With the continuous development and promotion of information technology in China, digital transformation has become an important engine for the promotion of the total factor productivity in circulation enterprises. Based on the data of China's Shanghai and Shenzhen A-share listed circulation enterprises from 2007 to 2020, this paper empirically tests the impact of digital transformation on the total factor productivity in circulation enterprises and its mechanism. The research results show that digital transformation can effectively improve the total factor productivity in circulation enterprises. The heterogeneity analysis finds that the role of digital transformation in promoting the total factor productivity has a differential impact on different types of circulation enterprises, and the role is stronger in state-owned circulation enterprises, warehousing, postal and transportation industries, and the eastern region. In terms of impact mechanism, digital transformation mainly promotes the improvement of the total factor productivity in circulation enterprises through three indirect ways: improving management efficiency, expanding market scale and reducing supply chain concentration. Furthermore, from the perspective of supply chain concentration, which reflects the characteristics of the circulation industry, digital transformation mainly improves the total factor productivity by suppressing the concentration of downstream customers, but it does not bring productivity improvement by reducing the concentration of upstream suppliers. The research conclusions have important significance for revealing the mechanism of the impact of digital transformation on the circulation enterprises operating, and provide a new perspective and way of thinking for releasing digital dividends.