I read with interest the new retail concept of Mercedes Benz called Retail of the Future, now in its pilot stage in several markets. If proven to work well in the test markets, this new structure will be introduced gradually in the rest of the territories.
So what exactly is Retail of the Future? The details are still sketchy, but it essentially means that Mercedes Benz will sell directly to the customers, with the dealers relegated to "Franchise Partners" whose main role is to provide after sales service.
Mercedes Benz cited several reasons for doing this. Firstly, the company said that new car sales profitability is always a roller coaster depending on seasonal factors, age of the models, production schedule and so on. After-sales or fixed ops as it is called in US is more stable. Therefore, Mercedes Benz argued that this new format is good for the dealers because it takes out the instability of profits over time.
Secondly, Mercedes Benz argued, retail cost can be reduced since dealership stock carrying cost is minimized. Presently, 10 dealers within close proximity of each other may be forced to display say 3 colours of the same model, but with the new sales format, MB carries the inventory in their so-called central repository, and the cost savings can be passed on to the customers.
Thirdly, with the growing need for touchless service, the role of showrooms have been reduced. More online activities are expected to take place as the new normal, and online services are better served by MB in a centralized manner.
Fourthly, as cars moved towards electrification, MB argues that current dealers are not yet adequately equipped to serve the customers, so MB can apply their expertise for their customers. New sales presentation requires deep understanding of touchscreens and software, energy computations (watts, kilowatts, voltage, current, resistance, types of motors, AC/DC, brush or brushless, permanent magnet or not, types of batteries, cylindrical, pouch, prismatic, blade etc, EVSE types, cables, current, power tariff etc). The expertise on ICE power train becomes obsolete.
So how does EV play a role in the change? Well, because consumers and potential car buyers do not know the new EV players, these new players have to introduce their products and have the customers experience the EVs, play with the features, understand the cars better, drive them to build confidence, and you cannot do this with the dealership format. For the dealership format, the customers walk into the showrooms after doing their homework, and usually already have adequate experience with the cars they intend to buy.
The new concept introduced by the new EV players is called the experiential centre, designed to be family friendly, a place to drop by while shopping, to linger, to try, to test, and to relax. The atmosphere is different from a typical showroom which is often highly pressurized, with a lot of wheeling and dealing, hard negotiation, going on.
The confidence in the format without dealerships is further boosted by the success of the brands which have done away with dealerships, Tesla being a good example.
Are we seeing a future landscape with dealerships being just a place for customer service support? Please feel free to drop your comments