To make breakthrough and expand rapidly in a region, Bianlifeng has to compete with restaurants for best store fronts, regardless of the cost. In fact, Bianlifeng’s outlets at the Angle Building and Yinke Building used to be a bake shop and a fast food shop. However, every insider in the retailing industry should know that it’s quite expensive to compete for store frontswith restaurants.

　　“It’s most difficult to run a mid-sized retailing store, since it makes no sense,” Xu Zheng, CEO of Miss Fresh, told TMTPsot in an interview.

　　Bianlifeng might didn’t expect to rent this two-storey store either, but it didn’t seem to have much choice. Suppose this two-storey store covers 400 square meters, Bianlifeng has to afford a daily lease of RMB 4,800, let alone other necessary costs.

　　In fact, if we compare Bianlifeng’s outlets with its predecessors, we may understand the problem in Bianlifeng’s business model.

　　A supplier for 7-11 and Lawson revealed to TMTPost that 7-11’s daily turnover (around RMB 20,000) is highest among all convenience stores, Lawson ranks the second with RMB 16,000, Full Time ranks the third with RMB 10,000, while Lin+ ranks the fourth with RMB 8,000. Suppose convenience stores’ gross profit rate is around 30 per cent, then their gross profits are RMB 6,000, RMB 4,800, RMB 3,000 and RMB 2,400, respectively. That is to say, Bianlifeng Yinke Building outlet’s daily lease equals to Full Time’s gross profit per day.

　　As a matter of fact, Bianlifeng’s gross profit rate might be below the average. The supplier revealed to TMTPost that 7-11, Lawson and Bianlifeng all relied on the same suppliers.

　　Take bread for an example, most Bianlifeng’s bread is customized-made by its contractors. Return rate and damage rate are the key to controlling cost in convenience stores, while these rates of bread are often the highest.

　　Warranty of Bianlifeng’s bread often lasts four to seven days. Considering the racking time, effective vending time for bread is often very limited.

　　Bianlifeng chose customized-made bread from contractors to create differentiation, but it had to afford higher supply chain cost.

　　Moreover, most contractors would make customized bread for convenience stores only when there is a certain scale of demand. The larger the demand, the lower the average price per unit.

　　However, for small-sized chain convenience stores, it has to afford higher cost to sell customized-made bread.

　　“Chain convenience stores such as 7-11 decide if it chose customized goods based on various factors, such as the consumption habit of customers nearby the distribution pattern of its outlets. This often takes a long period of time to tell,” the insider revealed to TMTPost.

　　Based on our observation, Bianlifeng’s return rate is not low. It is worth mentioning that racking time of Bianlifeng’s bread is quite unregular.

　　Different from traditional convenience stores, which put bread on racks before 07:30 AM, Bianlifeng put bread on racks near 2:00 to 3:00 PM, which puzzled us a lot. After all, when you put bread on racks in the afternoon, you’ve already missed the golden selling time for bread.

　　When we paid special attention to the goods Bianlifeng returned to suppliers, there’s a certain amount of bread. The insider above also confirmed TMTPost’s observation. In fact, Bianlifeng’s return rate has always been quite high.

　　The only way to solve this problem, however, is to open more outlets in a short time. As a matter of fact, this is also Bianlifeng’s current goal. However, no retailer can make profit simply by opening more outlets. An insider with years of offline convenience store management experience told TMTPost that cross-region, cross-city operation is often the biggest headache for chain convenience store brands.

　　“From 20 outlets to 50 outlets, from 50 outlets to 100 outlets… Every new stage means increased difficulty. Oftentimes, it takes a long period of time to coordinate with different outlets and manage the supply chain. This is also why many business owners dare not to conduct convenience store business,” the insider explained.

　　Fundamentally, convenience store business belongs to offline retailing business. Therefore, it has to face all kinds of problems offline retailers have to deal with. In this case, internet thinking is more like an icing on the cake than fuel in a snowy winter. After all, offline store management and supply chain management aren’t something could be accomplished at one stroke. This is also why it took Toshifumi Suzuki two decades to completely transform and re-build 7-11.

　　For sure, there’s going to be a protracted war in the offline retailing sector. However, before we jumped to new ideas such as “new retailing”, we might as well get familiar with business logics in the traditional retailing industry first.

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　　[The article is published and edited with authorization from the author @Xie Kangyu, please note source and hyperlink when reproduce.]

　　Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.