Leler scaled hard discount by making suppliers, franchisees and turnover share one rule

Leler's hard-discount model started from a stark operating target: make low-income shoppers see lower prices while keeping stores investable for small franchisees. Southern Weekly reported that Leler's direct stores run around 12% gross margin and that founder Chen Zhengguo tracks labor productivity and sales per square meter as core hard-discount metrics.

The mechanism was a deliberately simple franchise system. Southern Weekly reported that more than 90% of Leler's roughly 4,000 stores were franchised in 2024; a 100-square-meter store paid about RMB30,000 in franchise deposit, fee and cashier-system charges, while most capital went into inventory rather than fit-out.

Supply was the other half. 36Kr reported that Leler had alliances with more than 230 suppliers, used scale purchasing and cash settlement, and pushed a turnover-first assortment rule. It said inventory turnover days fell from 25 in 2023 to 18 in 2024.

The result was a flywheel: low store cost attracted franchisees, franchise stores increased purchasing scale, and purchasing scale improved prices. The model also carried risk; 36Kr noted uneven ERP adoption in older stores and rising management strain as Leler expanded beyond its Hunan base.

Let turnover, not gross margin, police the store

Franchisees got a low-complexity format: cheap location, sparse fit-out, supply access and few services.

Suppliers tolerated lower prices because Leler could clear inventory and deliver volume.

Turnover-first selection kept cash moving, which mattered more than headline margin in a low-price store.

Hard discount works when the whole system is designed around cash conversion, not when stores simply cut shelf prices.

By 2024 Leler had become one of China's most watched hard-discount retailers. The same mechanism created new constraints: national expansion raised logistics costs, older franchise stores had inconsistent systems, and the company began moving from loose franchising toward tighter controls over product, price and inventory.