Regarding the topic of dealer transformation, I haven't written about it for a long time. It's not that I don't want to, but because too many people are talking about it—they talk about transformation at the drop of a hat, and bring it up with everyone they meet. When everyone talks about transformation, on one hand, it's a good thing; at least there's an awakening of consciousness. But there are also many problems. Talking about transformation constantly, as if spending money to buy a system tool is transformation; standardizing personnel daily systems and work processes is also called transformation; transformation is everywhere... When everyone mentions "transformation," it's often easy to overlook the value and meaning behind it. What is true transformation? Let's set aside the specific measures for a moment. I think there are some criteria that can explain this relatively seriously. First, if it doesn't cost money, it's not transformation. Whether it's spending money on tools or on learning courses, if you don't spend money, you can't get truly high-value things. Second, if sales don't decline, it's not transformation. Transformation has a painful period, whether it's organizational or business. Serious transformation inevitably brings sales fluctuations. Only with sales fluctuations can you see that the underlying business model has truly been changed. Third, if employees don't resist, it's not transformation. Transformation must touch the vested interests of the original stakeholders. For example, if orders are moved online, salespeople won't agree because they won't be needed anymore; if warehousing and distribution are outsourced with more pay for more work, drivers lose their guaranteed base salary and want to do less for more pay, continuing to freeload. Fourth, if the boss doesn't suffer, it's not transformation. The past distribution model and organizational structure were usually accumulated and optimized by the bosses over many years, leading to today's business scale and profits. This is the experience of past success, but it doesn't guarantee future success. Transformation means change. If the boss doesn't change and doesn't suffer, true transformation cannot be achieved. That sounds a bit scary, but let's seriously discuss the topic of transformation. What exactly should we transform, and where should we go? -01- There has never been a "small and beautiful" dealer; only by making the business big is there opportunity! The dealer business is difficult, not because there's no business, but because the complexity of the business is increasing. The external environment changes rapidly—one moment e-commerce impacts, the next new retail invades. Dealers are powerless against these. They are slow to react and fail to adjust in time. Moreover, dealers have been in business for many years, with their own small territory. In the early stages, they were full of fighting spirit, but as the business matures and customers stabilize, the boss gets tired, and the salespeople get tired too. Stock competition—I believe many dealers have heard this term. When the market enters the stage of grabbing cake, if others do more, you naturally do less. To seize more market, dealers must upgrade their "weapons and equipment." External invasion, peer competition. Facing a limited market cake, dealers must strive to grow the business. Only by growing can they achieve scale, and with scale, they can potentially earn more profit. New Distribution's judgment on the future of commercial circulation: In the local commercial trade market, it will no longer be a game between manufacturers, nor competition between brands, but competition between dealers. Seeing this, some may wonder: brand owners suppress dealers, so there's no chance to grow the business. In the past, that was indeed the case; otherwise, there wouldn't have been brand-led "deep distribution" and "channel intensive cultivation" models. In the past, dealers couldn't dominate the market, but that doesn't mean they can't now or in the future. Consumption is stratified, retail is fragmented, and the market is changing. Brand owners can no longer just sell a single product. The deep distribution model under big single products was in a market of overall growth, where investing people brought sales. But now? Investing people doesn't necessarily bring volume, and most importantly, it doesn't guarantee a corresponding output ratio. If the cost of one person can't cover the profit they bring, then don't invest. In a regional market, the core of offline circulation of goods is: moving goods, getting goods into stores, and recommending goods. These three things can achieve large-scale distribution and sell-through with the help of internet tools. Some might say, look at Alibaba Retail Link, such a big platform, they can't do large-scale distribution and sell-through well; how can a dealer do it? I want to say, these two logics are completely different. Dealers are based locally, covering 50% of local large, medium, and small stores, with complete frontline promotion staff and timely logistics distribution. In a third- or fourth-tier city, Alibaba Retail Link might not work, but a dealer definitely can. But whether it's you is not certain! It depends on resource allocation and distribution thinking. From the supply chain perspective, the essence of supply chain is cost and efficiency. In the past, small businesses achieved low cost and high efficiency through "reduced configuration." As the business format matures, low cost and high efficiency brought by "scale" must be the direction. Having said all this, I want to say that in the future, the commercial circulation business in a regional market will definitely be the business of large dealers. The direction of transformation must be towards cross-category, multi-brand distribution to achieve overall business growth. -02- There is no linear growth, only structural growth. Since September 2019, New Distribution has organized 9 "Dealer Landing Growth Courses" across the country. When New Distribution talks about dealer business growth, it's not about adding people, vehicles, or brands. We believe that in the current era, linear growth by adding people, vehicles, and brands is no longer possible for dealers. For future growth, dealers must achieve "structural growth." What is structural growth? We believe it is reflected in five aspects: 1. Transformation of distribution