---
title: "Qualitative Change: The New Replaces the Old, the High Replaces the Low, the Strong Replaces the Weak"
description: "A philosophical question: Why do enterprises exist? Nobel laureate Coase answered in 'The Nature of the Firm': 'Enterprises exist because they reduce social transaction costs.' Enterprises thrive on high efficiency and perish on low efficiency. With the same product/service, the enterprise that can deliver it to customers at a lower price wins in market competition; at the same price, the one offering better quality wins. To survive and develop, operators relentlessly pursue higher efficiency and lower costs, reorganizing production factors so that more efficient new combinations replace less efficient old ones. This is the law of competitive survival: the new replaces the old, the high replaces the low, and the strong replaces the weak."
author: "陈立才"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-02-20"
categories: "Management & Methods"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/UbkcUWnjYCaeIIYYMg-0CA"
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citation: "陈立才. “Qualitative Change: The New Replaces the Old, the High Replaces the Low, the Strong Replaces the Weak.” New Distribution, 2023-02-20. https://xinjignxiao.com/en/articles/qualitative-change-the-new-replaces-the-old-the-high-replaces-the-low-th-7e63a7b7/"
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# Qualitative Change: The New Replaces the Old, the High Replaces the Low, the Strong Replaces the Weak

> A philosophical question: Why do enterprises exist? Nobel laureate Coase answered in 'The Nature of the Firm': 'Enterprises exist because they reduce social transaction costs.' Enterprises thrive on high efficiency and perish on low efficiency. With the same product/service, the enterprise that can deliver it to customers at a lower price wins in market competition; at the same price, the one offering better quality wins. To survive and develop, operators relentlessly pursue higher efficiency and lower costs, reorganizing production factors so that more efficient new combinations replace less efficient old ones. This is the law of competitive survival: the new replaces the old, the high replaces the low, and the strong replaces the weak.

