---
title: "Unveiling Bianlifeng: Burning $1.5 Billion to Revolutionize 7-Elevens with Algorithms"
description: "“The long-term value of convenience stores lies in using algorithms to optimize and cover all operations.” In a recent live dialogue with Hillhouse Capital's Zhang Lei about long-term value, Bianlifeng founder Zhuang Chenchao said this. Zhuang, better known as the co-founder and CEO of Qunar, left after Ctrip's acquisition in 2015 and founded Bianlifeng in 2016. The brand has taken detours, such as failed shared bikes and unmanned shelves, but its convenience store project is thriving."
author: "小锐锐一号"
publisher: "New Distribution"
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published: "2020-10-10"
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# Unveiling Bianlifeng: Burning $1.5 Billion to Revolutionize 7-Elevens with Algorithms

> “The long-term value of convenience stores lies in using algorithms to optimize and cover all operations.” In a recent live dialogue with Hillhouse Capital's Zhang Lei about long-term value, Bianlifeng founder Zhuang Chenchao said this. Zhuang, better known as the co-founder and CEO of Qunar, left after Ctrip's acquisition in 2015 and founded Bianlifeng in 2016. The brand has taken detours, such as failed shared bikes and unmanned shelves, but its convenience store project is thriving.

**“The long-term value of convenience stores lies in using algorithms to optimize and cover all operations.”** In a recent live dialogue with Hillhouse Capital's Zhang Lei about long-term value, Bianlifeng founder Zhuang Chenchao said this.
Zhuang Chenchao is better known as the co-founder and CEO of Qunar. After Ctrip acquired Qunar in 2015, Zhuang left and founded Bianlifeng in 2016. The Bianlifeng brand has taken many detours, such as shared bikes and unmanned shelves, which failed. Only the convenience store project is gaining momentum. A Bianlifeng store manager proudly told Record: “FamilyMart took seven years to open 2,000 stores, while Bianlifeng opened 1,600 in just over two years. It's a different approach.”
**-01- Rapid Expansion, Burning Capital**
Beijing is known as the “convenience store desert.” In recent years, brands like 131, Linjia, and Quanshi have failed to expand in this area. Good Neighbor, which has been in Beijing for 20 years, began expanding in 2018 but closed some unprofitable stores due to costs, maintaining around 300 stores. Besides high rents, large areas, and few shops, policies and market environment are “not friendly.” Good Neighbor CEO Tao Ye told Record that policies like “relieving population” and “cracking down on wall-breaking” in 2017 objectively affected the market and number of convenience stores.
In contrast, Bianlifeng has over 500 stores in Beijing, a rare achievement. Traditional convenience stores are a business with low capitalization and relatively slow capital accumulation. According to the China Chain Store & Franchise Association's “2020 China Convenience Store Development Report,” average daily sales per store are about 5,297 yuan, up 4% year-on-year; net profit margin for typical convenience stores in second-tier cities is only 5%. Bianlifeng's approach is the internet model.
(It is revealed that cumulative financing has reached $1.5 billion)
Most convenience stores expand through franchising. Bianlifeng is fully self-operated.
The investment per store is lavish. **A convenience store veteran, Wu Meng, once analyzed to China Business Journal that decoration and equipment per store cost at least 600,000 yuan; a senior executive from a Beijing convenience store said the investment per store should be around 1 million yuan.** Record's research found that Bianlifeng's investment in labor, equipment, and rent is significantly higher than peers. Equipment like ovens: imported brands cost 100,000 yuan each, domestic brands 30,000-50,000 yuan; coffee machines cost 70,000-80,000 yuan each. The number of store staff is linked to turnover. For example, with daily turnover of 20,000-30,000 yuan and 4-5 employees: salary standard: within 167 hours per month, fixed base salary of about 3,000 yuan; 167-200 hours, 28 yuan/hour; over 200 hours, 38 yuan/hour (cancelled at the end of 2018); commission based on daily turnover. The highest tier is “daily turnover of 50,000 yuan,” where store managers can earn up to 20,000 yuan per month.