model—model growth In the past, our dealers' distribution logic was mainly based on representing one or several brands. If the brand owner did well and more consumers recognized the product, sales could go up. Dealers followed brand owners, looking for dividends and opportunities. But now, the chance to quickly increase volume offline through brands is rare. Brands want volume; dealers want to survive. It's unlikely that brands can support dealers to survive well through volume increases. You can't rely entirely on brand owners. What do you rely on? On the value you provide downstream. For example, around a certain category, meet the supply needs of retail stores in that category. Through the combination of products under the category structure entering stores, achieve scale distribution; through gross margin design under the category structure, use hot products to attract traffic, new products to drive volume, and overall improve profitability. The core of making money is not the logic of single product price difference, but the combined profitability of scale distribution. Of course, if the dealer has the ability, they can not only distribute one category but also cross-category, multi-category distribution. Provide more than 50% of the product supply to small stores. This distribution logic completely changes; it's not the logic of distribution agency, but often the logic of retail procurement. 2. Application of digital tools—management growth Software tools are now fully popularized. I believe almost every dealer has experience using tools to improve operational efficiency, but some use them deeply, some shallowly. Shallow use, such as establishing a WeChat group, passwords, reporting attendance—I believe every dealer uses these. In fact, this is also an application of digital tools. Applying WeChat to our work is essentially a tool; also using DingTalk for clocking in, using Guanjiapo for inventory management, etc. These are the most basic applications. The logic of these applications is just for bookkeeping and attendance assessment. This basic digital management, frankly speaking, has minimal impact on the current and long-term growth of the dealer business, negligible. I once did statistics: more than 80% of dealers' application of digital tools basically stays at the above level, which cannot bring growth. What is deep use? It's truly applying to the actual business. If one day, all your business decisions and daily management decisions are based on data accumulated by digital tools as auxiliary reference, then I think you are using it deeply. Through system tools, put products online, people online, outlets online, warehousing and distribution online, so that every order flow is closed-loop online. This is the foundation of tool application. Based on this foundation, improve the efficiency of business visits, expense allocation, product distribution, and product sell-through. This is something every dealer, regardless of size or brand represented, can apply. 3. Embracing external platforms—cooperation growth Cooperate with B2B platforms like JD New Channel, Alibaba Retail Link, Yijiupi; cooperate with community group buying platforms like Xingsheng Youxuan, Tongcheng Life; cooperate with new retail platforms like PUPU Supermarket, Miss Fresh, Dingdong Maicai. As their platforms grow and expand, enjoy the dividends of platform cooperation. Of course, we also see some dealers who have their own "ideas." If they expand stores for the platform, they won't need me later; if they supply goods to the platform, it's unsafe if it closes down; if they supply goods to the platform, price breaking affects store customers' business... There are many who resist. What I want to emphasize is, on a small scale, sell a batch of goods, earn a sum of money, control risks. If you can't control risks, it's often a matter of your ability. For example, if a small store runs away with credit, if you can set up an early warning mechanism, you can completely avoid it. This is just looking at growth from a single transaction perspective. Looking longer, dealers face a new era and need to continuously learn to cope with changes. What's the best way to learn? Dive in personally! If you don't cooperate once, how can you know the advanced nature of others, why they can exist, and why they are recognized by capital? Look at their strengths more, and clearly see their weaknesses. We always say that platforms exploit brand owners and dealers. Can you exploit the platform? Can you see the platform's advantages, and then based on your own capabilities, find more cooperation possibilities or inspiration for your business? 4. Extension of second entrepreneurship—innovation growth Second entrepreneurship: some have done third-party logistics warehousing and distribution, some have done community group buying, some have done convenience stores, and some have done OEM private label. Although from the perspective of the dealer business, I don't encourage it much, it is a direction. If you haven't considered it now, then don't consider it. Cross-format innovation is a second entrepreneurship, requiring courage, perseverance, determination, and of course, a lot of money. From a cost-performance perspective, I suggest dealers focus on their local distribution business, make it bigger and stronger. The ceiling of the business is far from reached. 5. Regional expansion through mergers—expansion growth New Distribution's another judgment on the commercial circulation field: The era of dealer merger and integration has arrived! In the past, the vast majority of dealers were individual businesses, with less than 10 people, workshop-style. But now we see more and more dealers have become formal commercial companies, with at least 20-30 people, and many with over a hundred, which is common. Financial standardization, professionalization of executives and managers, standardization of business models, etc., are becoming increasingly prominent. The separation of management rights and ownership is becoming simpler under the organization of digital tools. In summary, for dealers' current and future growth, relying on people, vehicles, and brands is unlikely. To achieve the above structural growth, dealers must rely on transformation, changing the structure of the business. And transformation is inevitably painful. If it doesn't hurt, it's not transformation; if it doesn't hurt, there will be no growth!