Mercedes-Benz to roll out direct-to-consumer retail model in the UK, Germany in CY2023
With a centralised inventory, the company has given a huge shot in the arm to its franchise partners’ profitability and working capital requirements by doing away with inventory costs, and the risk of heavy discounting to liquidate stock.
German luxury carmaker Mercedes-Benz is closer to rolling out a direct-to-consumer (D2C) retail format in its home turf later this year. The retail model will be a replica and fine-tuned version of the carmaker’s lean retail push in markets such as South Africa, Austria, Sweden, and India, where the format, christened Retail of the Future, was introduced in October 2021.
The ROTF model in India has transformed the luxury carmaker’s retail business towards ensuring higher levels of transparency and rocketed its sales volumes on the back of a better and standardised customer experience. In FY2023, Mercedes-Benz India recorded overall sales of 16,497 units, registering a marked increase of 37 percent (FY2022: 12,071), owing to the strong demand for premium cars in the country.
The new format has also transformed the company’s channel partners, who have switched to being called franchise partners than dealers, as the entire vehicle stock, across the country, including that at the Mercedes-Benz India plant in Chakan, Pune, is now accessible to the partner and customer through a centralised system.
According to Santosh Iyer, MD and CEO, Mercedes-Benz India, “Convincing franchise partners (erstwhile dealers) was the first challenge to overcome in this transition to bring a mindset shift in retail. While profitability is core of any business, focusing on customer experience was our major target."
With a centralised inventory, the company has given a huge shot in the arm to its franchise partners’ profitability and working capital requirements by doing away with inventory costs, and risk of heavy discounting to liquidate stock.
“The onus and risk are now on us as an OEM. There are always variations in demand forecasting as the accurate predictability of the market is a big challenge. However, we have a better insight on the demand with data analytics, and we can convince our partners” Iyer added while speaking as a panelist at the Autocar India-Reliance General Insurance Brobot Interact virtual session on April 17. The discussion revolved around understanding the impact of digitisation on the automotive industry in India.
The Mercedes-Benz ROTF format has elevated customer experience in an extremely experience-oriented segment by eliminating price haggling between customer and dealer, as well as the non-transparency in stock availability. “Earlier, each dealer would have cars in their stock, but today, the entire stock nationwide has been aggregated under one roof, and each franchise partner now ends up retailing from the complete stock rather than what is with them.
“While it increases the logistics cost a little bit in shipping a car from one location to another, with the kind of road infrastructure progress in the country, we tend to offer better customer service and experience as customers also do not mind waiting a couple of more days in case of a high-end product purchase,” Iyer explained.
“We wanted a blueprint not only for India but for implementation across the world. The D2C format will go Live this year in Germany and the UK. The system was built on a wholesale template rather than a retail template by coordination among Singapore, India, and Germany. While we went Live, we continue to have a lot of scope to improve, and we are on it,” Iyer signed off.
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