It is said that under similar location and sales scale, Bianlifeng store managers can earn about 10,000 yuan, while 7-Eleven managers earn only half. A Tianjin store manager told Record that during the early brand promotion stage, Bianlifeng adopted a strategy of burning money to rent commercial buildings. “Bianlifeng rented four floors in a commercial building in Tianjin's 'CBD,' totaling over 1,000 square meters, but daily sales per store were only 3,000-4,000 yuan, less than the daily rent, losing at least 500,000 to 1 million yuan a year.” According to him, there are over 500 stores in Tianjin, and less than one-third are truly profitable. Currently, official sources say Beijing stores have achieved profitability.
**-02- The Core is Algorithms and 7-Eleven's Methodology**
Bianlifeng has achieved some success, which Zhuang attributes to algorithms, but on closer inspection, the core is still 7-Eleven's methodology.
These methodologies can be found in “7-Eleven's Business Secrets” by Toshifumi Suzuki, founder of Japan's 7-Eleven: **Build private brands.** In 2007, 7-Eleven launched its private brand Seven Premium, accounting for over a quarter of retail sales. Bianlifeng also created “Fengzhixuan,” starting with only three or four SKUs and now having hundreds, from beverages to lighters, covering almost all categories.
**Store personalization.** In 2014, 7-Eleven reformed its independently operated stores, establishing a store manager-centered model that meets the specific needs of consumers in the local trade area. Bianlifeng's “rapid innovation and iteration” in hot food and the use of electronic shelf labels draw from this. **Algorithms plus human experience.** 7-Eleven's strategy is to delegate ordering decisions to part-time and hourly workers, who use POS to access data from the previous day, the same period last year, and under similar weather as predictive references. **In many aspects, Bianlifeng has referenced 7-Eleven. Compared with 7-Eleven, this new internet company places more emphasis on algorithms and rapid iteration, which is reflected in SKU iteration, internal performance assessment, and other aspects.**
**Hot food “iteration”:** Hot food is the core competitiveness of convenience stores, with high gross margins and high sales proportion. Bianlifeng has a dedicated food R&D department and its own central kitchen. Generally, a new oden category is introduced every Tuesday, a new hot dish every Wednesday, and a new bun filling every Thursday, with the fate of each category determined by store sales. **Electronic price tags:** Typically, a convenience store uses electronic price tags for 200-300 SKUs, mainly daily items like bread, rice balls, and yogurt. The system dynamically discounts based on inventory from the same period yesterday and current sales to efficiently digest inventory. Through these means, achieving a “thousand stores, thousand faces” state.
Electronic shelf labels
Internally, Bianlifeng has a technical team of 1,500-2,000 people. A former Bianlifeng R&D employee told Record that most internal systems are self-developed, with a dedicated architecture department for upgrades and maintenance.
Internally, Bianlifeng emphasizes mathematical logic ability. In early 2019, the company was reported to “require employees to take math exams, and those who fail are fired.” Zhuang's response: “Convenience store business requires a large number of small decisions based on mathematical logic evaluation every day. If mathematical logic is poor, performance is hard to meet expectations.”
This rapid iteration also places higher demands on store managers and staff. Bianlifeng store managers generally hold biweekly meetings, with a major iteration every two weeks. Internal learning and communication software sends SOPs almost daily as learning tasks, with a dedicated department for assessment. “Our operations head said that if a store manager misses work during an iteration peak, they may fall behind in a few days,” an insider said.
Additionally, Bianlifeng selects customers as mystery shoppers to visit stores and rate service. For example, “smile service” initially included requirements like “showing a few teeth,” but later iterated to just saying “thank you.” “Many store managers left because of this factor,” a store employee revealed. However, he also mentioned that employees can appeal by reviewing video footage.
