Mercedes-Benz India (MBI) has announced a bold and ambitious plan which it believes could change the game for auto retail in India. The German automaker firmly believes that digitisation is the future for auto retail, and states that 15-20% of its bookings in the Indian market are done online. By the end of the year, Mercedes-Benz India plans to move away from the traditional retail route for a direct-to-consumer approach, as dealerships would only manage customer experiences and sales management.
The traditional method of auto retail entails Mercedes-Benz India to manufacture and provide the vehicles to the franchise dealerships in wholesale. The dealer would buy the vehicles from MBI and create an inventory which they would sell to the customers. A standard practice in most retail sectors.
With the new strategy, customers will directly buy the cars from Mercedes-Benz India and not the dealerships. The three key changes would mean that MBI would set a standardised all-India price and manage the whole national inventory and stocks. Additionally, the customer’s sales contract would no longer be with the dealer, but MBI directly. The system will allow MBI to take charge with a centralised ordering and fulfilment.
The dealerships would shift focus to being customer experience centres, manage the delivery of vehicles and of course, after-sales services. Dealerships would be responsible for brand experience, it would showcase the model range and cars to the customers, offer sales counselling and facilitate sales of the vehicle. Dealerships would be advertising their customer satisfaction ratings on their own websites which Mercedes-Benz says will be the differentiating factor. While MBI will have centralised stock management, vehicle storage will be decentralised with dealers continuing to operate stockyards. However, there will be no inventory costs for them as the units will be owned by MBI. This will allow better visibility of available stock for sales consultants and the customers.
Mercedes-Benz India claims that this will help have a nationalised and transparent pricing for its products. Special offers would also be standardised across the board and it believes it would cumulatively allow customers to have a better residual or resale value of their Mercedes-Benz cars. It would also allow customers to have a wider range of options as they will have access to the national stick, rather than just the dealer inventory. Meaning for example, if you want a C200 in a shade of red paint with a black interior, but the dealer doesn’t have one in stock. So now you can check the inventory for a similar spec at a nearby dealership, or at MBI’s stock instead of settling for a colour, combination or spec that you didn’t really want, and the dealer does not need to push a non-desired spec vehicle onto you. In the end, with the wider choice of variants and options, the customer could home happier.
While the dealership will initiate the vehicle order, fulfilling that is on the onus of MBI. Dealerships will operate with reduced risk, but associated risks will be transferred to Mercedes-Benz. Plus by analysing the data, Mercedes-Benz India can improve production and inventory forecasting and order management.
The move from Mercedes-Benz is not unheard of. Many brands, especially start-up companies that try and remove the middleman and sell direct-to-consumer have found success. However, it is the first time in India, an established luxury automaker is introducing a direct to consumer strategy. The new model is said to be rolled out in Q4 of 2021, following which we will know if it is in fact a retail model of the future for the auto industry.
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