**A philosophical question:**
**Why do enterprises exist?** Nobel laureate Coase, in 'The Nature of the Firm,' gave the answer: 'Enterprises exist because they reduce social transaction costs.' **Enterprises thrive on high efficiency and perish on low efficiency.** With the same product/service, the enterprise that can deliver it to customers at a lower price wins in market competition. At the same price, the enterprise that can deliver better quality to customers wins. To survive and develop in the market, business operators and managers relentlessly pursue: higher operational efficiency, lower internal operating costs, and lower external transaction costs. They reorganize production factors, letting more efficient new combinations impact and replace less efficient old combinations, and letting business models with stronger survival capabilities impact and replace weaker ones. This is the law of competitive survival: **the new replaces the old, the high replaces the low, and the strong replaces the weak.** The new can be new technology, new methods, new materials, new products, new markets, new models, etc. Every case shared in this book embodies the innovative thinking of its protagonist. 'Leveraging big data to connect all channels' defines the scope of this book. We will focus more on exploring: the development of various FMCG categories and brands in the digital trend, various cases based on new digital technologies and new business models, studying various business models, and studying various reorganizations of business elements. Whether each case in the book can sustain success is hard to conclude, but we appreciate and affirm every protagonist who stands at the forefront and seeks change. Let's look at the hot brand in the fresh food retail market over the past few years—Hema Fresh. First, a result: Hema Fresh's sales per square meter (referring to how much turnover can be produced per tsubo, 1 tsubo ≈ 3.3 square meters) exceeds 50,000 yuan, more than twice the industry average. In the fiercely competitive retail market, how did Hema Fresh achieve this? An innovative business model based on digital technology. Compared with existing retailers in the market, Hema Fresh achieved breakthrough upward thinking and downward strike. Here are its four key top-level designs, also the key points among many breakthroughs.
**Comprehensive sales per square meter:** One terminal, front store and back warehouse with five centers, one stone for multiple birds, maximizing sales per square meter and improving comprehensive online and offline sales per square meter. **Online orders:** Online revenue should be greater than offline, with each store achieving at least 5,000+ daily online orders. **330 delivery:** Achieve 30-minute delivery within a 3-kilometer radius of the store, so you can get it quickly if you want to buy, and eat it quickly if you want to eat. **Information ecosystem:** Advocate App payment, after offline payment, guide customers to the online platform, build a closed-loop information ecosystem, and build a closed-loop customer group attraction, retention, nurturing, and retention ecosystem. Accordingly, the offline terminal is not just a terminal, and the online platform is not just a platform. Through upgraded design, the increase in comprehensive sales per square meter can rely on the 'retail + scenario' dimension, online orders add the 'retail + network' dimension, 330 delivery adds the 'retail + logistics' dimension, and the information ecosystem adds the 'retail + payment' dimension. Thus, with the same floor area, sell more goods; with the same number of personnel, achieve higher output. The upgraded retail is still retail in essence, and it must face the essence of retail operation and management. In addition, the final financial indicator—net profit margin—awaits the test of Hema Fresh. Can the current business model achieve higher gross margins and lower operating expense ratios than ordinary malls and supermarkets? For example: because the customer base is more focused, there will be fewer customers per unit area; can it achieve revenue scale advantages in the target area? How to achieve lower customer acquisition costs? The strong central information system support comes with expense investment; the new model's requirements for employees are much higher than ordinary formats, which means higher salary expenses; can warehousing and delivery achieve lower rates than customers shopping in stores?
**Consumer goods market**
**Always changing, always evolving** The market produces talents in every generation, each leading the trend for a few years. The consumer goods market is always changing and evolving. One day, the current new wave will be beaten by newer models and stronger waves. Here, let's briefly review the development history of China's retail channels over the past 70 years. The supply and marketing cooperative established in July 1950 was once glorious, with people saying 'Marry a man from the cooperative' ; in the 1980s, grocery stores and mom-and-pop shops bathed in the spring breeze of the market sprang up like bamboo shoots after rain, blooming everywhere and thriving; in 1995, the first Carrefour opened, positioned as a one-stop comprehensive shopping center, which was a thunderclap in the industry at the time, with customers flocking to it. Retail giants like RT-Mart, Walmart, China Resources, Bailian, and Wumart developed prosperously until 2015; in the year before the 21st century, Alibaba, with the motto 'Make it easy to do business anywhere,' was established, leading the online channel to surge forward, conquering territories, until it acquired RT-Mart, the most successful hypermarket at the time, making people sigh that RT-Mart 'defeated all hypermarket competitors but lost to the era.' In the case above, Hema Fresh opened its first store in 2016, and its birth announced the arrival of the new retail era with online and offline integration and a shopper experience-centered approach. There will definitely be a next generation, and there will be the next more efficient business player. Who will it be? Let's briefly sort out the existing channels and find at least seven types. Now, the market has more and more channel types, with increasingly blurred boundaries, meeting customer needs in various scenarios. **The new beats the old, the new replaces the old, essentially high efficiency replaces low efficiency, and advanced models replace backward models.** Most of the time, the birth of new businesses and models is about meeting customer needs with higher cost performance. The new may not completely replace the old, but the new will push the whole forward, making the market more three-dimensional and complete. For channels and retailers, comfort behind is stagnation. Many salespeople habitually think that the fewer competitors in the market, the bigger their market, but without competitors, enterprises often stagnate. A hypermarket fears other hypermarkets within a 5-kilometer radius; a mother-and-baby store fears other mother-and-baby stores in the same community or street. Competition pushes us forward, and insight lets us develop. The real competitor is not other brands, but constantly changing customer needs. Omnichannel thinking does not necessarily mean entering all channels. Every brand, when facing channels, should think one more time: Which channels should we enter? In which niche channels can we win? In which niche channels do we operate with higher cost performance? Flood irrigation is relatively easier, while precise operation requires more effort. In the blue ocean market, the first choice is to claim territory, while in the red ocean market, fine operation is required.
**【Taobao Scan to Buy Book】**
Enterprise procurement, please contact: Cici - Insight Code Consulting
E-mail: ninaji@insightcode.com
**Recommended Reading**


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## Citation metadata

- Publisher: New Distribution
- Author: 陈立才
- Published: 2023-02-20
- Canonical: https://xinjignxiao.com/en/articles/qualitative-change-the-new-replaces-the-old-the-high-replaces-the-low-th-7e63a7b7/
- Original source: https://mp.weixin.qq.com/s/UbkcUWnjYCaeIIYYMg-0CA

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