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  • Writer's pictureBonnie Young

Translation and Analysis: Bianlifeng, Chinese Smart Retail Giant, Knows How to Cater to Consumers

Updated: May 28, 2020

I’ve only seen news of this Bianlifeng transaction covered on 1 English-language outlet, Deal Street Asia, which is a paid subscription. Therefore, I wanted to share my translation and analysis for the Chinese tech giant here.

The Situation: This week, Chinese automated retail company Bianlifeng raised $100 million USD in its Series C, putting the company’s total capital raised at $1.5 billion USD. This makes Bianlifeng one of the most capitalized private tech companies in China. The investors in this round were undisclosed, but it was a mix of Chinese, global and university endowment funds. This round’s valuation is also unknown, but the Series B post-money valuation in 2018 was $1.6 billion USD from investors Tencent and Hillhouse Capital.

Company Overview: Bianlifeng (pronounced Be-N Lee Fung) is a smart retail company founded by former Qunar CEO, Zhuang Chenchao in 2016. Its name translates to “Convenient Bee”. The company provides cashierless QR code and mobile payment enabled 24-hour stores. The stores are cashierless, but there's still a few workers per store to serve fresh food and oversee checkouts.

Profitability: Bianlifeng recently shared that the 500 stores in its largest market of Beijing are profitable. The company also shared that it aims to achieve company wide profitability by the end of 2020. This marks an important milestone in the company’s lifecycle and likely means this is the last round of capital needed before an exit.

Store Expansion History: To date, Bianlifeng has been extremely aggressive in opening stores. It is only 3 years into operations and already has 1,500 stores in 20 Chinese cities, with 500 stores in Beijing alone. For reference, industry veteran 7-Eleven has about 2,500 stores across China. The company expanded into providing smart vending machines at convenient locations in 2018, but overextended itself early on. Shortly after launch, it had to pull out of 38 cities, leaving machines in the top 10 cities and focusing on operational efficiencies.

Differentiation: Beyond the cashierless payment method, Bianlifeng has able to differentiate itself by being very adaptable with both store layout and goods sold. The consumer habits ultimately determine what the store looks like. Bianlifeng’s best selling items are its hot lunch boxes, and the company’s data driven adaptability has been especially important in optimizing food choices. Having store-specific food choices is especially critical in China (more so than Japan or Korea) because Chinese food varies incredibly from province to province and city to city. Bianlifeng’s algorithms quickly optimize top food choices for every store such that you may not see the same menu at two nearby stores.

Competitive Landscape: Unmanned retail in China is pretty crowded and has seen a lot of consolidation in the past few years. Bianlifeng acquired competitor LingWa in 2018. One of Bianlifeng’s main competitors today is BingoBox, an unattended retail competitor that is known for its very small stores (about 160 square feet). The company has 500 stores across 28 cities in China, Taiwan, Korea, and Malaysia. BingoBox last raised an $80 million USD Series B led by Fosun Capital with participation from GGV Capital, Qiming and Ventech China.

My Take: Bianlifeng is adding data-driven and mobile payment aspects to the convenience store model, but it can't remove the inherent downsides to having such a large physical footprint. The company will still struggle with traditional convenience store challenges such as low margins, working capital for inventory, and securing new store locations. I think the business will continue to expand rapidly over the next few years and will need to make more strategic acquisitions to stay dominant in the space.

What are your thoughts on Bianlifeng and the future of automated retail? Reach out to me to share your thoughts.

Below is my translation of a deep dive Bianlifeng article published on Chinese news site 36Kr. The whole article is about 5,000 words, so I summarized and translated the main points below.

A Closer Look at Bianlifeng and Keys to Success

My Translation and Summary Below

Founded just 4 years ago, Bianlifeng has grown at lightning speed and currently has over 1,500 stores across 20 cities in China. The company announced that the 500 stores in Beijing are profitable, and shared its goal for all stores to be profitable by the end of 2020.

The average convenience store in China takes 7 years for each store to become profitable. So, how will Bianlifeng achieve profitability more quickly than these traditional convenience stores? The answer is the adaptability and data driven nature of the business.

1. Be Data-Driven and Human Capital Light

The Next Big Opportunity: After Bianlifeng founder Zhuang Chenchao sold online travel agency Qunar to Ocean Management in 2016, he quickly looked for the next big opportunity. He saw transforming China’s convenience stores as a massive opportunity.

Convenience Stores vs Population: For market backdrop, we can look at some basic statistics on the number of convenience stores vs population in different Asian countries. Korea has 1 store per 1,500 people, Taiwan has 1 per 2,000-2,400 people, Japan has 1 per 2,000 people and Thailand has 1 per 2,500 people. By those benchmarks, the city of Beijing is extremely underpenetrated. Beijing has 22 million people, but only 700 franchised convenience stores (1 store per 31,000 people), with mom-and-pop shops addressing the remainder of the demand.