**Based on comprehensive indicators, stores are ultimately classified into three grades: A, B, and C. If they get an A, they receive high commissions and other rewards; B means no reward or punishment; if they get C for two consecutive months, the store manager is eliminated.**
**-03- Still Not an Easy Business**
Pan Jinju, founding partner of Kuanzhong Ventures, believes convenience stores are a good business. Compared with declining traditional hypermarkets or malls, a long-term advantage of convenience stores is “closer to young consumers, lower costs, and internet methods like e-commerce, delivery, and home services cannot intercept traffic.”
Moreover, her research found that regional convenience store brands like Zhejiang Sanjiang Shopping and Shandong Jiajiayue have sales of nearly 10 billion yuan each, are listed companies, and have considerable stock performance.
In the broader market environment, in Japan and Taiwan, there is one convenience store per 2,000 people. But in Beijing and Shanghai, the numbers are 8,889 and 3,769. In China, Japanese convenience store giants like 7-Eleven, Lawson, and FamilyMart have been in the market for over a decade, but due to strict site selection and profit targets, by the end of 2019, their scale was still 2,000-3,000 stores. The largest brand, Meiyijia, has about 20,000 stores, but mainly in the south.
Due to optimistic future prospects, market players have increased in recent years. In 2018, Suning Xiaodian claimed to “open 5,000 stores in three years,” and recently opened franchising, claiming “10,000 stores in three years”; meanwhile, JD Convenience Stores and Tmall Xiaodian also claimed to open millions.
But this business is not as easy as imagined. **Unlike general grocery stores, the core feature of convenience stores lies in deep management, a supply and distribution system covering hot food, cold food, and general merchandise, and refined management processes; in addition, digital means are used to improve efficiency in every link.** Zhuang has no retail background; his first venture, Qunar, is China's largest travel search engine. Bianlifeng's rapid expansion is mainly based on his statement: “Use algorithms to optimize and cover everything in convenience store operations.”
Self-service ordering and payment
Current research shows that algorithm involvement is still insufficient. Automatic replenishment accuracy is still poor, requiring manual correction of SKUs. To this end, Bianlifeng's relevant departments often optimize automatic ordering through store research. Every Saturday, Bianlifeng gives stores new product display diagrams. There is also a dedicated inspection department checking whether positions and products, and products and price tags, are accurate. But for stores lacking experience, errors are easy.
In short, each link still requires significant human intervention. Store manager experience and other quality indicators remain key factors distinguishing store performance. According to Record, it is not uncommon for post-90s to become store managers or even regional heads at Bianlifeng. For example, Bianlifeng claims, “It takes only 45 days to 6 months to train a store manager.” **— How to balance rapid expansion and store management, algorithm iteration and user experience, remains a major challenge for industry players.** For instance, JD and Tmall only license their brands, using traditional “mom-and-pop stores” as simple distribution channels. Suning Xiaodian also underestimated this business, losing 296 million yuan in the first half of 2018 and 2.213 billion yuan in the first half of 2019. From the second half of 2019, Suning Xiaodian was directly stripped from financial reports. As of the end of June this year, Suning Xiaodian's store count had shrunk from a peak of 4,508 to 1,835.
It is reported that the cost per Suning Xiaodian store is around 500,000 to 1 million yuan. But actual input and output do not match, and many believe they are actually “hundred-yuan daily stores.” A senior industry editor told Record that Suning Xiaodian expanded too quickly, and supply chain and management did not keep up.
A senior person interviewed by Record believes that compared with established convenience stores like 7-Eleven, these new convenience stores still lack a human touch. This is reflected not only in communication between staff and customers but also in product selection. “7-Eleven's product selection is warm and surprising, which comes from the operations team's insight and cannot be fully replaced by digital means.” Rome was not built in a day. The culture and management experience that 7-Eleven has accumulated over 50 years cannot be fully replicated overnight.
Source: Record (ID: tigerrecord), Author: Lin Bo
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