Today I passed by Yonghui Supermarket and saw that the Fat Reform Store had caused a disaster for Yonghui Supermarket. Pang Donglai attributed his success to sincerity and love, which is the biggest lie in business. Yonghui Supermarket was really fooled by this trick. Yonghui has a pitifully low customer flow. What else can we learn to provide quality services? We only increase costs without being able to recover. The essence of Pangdonglai is an atypical retail complex with extremely high commodity turnover rate, extremely low loss rate, and partial monopoly pricing power. Its success has never been due to warmth. The comprehensive gross profit margin of traditional supermarkets is usually around 20%. The book gross profit margin of Pangdonglai has not significantly surpassed the industry average level. What really makes it make big money is its far superior capital efficiency compared to its peers. Relying on high turnover and low inventory, the essence of the retail industry is a capital efficiency game. Traditional supermarket standard products take 30 to 45 days to sell on the shelves, resulting in extremely high capital occupation costs. Thanks to its huge customer flow, Pangdonglai has extremely short product turnover days, with many popular products being sold on a daily or even hourly basis. Assuming that both have a gross profit margin of 20%, Yonghui's funds are turned over 6 times a year, and Pangdong's funds are turned over 20 times a year. For the same principal, Fat Dong can only roll out 400% of the total gross profit in the past year, while its peers can only roll out 120%. There is a huge source of cash flow, and direct cash procurement lowers prices. High turnover → Low purchase price → High salary → High service → More customer flow Fat Donglai's DL series includes craft beer, baked goods, and fruit juice. Contributed 30% of sales revenue, but far exceeded 30% of profits. Cutting down middlemen and adding trust premium, the gross profit margin of these private brands is higher than 20%. So its business logic has never been sincerity for the market, but trust=premium+high turnover=capital efficiency crushing. Why can't Yonghui learn In 2025, Yonghui will incur a loss of 2.55 billion yuan, with a cumulative loss of nearly 12 billion yuan over five years and an asset liability ratio of 88.96%. It's not that it didn't work hard, adjusting 284 stores and closing 381, the efforts can be described as significant. But no matter what, we can't use the gross profit of the vegetable market to bear the service cost of luxury goods. The rent in the core business districts of first tier cities is 5 to 8 times that of Xuchang. Pangdonglai is a self owned property with much lower passenger flow than Pangdonglai. The cost difference between the two is only 10 times, and the requirement to reach the breakeven line is also increased by 10 times. If turnover slows down, the loss of fresh produce will increase; When the loss increases, the net profit is consumed. Yonghui is stuck in the quagmire of slow turnover, high losses, and high store rent. Even more cruelly, it learns about watches - high salaries, shortened business hours, and no reason for returns and exchanges. But I didn't learn about the low rent and ultra-high passenger flow in third tier cities, which bring about rapid turnover and the pricing power of our own brand supported by trust premium. Setting aside the forced increase in labor and service costs by financial models, cash flow will inevitably dry up instantly. Yonghui's predicament is not due to lack of sincerity, as the financial model is fundamentally incompatible.