Challenges with the Convenience Store Model: The convenience store business model is very tough. Even convenience stores that were early into the Chinese market have been slow to expand. Lawson’s (Japanese) and 7-Eleven entered China 15 years ago, but neither has more than 2,500 stores in China today. Revenue per store per day for Lawsons is 12,000 RMB and 20,000 RMB for 7-Eleven. Convenience store revenue per store has not increased much over time, but store rent and worker salaries have consistently risen with inflation.

Bianlifeng vs Competitors: The biggest difference between Bianlifeng and these traditional convenience stores is its willingness to adapt every store to local needs and leverage its tech instead of human capital to scale. From the beginning, Bianlifeng meticulously studied trends for each individual store and optimized for consumer buying habits. The average Bianlifeng store has 2,500 different items and rotates out 150 items each week. Additionally, the average store worker only needs 5 days of training before he or she is fully operational.

2. Localize and Adapt, Especially with Food

Using Japan as a Reference Point: Japan is a great example of a population to study, as Japan’s franchised convenience stores have been very advanced since the 1990s. The largest revenue generator by far is fresh food, which makes up about 50% of 7-Eleven Japan’s sales. In Japan, fresh food usually consists of bento boxes, onigiri, bread, and side dishes, and has become the fast food of choice amidst Japanese workers’ busy lives. Beyond just being convenient, Japanese convenience store food is also very cheap. Fresh food at a convenience store is only about half the price food that you would otherwise buy at an izakaya.

Differences Between Japan and China: But in China, the dynamics are meaningfully different from Japan. China has a lot of street food vendors, and currently street food is cheaper than convenience store food. To add to competition, there’s so much selection amongst Chinese street food vendors. In the North, there is jian bing guo zi and grilled cold noodles, and in the South, there’s even more variety. Most importantly, Chinese people are the biggest lovers of hot food in the world. Therefore, onigiri and other Japanese staple cold foods are not as popular in China.

Hot Box Lunches for Office Workers: In the early days, Bianlifeng knew to follow these trends and offer Chinese shoppers lots of options for hot food. The company’s main target audience became office workers looking for quick and affordable lunches. The business soon learned that boxed lunches under 30 yuan (about 4 USD) with strong dish selections was a best seller. By 2018, these boxed lunches became the number 1 selling item and was responsible for ⅓ of all revenue. Bianlifeng has about 12 hot food dish options at any given time, and has a schedule to switch in new options frequently. The new options try to mimic popular street foods like a Shandong famous street dish: braised claypot chicken.

Interesting Food Stats: Bianlifeng has shared some interesting food stats. In Shanghai’s Changning district, the most popular food items are scallion braised pork, salted egg tofu, and spicy chicken. In Beijing Xi’erQi district it is stewed tofu, Sichuan style green beans, tomato with eggs, stewed beef with potatoes, and spicy eggplant.

Distribution Centers: Currently, Bianlifeng already has 2 fresh food distribution centers in Beijing and plans to build a 3rd in Tianjin. According to reports, these 3 distribution centers would have the capacity to serve 5,000 stores across Northern China.

3. Bianlifeng: The 3rd Generation of Convenience Stores

The Purpose of a Convenience Store: The overall value of the convenience store is to provide everything that a person needs at a location close to them. Convenience stores are usually more expensive than the large supermarkets, but you pay a premium for convenience. Today, Chinese convenience store revenue is dominated by hot lunch boxes, but that’s just a reflection of the current biggest needs of working Chinese people. In the future, convenience stores need to be adaptable enough to fulfill any consumer needs as consumers’ lifestyles evolve.

Company Thesis: In discussing the inspiration for Bianlifeng, Founder Zhuang Chenchao said, “We’re investing in China’s consumption level 10 years from now, not China’s consumption level today. I’m confident that the average Chinese person’s consumption will continue to rise.”

3 Generations of Convenience Stores: We can view the rise of convenience stores in China as being in 3 generations.

1st Generation: Convenience stores in China rose during the 1990s and the rise in the housing market. It competed with the mom-and-pop stores and was a mini-supermarket. If it was in a good location, it could count on decent business.

2nd Generation: Convenience stores mimicked Japanese stores with Chinese franchises like OurHours and Today. These stores had strong regional traction, but had difficulty expanding beyond those borders. Most of these newer age franchises have gone out of business in the last few years.

3rd Generation: Bianlifeng and other automated retail brands. The key differentiator is that these brands have no requirements for what a store must look like or what it must stock. It’s simply the manifestation of consumer needs for that location.

Bianlifeng Company Timeline: Bianlifeng is following a pretty standard Chinese internet company timeline. This consists of 1-3 years of proving product market fit, 3-5 years of store expansion, and a potential IPO about 5 years from today. However, because convenience stores are a low margin business, the capital markets have understandably been speculative. Today, China still does not have any publicly traded convenience store franchises.

About the Author and Translator

Bonnie Young runs the Amplified blog. She shares her insights on market trends from US to Asia and interviews founders that are shaking up the tech scene. Please reach out to her on LinkedIn with your questions and feedback. She is currently looking for a growth equity or VC role in the Bay Area.


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