"Redo all retail in the form of wholesale!" Leerle founder Chen Zhengguo's Mandarin is not standard, but when it comes to retail, he often delivers memorable quotes. This is the most widely known one. Starting from a 123-square-meter supermarket in 2011, after more than a decade of development, Leerle has grown into a giant with over 3,900 stores and 40 billion yuan in sales. Before 2023, Leerle was mainly known in Hunan and other southern provinces. In 2023, as snack discount stores became hot and hard discount became an industry hotspot, Leerle became a subject of intense study. Some industry insiders call Leerle the pioneer of hard discount in China. At a time when hard discount is an industry hotspot, Leerle stands out as a unique entity. How did it grow? How does Leerle actually implement hard discount? What implications does it have for the development of hard discount in China?
Starting from One Store
Leerle's growth has accelerated, adding nearly 1,000 stores in 2023 alone. Despite the extreme difficulties in physical retail, Leerle's store closure rate is less than 2%. In 2011, when founder Chen Zhengguo opened his first supermarket, he probably never imagined Leerle would achieve what it has today. Chen Zhengguo is from Shaodong, Hunan, a place known for its business acumen, often called the "Jews of Hunan." But Chen's entry into business was driven by necessity. Due to poor family conditions and the need to support his brothers, Chen earned money through retail ventures during college. After graduating, he worked in telecommunications for ten years before starting his own business in 2011, returning to retail. At the time, his entire savings were only 320,000 yuan. To save costs, he chose a small store in a limited location. For the first three months, prices were so low that customers doubted quality, foot traffic was sparse, and business was poor. Chen had studied an analysis article about leading foreign discount retailers during college, which reinforced his belief in "ensuring quality while achieving the ultimate low prices." After three months, business surged. The 123-square-meter store achieved daily sales of over 60,000 yuan from Monday to Thursday, and even 70,000-90,000 yuan on weekends. Chen said that at the time, he wore out over twenty calculators a year and hired 14 people just to stock shelves. To maximize space, he had shelves welded to the walls and used high racks, allowing more products to be displayed in the limited space. Today's Leerle hard discount model differs from others; this first store set the initial template for Leerle's later chain expansion. With the success of the first store, Chen opened two more, which were equally popular. Leerle's early success attracted attention and interest from potential franchisees. Chen didn't intend to profit from franchise fees, so for the initial franchise stores, he simply allowed them to use the Leerle name, shared his sales experience and pricing logic, and provided access to upstream procurement resources. This formed a loose purchasing alliance under a unified brand. This seemingly non-commercial approach became a key step in accelerating Leerle's hard discount business and its path to success. Leerle's growth logic: Adhere to high quality with extreme prices, and drive sales through extreme efficiency, frequency, and space utilization. Because of high sales volume and prompt payments, Leerle gains a competitive edge in sourcing. The addition of franchise stores further scales up sales. With scale, Leerle's "low margin, high turnover" model runs more smoothly. A few numbers illustrate how Leerle's hard discount flywheel spins: In 2014, three years after the first store, Leerle had 3 new directly-operated stores and over 50 franchise stores, totaling over 80 stores with sales of 300 million yuan. By 2017, three years later, store count exceeded 500 with sales of 3 billion yuan. In 2020, it reached over 1,800 stores and 15 billion yuan in sales. By 2023, the numbers became nearly 3,900 stores and 40 billion yuan in sales.
Low Margin, High Turnover
Leerle storefronts prominently display "Wholesale Supermarket" signs. Inside, customers find several characteristics: complete categories, all genuine products, and hard-to-beat low prices. Leerle's products are 20-30% cheaper than surrounding stores, and the assortment is vast—a 500-square-meter store can carry a base of 15,000 SKUs. "Many people calculate virtual gross margins; only what you actually sell is your margin." Chen's approach to hard discount is simple: "small profits, quick turnover." Stores operate on just 18% gross margin, but due to high turnover and low operating costs, Leerle achieves high sales per square foot. To save costs, Leerle's site selection follows the principle of "good location, bad position" —for example, near factories or schools to ensure foot traffic, but often on the second floor or basement to secure lower rents. Extreme prices attract customers, creating self-generated traffic and leading the retail mindset. Store decoration is minimalist—not too shabby, but never over-invested. While other supermarkets spend 60,000-70,000 yuan per 100 square meters on decoration, Leerle keeps it under 30,000 yuan. Leerle uses high shelves primarily to display more products. While traditional supermarkets see declining foot traffic and add fresh produce to attract customers, Leerle insists on making standard products the benchmark. "In the retail of standard products, Leerle currently has no comparable competitor nationwide," emphasizes Chen. Leerle has no bakery, no fresh produce; it deals mainly in high-turnover FMCG standard products. This simplifies supply chain and operations, allowing the low-margin, high-turnover model to function at the store level and across the entire Leerle system. Currently, Leerle stores are mainly in Hunan, Hubei, Jiangxi, Henan, Sichuan, Guangxi, Chongqing, Yunnan, Anhui, Guangdong, and other provinces. Of the 3,900 stores, 2,600 are in Hunan. These stores can be broadly divided into two categories:
One is franchise stores, which started as a loose purchasing alliance and later incorporated digital systems and operational standards, gradually forming a franchise chain system.
The other is directly-operated stores, with a dedicated store-opening team that opens an average of 60-100 stores per year. The strong profitability of directly-operated stores is a key reason Leerle focuses on them. Chen calls himself "a renovator of supermarket bad assets" —when he takes over underperforming supermarkets, business improves. This is a unique expansion model for Leerle. The front-end stores form a low-margin, high-turnover model that can be quickly replicated, expanding procurement scale, which in turn secures low-cost supply from the back end. Once the hard discount flywheel spins, Leerle begins integrating its supply chain—the core of hard discount—which holds even greater potential for the future.
