China Consumer

An all-consuming question

Why a ‘Big Data’ cashier-less store has been a Covid victim too


Bianlifeng: one of China’s better known cashier-less retail chains

Amazon unveiled the first cashier-less convenience store in Seattle in 2018. The US tech giant later rolled out the “Just Walk Out” technology to Amazon Go and Amazon Fresh-branded stores. More recently, it added two Whole Foods stores, a grocery chain it bought four years ago, to the growing list of retail stores equipped with the technology.

How it works is that sensors are placed under each product. Once the shopper lifts a product from a shelf, freezer or produce bin, the sensor automatically recognises the goods, and charges it to the shopper’s Amazon account. And of course, the idea is that you can “just walk out” without going to a cashier first.

The concept of cashier-less retailing also started appearing in China around the same time. Before long, start-ups that offered a similar service began cropping up. Not many lasted long though. Bianlifeng, which means ‘Convenience Bee’ in Chinese, is one of the few that seemed to withstand the test of time.

Founded in 2016 by Zhuang Chenchao, the entrepreneur behind online travel service provider Qunar (sold to Ctrip in 2015), the first Bianlifeng convenience store was opened in Beijing in February 2017.

It didn’t take long for Zhuang to find new investors after forking out about $300 million in initial capital from his own private equity fund Zebra Capital. In 2018, Bianlifeng raised $256 million in a Series B fundraising from Tencent and Hillhouse Capital. Two years later, PE Daily reported that the start-up completed a further Series C round though the amount was not disclosed.

In late 2020, the company announced that it would embark on  “high-speed expansion mode”, with the total store count reaching 4,000 in 2021 and 10,000 by 2023. Last July, there were also speculation that Bianlifeng was looking to go public in the US where it planned to raise as much as $500 million.

The IPO did not happen and Bianlifeng’s expansion plan was also scuppered. Last week, Entrepreneur reported that between the end of last year and April, the retailer had quietly but quickly closed 700 of the 3,000 stores under its management.

Bianlifeng denies that the closures had much to do with disappointing sales. Instead, the company claims that with the recent Omicron outbreaks, there have been problems  with logistics and most of the shutterings are only temporary.

While the pandemic was a big reason for disappointing sales, critics also reckon that Bianlifeng has a lot of internal problems. For a start, the company doesn’t consider itself a retail business but positions itself as a tech firm.

“On the surface, Bianlifeng is a chain of convenience stores, but in fact we are a data technology company,” the company told Entrepreneur.

As a result, store managers are not required to have customer-facing experience (as many as 60% of its employees are engineers). As Southern Weekend puts it, they are more like technicians and their job is to make sure the proprietary technology platform runs smoothly. 

One consumer told Entrepreneur that the reason he doesn’t shop at Bianlifeng (and prefers 7-11, even though it is further from his office) is because of the poor customer service.

“The staff at Bianlifeng have a very bad attitude and they just ignore the customers,” he complains, adding that the merchandise selection at Bianlifeng is not attractive enough for him to put up with the bad customer service.

The pandemic has also presented problems for a company that makes all of its decisions based on Big Data.

“When the software encounters a ‘black swan’ event like the pandemic, the data it obtains, whether it is on customer behaviour or the supply chain, will be different from the past,” Entrepreneur explains. “At the same time, it is difficult for an algorithm-driven system to immediately make corresponding changes to cope with the changing  environment. As a result, it fails to keep up and employees on the ground have not been given any power to make decisions.”

The aggressive expansion during the pandemic, too, has taken a toll on its bottom line. Most of the new store openings were in second- and third-tier cities. While rents are lower, building a new supply chain to support the new markets is capital-intensive. Without additional financing, the company is unlikely to be able to sustain the losses from existing stores.

“Expansion is a double-edged sword. In this regard, Bianlifeng is facing a similar predicament to [hotpot chain] Haidilao, that is, expanding too fast after the pandemic. Most of the recent stores that closed were located in markets it expanded into after 2020, such as Hefei, Qingdao, and Zhengzhou,” Entrepreneur observed.

But then again, the convenience store business is notoriously competitive. Last year, Lawson announced that its China business made full-year profits for the first time in 2020 – that’s 25 years after it first entered the China market, reports new portal 36kr. Meanwhile, FamilyMart and 7-Eleven are only making money in some parts  of the country, according to SupChina.

In fact, just last week, 7-Eleven also hired a new head of its China business to address some of these strategic questions…

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