In recent years, we often hear the term 'transformation and upgrading.' Before discussing how dealers should transform and upgrade, let's first understand what 'transformation and upgrading' means. 'Transformation' refers to a new industry that has no direct relationship with your original business, possibly using your original funds, hardware, resources, etc., but the new industry is not directly related to the original one. For example, a dealer originally in trading now moves into manufacturing, retail, or third-party logistics. Although seemingly still in the retail industry, it is now at another node in the ecosystem. What is 'upgrading'? It refers to implanting a new element into your original business to make it more efficient, lower cost, or increase sales. For example, a dealer's warehouse was originally messy, but now by introducing AI software technology or shelving, the warehouse's efficient output is upgraded. In the current market environment, all dealers must transform and upgrade (emphasized here: it is a must). Your current trading business may still be profitable, but this is just the residual volume of the traditional industry's inertial market. Just like in the era of film cameras (traditional enterprises), digital cameras emerged (new enterprises). Due to the large existing stock of the film market, during the transition period, the film business will not disappear immediately, but as the number of film customers decreases, the business becomes increasingly difficult, until today film has become a choice for enthusiasts, a niche specialized industry. Consumers have changed (changes in mainstream consumer groups), and the times have changed (from the industrial era to the internet era). These two major factors have ultimately forced our dealers' businesses to be 'faster,' 'more cost-effective,' and 'better service.' Our dealers' transformation and upgrading is to solve these three major problems. In the author's words, it is 'a more efficient model replacing the traditional model,' and it needs to be an improvement of 50% or more, even over 100%. For dealers to truly achieve 'faster,' 'more cost-effective,' and 'better,' they need to break through from three aspects: 'scale,' 'model,' and 'efficiency.' But among these three goals—'scale,' 'model,' and 'efficiency'—which should be tackled first? Different dealers have different orders for solving these three difficulties. Who needs 'scale'? Of course, it is enterprises that lack scale. Who lacks scale? It is the smaller local enterprises. So scale is temporarily not needed for large local dealers. Who needs 'efficiency'? All dealers need efficiency because dealers nationwide have relatively rough management and low efficiency. Who needs 'efficiency' more? The answer is enterprises with scale, that is, our large dealers. Why? Small dealers have one person doing several jobs, while large dealers have multiple people doing one job (e.g., order processing department, finance department). If efficiency improves by 50%, the small dealer still has one person, but the large dealer can reduce staff by half. So efficiency is very important and obvious for large dealers! Just like weight loss, fat people see better results. Who needs 'model'? All dealers need new models. What is a new model? It is a new business behavior that meets market needs. For example, as distribution costs rise, the new business model of unified warehousing and distribution emerged, eventually evolving into third-party logistics. Another example: as sales decline for many dealers, the B2B platform business model emerged, allowing dealers to quickly cover the entire network for sales. From a certain perspective, a new model is already a transformation into a new enterprise. Of course, current new models are not yet mature or large-scale, so they have not yet had a significant impact. Moreover, 'new models' must include '+ internet' technology components; otherwise, your model is still traditional. Do not underestimate '+ internet'; its power is immense. It is like building an air force after your original ground forces, combining land, sea, and air operations for tremendous power. Based on the above description, should dealers first 'transform' or first 'upgrade'? If you are a large dealer, first 'upgrade'—upgrade efficiency (efficient operations) and upgrade the model ('+ internet')—then 'transform'—transform logistics into third-party (unified warehousing and distribution) and transform the platform into third-party (B2B platform). This way, success is more likely. The order cannot be reversed, otherwise it is dangerous. For example: due to rough management, warehouse accuracy is 96%. If you first 'transform' into third-party logistics, the resident merchants will see your inventory is inaccurate (even if you raise it to 99%) or inefficient, and they will be very uneasy, even worried it will affect their business or service. At that point, if you spend time 'upgrading' efficiency, it will be too late. But if you first upgrade accuracy to 100% and then transform, resident merchants will be very reassured, and the service you provide will be better than what they had before. Nationwide, the author has seen too many cases of transforming into third-party logistics but with low operational efficiency, causing complaints from resident merchants, poor service, and even data errors leading to distrust. In such situations, trying to improve operational efficiency later is very difficult because your scale is already large, and normal business leaves you little energy for adjustments. If you are a small dealer, first transform, then upgrade. The best way to transform is to follow the large dealers, or form an alliance with multiple dealers of similar scale (alliance rules must be well-defined, otherwise it may collapse), set a model, and then upgrade that model. Based on the author's random surveys and follow-ups with over 10,000 legitimate users of Youshang Software, combined with the experience of more than 50 platforms of Maideline, it is found that if large dealers use appropriate methods for transformation and upgrading, the success rate is higher and the speed is faster. This reminds me of a saying by Deng Xiaoping: 'Let some people get rich first, then drive others to get rich.' Is the path of dealer transformation and upgrading not also a process of getting rich anew! The author of this article is Xu Yonggang, CEO of Maideline. -END-