that the doors will not open for another 90 minutes.
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“In the mornings, people start waiting from 6am or 7am, which is hours before the mall opens,” said a staff member supervising the queue, who declined to be named, citing company policy.
The scene looks like a product launch for a new smartphone, but the store that has inspired this excitement is in fact a local supermarket named Pangdonglai.
Pangdonglai has become an unexpected viral sensation in China over the past couple of years, making its stores go-to destinations ahead of the Lunar New Year holiday, which begins on January 28.
For 20 years, the company operated a handful of outlets in two obscure cities in Henan, and was about as far from trendy as it is possible to be. But its image has now transformed, with shoppers travelling to Xuchang from across the province – and even the country – just to shop at Pangdonglai.
The company’s surge in popularity has allowed it to shrug off the struggles facing China’s bricks-and-mortar retail sector, which has been mired in a deep funk amid a consumption slowdown and strong competition from online platforms.
In 2024, Chinese supermarket giants including Yonghui and RT-Mart reported major losses. Meanwhile, Pangdonglai saw its profits surge to over 800 million yuan (US$110 million), a fivefold increase compared to 2023, the company’s founder Yu Donglai revealed via his social media account.
Almost overnight, the small local chain had become one of the hottest names in Chinese retail.
On the surface, there is little special about Pangdonglai. Its product offering and prices are similar to those found in any other Chinese supermarket chain. But according to its fans, what sets the company apart is its considerate customer service.
“I’ve been to other supermarkets, but none of them have service as good as Pangdonglai,” said one customer surnamed Kong, who had travelled to Xuchang from another city in Henan to do his Spring Festival shopping at Pangdonglai.
“That’s especially true when it comes to the attitude of the staff. The staff at Pangdonglai are incomparably nice.”
Browsing the Pangdonglai outlet in Xuchang, the company’s attention to detail stands out. The aisles are covered in detailed signs offering customers tips on everything from selecting the right shopping trolley to choosing the sweetest fruits. Magnifying glasses are provided next to products with ingredient lists in small print, to help customers read them more easily.
Larger retailers like Yonghui have already begun studying the so-called Pangdonglai model, introducing similar features and services to their own stores. Analysts say the trend could end up driving positive changes across China’s offline retail sector.
“China is no longer short of product supply, and it’s difficult to stand out simply by differentiating your product offerings from others. However, there’s still a lot of room for merchants to improve their service quality,” said Xu Tianchen, senior economist at the Economist Intelligence Unit (EIU).
“In other words, it represents an ‘industrial upgrade’ in terms of providing good services to clients. I have 100 per cent confidence in a potential transformation in offline retailing.”
Pangdonglai has also found that customers are willing to pay slightly more for a superior customer experience. Though some items on its shelves are a few yuan more expensive than those found on online platforms, consumers appear to perceive its prices as fair.
Despite living in Luoyang, a city neighbouring Xuchang, Zhou Yaowen routinely drives to Pangdonglai to shop for groceries. The 30-year-old housewife rarely feels the need to compare prices across platforms or seek out the cheapest possible items.
“As long as I’m happy and the products I buy are genuine and of good quality, I won’t care that much about other things,” Zhou said.
Zhou realises that many others in China do not have that luxury. Her family is fortunate that her husband’s steady factory job in northwest China’s Shaanxi province, which pays about 20,000 yuan, has insulated them from the effects of China’s recent economic downturn.
People in smaller Chinese cities like Xuchang have been hit less hard by the slowdown than those in major metropolises like Beijing in Shanghai, which is another reason Pangdonglai has prospered in recent months.
During the first 11 months of 2024, retail sales in China’s first-tier cities – including Beijing and Shanghai – saw negative growth. But retail sales in third- and fourth-tier cities such as Xuchang rose 8.3 per cent.
“Residents of first-tier cities are feeling a double blow,” said the EIU’s Xu. “They have borne the brunt of the economic slowdown, which has disproportionately impacted big-paying jobs in the largest cities. And falling home prices are affecting their willingness to spend, as many of them have large mortgages.
“People living in smaller cities tend to be free from these troubles.”
More from South China Morning Post:
- China’s embattled restaurants, embroiled in price war, struggle to stay afloat
- China’s consumer sentiment approaches ‘tipping point’ to soar after stimulus barrage: UBS
- Chinese cadres urged to splash the cash to boost consumption ahead of Lunar New Year
- From toys to trading cards, China’s ‘goods economy’ fills emotional voids, opens wallets
- China remains stuck in low consumer inflation for second year
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