mercedes: Mercedes goes for direct sales, to slow down dealer expansion

NEW DELHI: Mercedes-Benz will not be expanding its dealer footprint in India beyond the current sales and service touch-points as it migrates to a direct sales model where it takes up the responsibility of distribution, warehousing, retail and even discounts under its control. The company, which leads the luxury market in India, has invested Rs 60 crore for the new retail format – a first for the auto industry in the country — that will see dealers act as franchisee partners, being responsible mainly for product demos, brand experience, and car delivery and after-sales. “The new direct-to-customer model – under the ‘Retail of the Future’ initiative — will help drive in transparency and ease into the whole system through installation of a robust online platform,” Mercedes India MD & CEO Martin Schwenk said. In the new set-up, Mercedes will announce a nationally-set price as it will own the entire stock of cars and invoice them directly to the customers. The interesting part is that dealers will not be allowed to offer any discounts to attract customers, and would rather be treated as franchise partners. Any incentive scheme will be directly rolled out by the company. This will the first instance of an auto company carrying out direct sales with the dealers and retailers – now known as franchise partners – getting engaged only for enquiry, customer experience, delivery and service support, earning a commission and incentive on the volumes they do. Schwenk said that with the new programme, need for new dealerships beyond the 100-odd touch-points is minimal. “We are present in around 50 cities, which is sufficient to take care of existing and new customers. We have no intentions to further increase or reduce this network.” The new retail programme, which has been implemented in countries such as Austria, Sweden and South Africa, will see customers have visibility over the entire stock of cars available with the company. Also, most of the processes such as model selection, pricing and finance, will be available and controlled by a specially-created online platform that would help buyers keep track of the entire sales processes. The company says that the measure will ensure better dealer profitability by eliminating chances of any cut-throat price war between them. The dealers will also benefit by saving on the inventory holding cost that they currently have. Such expense generally runs into crores of rupees for each retailer, and carries an interest cost and potential penalties if stocks are not liquidated (sold) on time by them. Santosh Iyer, VP (Sales & Marketing) at Mercedes India, said that the initiative is the result of a two-year effort. “The idea is to free up the dealers and give them time to engage in customer experience and sales, and after-sales functions. From a discount agent, we want to transform them into a real sales agent,” Iyer said.

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