Mercedes CEO ‘excited’ by agency model despite two-tier car retail sector concerns

Mercedes-Benz UK chief executive Gary Savage has said he finds the roll-out of the brand’s direct-to-consumer agency model car retail strategy “hugely exciting” – despite agents' two-tier car retail sector concerns.

Savage was quoted in a statement issued by the German premium carmaker after the first month of trading under the new model – to replace the franchised agreements previously held by its 138 franchised sites – brought a 20.9% decline in registrations to 5,030 units in January's growth market.

One AM100 car retail group director told AM the situation could have been worse if not for the OEMs’ registration of its own demonstrator fleet to replace those owned by retailers under the previous franchise agreement.

Despite Mercedes’ hopes of a move into luxury segments, the “concerned” retailer – now an agent under the terms of the Mercedes agreement – also called for the brand to implement a “pricing realignment” to avoid the creation of a two-tier sector where rival franchised brands maintain greater flexibility to entice customers with discounts and incentives.

Price 'isn't as compelling'

Savage said: “Under our new agency model, pricing is transparent for our customers wherever they choose to buy, eliminating the need to shop around. This means customers can be confident they will always get our best price.”

However, AM’s retailer source argued that “without retailer discounts, consumers are now looking at Mercedes and finding that the price just isn’t as compelling as it once was”.

AM understands that Mercedes has already implemented £3,000 discount of its A-Class hatchback over one weekend in January in a move that appears to fly in the face of the agency models’ fixed price promise to consumers.

In his appraisal of the first month of agency trading, Savage said it was “a hugely exciting time for us and our network – providing our customers with a range of benefits”.

He added: “In an increasingly digitised world, customer-buying habits have changed – and an Agency model provides a consistent and transparent purchase journey – whether that’s online, in a physical showroom, or a combination of the two.”

Mercedes-Benz said its Online Showroom provided customers with visibility of exactly where they are at in the purchase journey – from choosing a vehicle from all available UK stock, through to the vehicle handover – via a convenient, easy-to-access portal, offering a truly seamless “omni-channel” experience.

Agents, which AM understand received 5% of car sales margins, have maintained their financial compliance responsibilities, however, meaning that a complete end-to-end online retail journey is still not an option.

OEM priorities

Savage said: “Mercedes-Benz Agents continue to play a central role in serving our customers throughout their entire new car purchase journey. 

“Initial feedback shows customers are enjoying the simplified buying experience, with an average 5-star rating of 4.7.  Feedback includes ‘very easy, simple, quick process’ and ‘I like the transparent price so no need to shop around’.”

This weekend sees the launch of our brand-new Mercedes-Benz Agency TV ad, which will air during this Sunday’s England Vs Italy Rugby game.

Yesterday (February 9) Volvo Cars chief executive Jim Rowan highlighted the Swedish premium brand's priorities as it transitions to an agency model.

AM recently reported that Volvo had delayed its planned roll-out in the UK - its pilot region - by around three months to June 1.

Rowan said: "What I care about is that in every single touchpoint within that we're still connected with that customer. So if you go to a dealership you're still buying from Volvo.com and we're still part of that conversation, and then that gives us access to that customer, that customer's data, and it gives us a much better chance of continually engaging with that customer to find out what they like and don't like about the product and, hopefully, keeping them as a lifelong customer."