In 2013, as e-commerce was booming, Hubei businessman Ye Guofu took a different path, choosing to focus on brick-and-mortar stores when he founded Miniso. Ye, deeply committed to retail, believed in the power of physical locations and sought to bring Miniso, a brand selling affordable small goods, into high-end shopping malls. He would routinely visit upscale malls during business trips, hoping to convince mall operators to give Miniso a chance. Yet, due to brand positioning and contract negotiations, he often faced rejection.
Undeterred, Ye had a larger vision: to create a “Chinese version of Costco.” He frequently expressed admiration for Costco’s business model, acknowledging that Miniso was still in its early stages compared to the retail giant. Now, with Miniso’s acquisition of a key stake in Yonghui Superstores, Ye’s ambitions may finally be within reach.
Following the acquisition announcement, Ye hinted during a conference call that Miniso still lacked significant recognition in China’s top 1,000 shopping malls. He saw Yonghui as a vehicle to influence shopping districts and secure prime locations with more favorable lease terms, much like how Zara drove growth for Inditex’s other brands.
However, the market reaction was less enthusiastic. On the first trading day after the announcement, Miniso’s stock price dropped in both the US and Hong Kong markets, while Yonghui Superstores’ shares hit the daily limit-up. Investors questioned why Miniso would invest such a significant sum in a traditional supermarket chain. The deal—RMB 6.27 billion (USD 877.8 million) for a 29.4% stake—would nearly deplete Miniso’s cash reserves, which stood at about RMB 7 billion (USD 980 million).
Ye defended the decision, pointing out that Yonghui was at a turning point in its performance and that major improvements could be expected within the next one to two years. He even suggested on his social media that the confusion around the deal might indicate he was ahead of the curve.
Ye’s confidence came from his visits to revamped Yonghui stores modeled after Pangdonglai, a small but successful supermarket chain. In July, Ye spent an entire evening at one of Yonghui’s stores in Zhengzhou, observing the bustling crowds. After visiting other locations, Ye became convinced this was a major opportunity for Miniso.
But the sellers involved in the transaction seemed less optimistic. For some, Yonghui was more of a burden than a prize. DFI Retail Group, one of the sellers, had acquired a 20% stake in Yonghui for RMB 5.69 billion (USD 796.6 million) in 2014, but sold it at a loss following Miniso’s acquisition. JD.com, another seller, also reduced its stake from 6.98% to 2.94%.
An investor told 36Kr that, while Miniso secured a favorable price, its large stake in Yonghui came with limited control. Both companies also share a common investor, Tencent, and without new backers, there’s a risk of a market collapse, which could affect Tencent as well. The investor speculated that Miniso’s role might be to stabilize Yonghui’s value.
Pangdonglai’s model is central to Ye’s strategy. During the call, he discussed how retail could evolve toward either low prices or differentiation, and he saw Pangdonglai as a leading example of the latter. The results from the revamped Yonghui stores were impressive: daily sales in the first month after a store’s reopening reached RMB 1.87 million (USD 261,800), a nearly 14-fold increase. A second store saw an 8.2-fold increase. Following these successes, Yonghui announced plans to roll out similar revamps in ten other cities across China.
On the product side, Yonghui fully adopted Pangdonglai’s approach, overhauling its third revamped store with more than 90% of Pangdonglai’s product mix. This transformation was pivotal in pulling Yonghui back from the brink of collapse. Before the revamps, the supermarket chain was struggling—its stock price had dropped from over RMB 11 to a low of RMB 2. By 2023, Yonghui reported a net loss of RMB 1.329 billion (USD 186.1 million) and a net decrease of 33 stores. The trend continued into the first half of this year, with a net reduction of 57 stores.
While these changes haven’t yet produced significant financial improvements, they have lifted Yonghui’s stock price, with the company hitting two daily limit-ups in August. However, not everyone is convinced that the Pangdonglai model can be successfully scaled across Yonghui’s national footprint.
