Post-Covid-19, How OEMs, dealers are changing their retail models

The pandemic increased the cost-consciousness of OEMs and dealers, who are starting alternative sales channels, direct customer access and leaner retail formats: McKinsey

Post-Covid-19, How OEMs, dealers are changing their retail models

Carmakers make cars; dealers buy these from carmakers and then sell to end-customers. This has been the practice for as long as one can remember. It also makes sense; a buyer, for example, cannot approach the factory gates of Maruti Suzuki plant in Manesar to buy a car!But the pandemic changed that.

By mid-2020, after the first lockdown, most carmakers had started online car sales by putting in place an end-to-end online car-buying platform. For the buyer, the steps include:—Setting the budget;

—Selecting a brand/model;—Visiting the carmaker’s website;

—Test drive (most dealers send the vehicle to your home/office);

—Negotiating and finance (online and on phone);

—Taking delivery (most carmakers promise car delivery at home/office).“While online car sales did take off during the lockdown, these processes were in place prior to Covid-19 as well,” Brajesh Chhibber, partner, McKinsey & Co, told FE.

“The lockdown helped speed up the adoption of digital, including online sales, and OEMs started focusing much more on enhancing customer experience, including reaching out to them even before they knock at the doors of dealerships.”During the lockdown, Hyundai India, for example, started the online automotive retail platform called ‘Click to Buy’.

Maruti Suzuki digitised 24 out of the 26 car-buying steps it says exist (except the two steps of ‘test drive’ and ‘taking car delivery’). Kia India started ‘VR Showroom’. Honda started ‘Honda from Home’, Tata Motors started ‘Click to Drive’, Mahindra started ‘Own-Online’, and so on.“The pandemic increased the cost-consciousness of OEMs and dealers, who started taking smarter decisions about further outlet consolidation, leaner retail formats, direct customer access, and alternative sales models,” Chhibber added.

“This continues, and omnichannel sales will be the new normal.”Dealerships are now going where customers are, instead of the other way round. “In addition to digital, this includes leaner and flexible retail models, such as experience stores, pop-up stores, and so on,” Chhibber said.

“Essentially, they are going where the footfalls are.”Three examples of a totally transformed retail experience are Mercedes-Benz India, Citroen India and Volvo Car India.Last year, Mercedes-Benz India implemented the Retail of the Future (ROTF), a format under which Mercedes-Benz India owns cars, sells these via franchise partners (existing dealers), invoices new cars to customers directly, and processes and fulfils the order.

Martin Schwenk, MD & CEO, Mercedes-Benz India, told FE that with the ROTF, dealers don’t have to invest in building up inventory. “Rather, they will be utilising their monies into newer ventures for the advancement of dealership network,” he said.In July 2021, Citroen became the first carmaker in India to start doorstep delivery of cars, when it started taking online bookings of the C5 Aircross SUV, and delivering directly to customers from its manufacturing plant in Tiruvallur, near Chennai. This initiative covers purchase, online trade-in, finance, insurance, maintenance packages, extended warranty and registration before doorstep delivery.

Last week, Volvo launched the XC40 Recharge, which will be sold only online (and not via dealerships).But most carmakers FE talked to said that online isn’t a separate sales channel, and that dealerships will exist. “Online or offline, a car has to be sold through dealerships. Dealers are not middle men, they are our partners,” an executive at a leading carmaker said.

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