Integrating the Supply Chain
Leerle's birthplace, Changsha, is home to the Gaoqiao Market, the largest national wholesale market in Central-South China and the second-largest comprehensive market in the country. Fertile soil nurtures strong trees. Gaoqiao Market hosts nearly 6,500 distributors and wholesalers of various goods, with extremely developed commodity circulation. Its 1.6 million SKUs provide rich product support for Leerle. "We currently have about 400 suppliers, of which over 230 are core suppliers." Each week, these suppliers' owners visit Leerle's headquarters in batches, where Chen personally explains Leerle's upcoming product and procurement plans. "If Chen Zhengguo of Leerle raised his hand at Gaoqiao, he could collect 50 million yuan in cash within 10 minutes," is a saying in Changsha's retail circle, reflecting Leerle's influence and bargaining power at Gaoqiao Market. "Initially, all suppliers were distributors; now 27% are direct factory supply, and more will come." Absolute sales volume brings absolute influence; more and more manufacturers choose to cooperate directly with Leerle. In the early days, suppliers delivered directly to Leerle stores. In 2017, Leerle began building its own warehouses and systematically integrating supply chain resources, effectively transforming Leerle from a store-level player into a B2B platform. Unlike other B2B platforms that only supply small stores, Leerle is actually a "B2B platform + store franchising + supply chain partnership" system. In 2023, Leerle accelerated its outward expansion. There are several ways to join the Leerle business system: First, single-store franchising, with two store types.
Small store: 300-800 square meters, 12,000-13,000 SKUs, pure B2C retail.
Medium store: 1,000-2,000 square meters, 20,000-30,000 SKUs, primarily B2C retail with some B2B wholesale. For single-store franchising, Leerle charges a service fee based on store area and provides site selection, planning, and design services. Leerle supplies its franchise stores at zero profit. Second, becoming the exclusive regional partner for Leerle brand in a county or district.
Partners can open Leerle franchise model stores in their region, replicate Leerle's regional development model, and promote the brand locally through model and supply chain output, achieving a grid layout of Leerle brand stores in the region. Partners enjoy the benefits of brand development.
Partners can open warehouse stores of 3,000-8,000 square meters, combining local B2B wholesale and B2C retail. Small B-side customers can self-pick from the warehouse store, and delivery is available for orders meeting a certain amount. (Leerle's headquarters warehouse in Shanghe International, 22,760 square meters, carries over 60,000 SKUs, with daily wholesale and retail sales exceeding 3 million yuan, mainly from B-side store owners self-picking.) Additionally, one can join Leerle's Letongtong Cloud Warehouse for supply chain distribution services. Of course, as a B2B platform, stores can order directly from Leerle without joining the system, with Leerle keeping product margins at industry lows. Leerle's hard discount growth trajectory can be summarized as: Replicable store model → Scale up procurement to reduce costs → Build B2B supply chain and warehouse store model → Expand nationwide stores + integrate local supply chain resources → Further scale to gain cost advantages. In a sense, Leerle is actually a B2B platform disguised as a supermarket, with supply chain as its core competency, which grew out of Leerle's front-end "low margin, high turnover" replicable model. Chen says: "Leerle's mission is 'Do my best to save you money'; the consumer is the starting point of this model."
Summary
Rumor has it that Leerle founder Chen Zhengguo read extensively about retail and founder biographies in his early years, giving him deep knowledge of various retail models. When I asked him about this, Chen told me that he knew about Germany's ALDI as early as college, and that the hard discount concept was indeed in his mind when he started his business. However, Leerle grew step by step in a unique environment, creating a hard discount model with Chinese characteristics. Chen says, hard discount requires extreme efficiency, extreme product turnover, and extreme sales per square foot. Without big capital to burn, you must learn to integrate social resources. Moreover, hard discount is a long-term endeavor; without patience, you can't do it well. Also, the Chinese market differs from abroad, so you must adapt hard discount to actual market conditions. For example, regarding private labels: Leerle does not do private labels; at most, it does co-branding, Chen says. On one hand, Leerle lacks the capability to control quality because the manufacturer isn't yours; private labels pose a risk. On the other hand, domestic private labels are often used to increase margins, which contradicts the hard discount philosophy. "True private labels require sufficient sales scale to support production lines, and you must have the capability to control raw materials and production processes, all aimed at achieving lower prices and delivering extreme cost-performance products to serve the people." After more than a decade of deep market cultivation, Leerle has become an unavoidable player in China's hard discount development. Amid the wave of retail discounting, Leerle has also become a destination for industry professionals to study and research. On March 15, in Chengdu, the "2nd China FMCG Hard Discount Conference" will bring together discount retail founders, brand executives, distributor bosses, traditional retail enterprises, and industry research experts to focus on core hard discount topics and examine new directions, new thinking, and new opportunities in the discount era. We look forward to your arrival! On March 14, a closed-door hard discount session will be held: Hard Discount Models and Operations, with one-on-one dialogues with expert teachers, sharing experiences, and discussing dividend opportunities in the hard discount era! Over the three-day conference, centered on the theme "Supply Chain Revolution," in addition to the 2nd Hard Discount Conference, there will be a main forum, a China FMCG Distributor Conference, over ten sub-forums and closed-door exchanges, and the first major debut of the [Extreme Supply Chain] Brand Factory Direct Sourcing Fair. Together with thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country, we will meet in Chengdu for continuous brainstorming, discussing the challenges and opportunities, changes and solutions of the supply chain revolution era. In this era of supply chain revolution, a new business era will be born. We hope every participant will still have a place in this wave, and we believe this will be a conference worth your while! For business cooperation, please contact: 🔺Scan for ticket inquiries🔺