A source close to Yonghui pointed out that the two companies operate under fundamentally different business models. Pangdonglai’s success is rooted in its localized operations in Xuchang, while Yonghui is a large chain with a vast supply network. Moreover, the recent changes in Yonghui stores have focused on two key areas: adjusting store layouts and service, and introducing Pangdonglai’s proprietary products—moves that some observers dismiss as marketing tactics rather than a meaningful transformation.
An industry insider from a major supermarket chain noted that since 2009, no one has managed to fully replicate the Pangdonglai model. Successes have been limited to select local markets, often with long-established retailers that hold strong reputations in lower-tier cities.
More than the Pangdonglai-style revamps, external observers are focused on whether Miniso’s sizable investment will lead to any real synergy with Yonghui. Before the acquisition, Miniso had been riding a wave of growth. By the first half of this year, it had expanded to 6,868 stores worldwide, with its toy brand, Top Toy, opening 195 locations. Miniso’s gross merchandise value (GMV) reached RMB 14.5 billion (USD 2 billion), with a 25% year-on-year revenue increase. The brand’s global presence was bolstered by 2,753 overseas stores.
Miniso’s expertise in IP-driven products has been a major factor in its growth, drawing frequent comparisons to Pop Mart. The company’s long-term goal is to become the global leader in IP-driven retail. Its success abroad also hints at the potential to bring IP and supply chain advantages to Yonghui. Unlike in China, where Miniso operates most stores itself, the majority of its overseas locations are franchise-operated, with local partners contributing resources while Miniso provides IP and supply chain support.
An investor told 36Kr that Miniso’s IP-driven strategy offers strong perceived value to overseas consumers. For instance, a phone charging cable with an IP design might retail for USD 10 abroad—considered expensive in China, but seen as affordable in Western markets. The premium is evident: according to Guohai Securities, Miniso’s Barbie collaboration products averaged a price premium of RMB 10.3 (USD 1.4), with a premium rate of 44.8%. The sales numbers also tell the story—Miniso’s pop-up store at Shanghai Jing’an Joy City, in collaboration with the Japanese IP Chiikawa, brought in RMB 2.68 million (USD 375,200) in just ten hours.
For Yonghui, however, the days of relying on fresh produce to lure customers into stores, followed by high-margin retail product sales, are behind it. The rise of e-commerce, group buying, and live streaming has disrupted this model. In the first half of 2024, Yonghui’s gross margin stood at just 21.58%, compared to Miniso’s significantly higher margin during the same period.
Miniso plans to inject IP-driven products into Yonghui’s offerings and help develop its private label portfolio, with an eye on benchmarking against Sam’s Club, Costco, and Pangdonglai. During the acquisition announcement, Miniso pointed out that Yonghui’s private label products lacked differentiation and were low-margin—areas where Miniso’s strengths could be leveraged.
However, the two companies’ product categories differ significantly. Miniso’s focus is on cosmetics and household goods, while Yonghui operates large supermarkets centered on fresh produce. This disparity raises doubts about the potential for IP synergy between the two.
An industry expert told 36Kr that for true synergy to occur, one party would likely need to relinquish control, suggesting Miniso would need full authority to execute changes at Yonghui. Another hurdle is that Miniso has little experience in fresh produce or fast-moving consumer goods (FMCG), making its ability to replicate Costco’s model through Yonghui uncertain.
A former Yonghui house brand developer added that, while opportunities for collaboration between the two companies exist, their distinct business models and target audiences would require significant adjustments.
For Miniso to shift from household goods to fresh food and replicate Costco’s model through Yonghui, its product development pace may need to slow. According to 36Kr, Sam’s Club and Costco refresh only 5–10% of their product lines annually, while Miniso updates over 20% of its products each year. While such rapid turnover works for smaller stores, it could prove unsustainable for a large supermarket like Yonghui.
This article was written by Yang Yafei and was originally published by 36Kr.
