While a model such as Retail of the Future has not been tested in India, Martin Schwenk, MD & CEO, Mercedes-Benz India, tells FE’s Vikram Chaudhary that it’s not an experiment or a pilot, but the way forward for the carmaker in India.
Will Retail of the Future change the car-buying experience for a customer, and will it also change the look and feel of an existing dealership?
The look and feel of a dealership won’t change, and the car-buying experience for a customer will only get better.
How will the customer benefit?
She gets better choice. For example, earlier, if a customer wanted, say, a red C-Class at a dealership in Delhi, and the dealer only had the white C-Class, she either had to wait or search at other dealerships. Now, the same dealership can check if there is a red C-Class in the national inventory, and if a couple of these cars are found, say, in Pune, the same can be shipped to Delhi for the customer. Instead of having to choose from 20-odd cars at a dealership, she can choose from hundreds of cars.
How will Mercedes-Benz India benefit?
This will help us better manage customer demand and, therefore, better manage inventory.
How will the dealer benefit?
They are now called franchise partners. Earlier the dealer used to buy the inventory from us, and then he had to sell the car to the end-customer. This added a lot to fixed costs. Now, cars owned by Mercedes-Benz India will be parked at dealerships.
Indian customers usually haggle even while buying vegetables. Earlier, a customer could haggle with dealers on pricing and discounts. With a single fixed price pan-India, won’t the customer feel disappointed?
Do you haggle while buying gold? It’s got a fixed price. The aim is to reach towards price stability in luxury cars as well. In the long-term, this will lead to better resale value and better residual value of a car.
Is there data to prove that such a step leads to higher sales?
Mercedes-Benz is running such a model in South Africa and Sweden. While every market is different, the success we’ve seen in Sweden has led to pushing this model in India.
India is many countries in one: When it’s marriage season in, say, Kerala (when car purchases pick up), it could be a lean season in Punjab. How can one price (without dealer discounts) make sense?
I must add there are certain challenges that we still have to figure out, but we’re confident this model will work.
How will franchise partners make money?
Earlier, dealer partners used to earn a margin on every car sold. Henceforth, franchise partners will be paid a commission, which will be slightly lower than the margin, but according to our simulations it will make them more profitable overall.
Was there a pressure from the headquarters in Germany to try such new sales models, because over the last couple of years sales are almost flat?
No, the decision is independent of any market turbulence, and that is no pressure from Stuttgart to do this. Stuttgart places a lot of trust on the local team, and discussions that lead to such kind of decisions always require a strong viewpoint from the Indian team.
Is Retail of the Future in an experimental stage?
It’s not tested in India for sure, but I won’t say it is an experiment or a pilot. I believe this is the way forward for us in India; this model will have to prove itself in due course of time, and I believe it will.
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