A new auto sales channel takes shape: Mercedes-Benz India’s ‘Retail of the Future’

Mercedes-Benz implements Retail of the Future; will sell cars directly to customers.

By:October 23, 2021 8:52 AM

Carmakers make cars, and dealers buy these cars from them and then sell to end-customers. This has been the practice for as long as one may remember. It makes sense also; a buyer cannot approach the factory gates of a Maruti Suzuki plant in Manesar to buy a car! Mercedes-Benz India, however, thinks direct selling to end-customers is possible. On Friday, the German luxury carmaker implemented the Retail of the Future (ROTF), a new format under which Mercedes-Benz India will own cars, sell these via franchise partners (existing dealers), invoice new cars to customers directly, process the order, and fulfil these.

Martin Schwenk, the MD & CEO of Mercedes-Benz India, said: “In June, we announced a disruptive retail business model that is highly customer-centric and promised a seamless, omni-channel and transparent experience to our customers. Now we are proud to implement the ROTF after successfully establishing a robust digital backbone, which will support this significant transition in our retail business. The ROTF is a unique customer-centric business model, which caters to the evolving trends of our customers, while empowering our franchise partners by significantly reducing their financial and operational risks in the market.”

“The goal is to offer one transparent price and purchasing experience for customers across India,” Santosh Iyer, vice-president, Sales & Marketing, Mercedes-Benz India, told FE. Conceptualised two years ago, the ROTF has been implemented at an investment of Rs 60 crore. This new direct sales channel, however, doesn’t change the look and feel of the existing dealerships, just that dealers are now being called franchise partners. “Cars will be delivered only through franchise partners, who continue to remain brand representatives in the market and are responsible for developing customer relationship and managing operational handling of customer interactions,” Iyer added. “They will also be responsible for developing local market requirements, and the current showroom infrastructure will remain the same.”

Customers can now avail the best price guarantee (Mercedes-Benz India will set price of cars), have an endless choice from a ‘centralised’ national stock (earlier their choice was more or less limited to a dozen or so cars available at the dealership), and won’t have to pay any ‘incidental’ charges (although the agent will charge doorstep delivery expenses if a customer is beyond 100 km from the agent location). Customers can book any model by paying an amount of Rs 50,000.

Mercedes-Benz will also offer the VIN number to a customer during the order booking stage itself. The carmaker has launched an exclusive Digital Commerce Platform, an online store, in which customers search from the available stock. The ROTF will be applicable only for new car sales and will not alter the functioning of separate business lines including customer service, pre-owned cars and allied businesses. “There are certain positives to the ROTF,” said an automotive analyst who didn’t want to be quoted.

“One, the brand value will not get diluted because of dealer discounts. Two, the carmaker will have larger control over the inventory. Three, it may lead to lower operational costs for dealers in the long run, as they may not really need huge dealerships at prime real estate.” In other words, with the ROTF, dealers won’t have to invest in building up inventory. Rather, they will be utilising their monies into newer ventures for the advancement of dealership network.

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