Mercedes-Benz India today introduced its new retail sales model called ‘Retail of the Future’ (ROTF). With this new model, the company plans to promote a ‘direct to customer’ retail approach to creating a more customer-centric brand. To the effect, under this business model, Mercedes-Benz India will own the entire stock of cars, sell them via appointed Franchise Partners, invoice the new cars to the customers directly, process the order, and fulfill them. This would also mean that the company will offer one transparent price across India. The new retail model will be applicable only for new car sales, whereas other verticals like – customer service, pre-owned cars, and allied businesses will remain unchanged.
Talking about the introduction of the new retail sales model, Martin Schwenk, MD & CEO, Mercedes-Benz India said, “This long-term strategic move will strengthen our customer focus by introducing a fundamental transition in the retail business in the market. It also will deliver a win-win solution for both customers and Franchise Partners, underscoring our clear vision for a future that is sustainable, empowering and digital. The advent of new sales channels has brought sweeping changes in customers’ aspirations and requirements and being a customer-obsessed brand, we have adapted our current business models to meet our customers’ aspirations and needs.”
Commenting on Mercedes-Benz India’s new retail model, Vinkesh Gulati, President, FADA India said, “The agency model introduced by Mercedes India will be an out-of-the-box thinking by the company. Even though the model has tested waters internationally, India is a unique market where customer physic is very different as they change Dealers and even brands on any additional discount. Even though on the face of it, this model looks beneficial for the dealer community dealing in Premium Brands with low Volume but we will need to see if this model can work with mass-market brands so that every dealer can benefit from it.”
Now, for customers, this might not be a big change. They will still have to visit the showroom or go online to purchase the vehicle, and, they will continue to the facilitated by the franchise representatives. What will change, however, is they’ll get uniform and transparent pricing, larger stock availability for choosing, and better customers service as that will become the major focus areas for dealerships. However, things will be widely different for franchise partners, the dealers, who will be operating on reduced risks and liabilities right now. A direct-to-customer retail model would mean they won’t have to worry about inventory cost, warehousing of the stockpile, which is added cost to dealers right now.
However, this also means that dealers won’t be able to offer selective discounts or deals to attract buyers to compete with other dealers and gain more margin. Instead, now, in order to compete with other franchise partners, dealers will have to offer improved customer service, which will be measured based on what the company calls the CSI rating. In short, dealers will get commissions instead of sales margin.
As for Mercedes-Benz India, it will be responsible for centrally managing the selling price of all new cars. The company will also be owning and managing the entire stock of new cars and will have to take care of order processing and fulfillment. This means the company will stop wholesale despatches to dealers. The company says that this new retail model will allow Mercedes-Benz to have better control over volume scalability and achieve price stability within segments. The company will also get improved forecasting with regards to the market trends and customer insight, along with better inventory management.
Mercedes-Benz India will implement its new Retail of the Future sales model starting from the fourth quarter (Q4) of the 2021 calendar year.