FADA welcomes shift in Mercedes retail structure. But a word of caution

Mercedes-Benz India on Wednesday announced a change in its retail structure in the country by opting to have a direct to customer model under which it would own the entire stock of new vehicles for sale. While promising transparency and best prices to customers, Mercedes highlights it would improve the financial health of dealer partners due to lower cost structure and zero inventory. The Federation Of Automobile Dealers Associations (FADA) has largely welcomed the move while also choosing to highlight that the viability of such a model for mass-market players would remain to be seen.

Mercedes has introduced its Retail of Future business model with a view of enhancing car-buying experience while promising better financial stability of dealer partners in Covid-19 times. The company would own the entire stock of new vehicles and a customer can walk into any showroom in any part of the country and make choice from all the available options from the car maker, not just those available at the dealer. This model is a first in India but Mercedes had previously adopted this in Sweden and South Africa.

FADA President Vinkesh Gulati is of the opinion that it could help Mercedes dealers but also added that it could be something specific to the luxury vehicle space. "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," he explained. "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 out of it."

The shift to a direct to customer model from Mercedes is perhaps the second biggest move in Covid times related to how cars are sold. This after almost every auto company shifted to either establish or enhance online retail channels in the country last year.