HARD CUTS: Mercedes-Benz plans to cut between 15 and 20 per cent of its dealerships in Germany with 80 per cent of all European sales to be made via an agency style model by 2025.
MERCEDES-BENZ will reduce its global dealership numbers by approximately 10 per cent as part of a broad overhaul of its distribution network.
As the Three-pointed Star pushes toward a global agency-style sales model – allied with an ever-expanding online retail presence – the Sindelfingen-based brand no longer requires a wide network of bricks-and-mortar dealerships, particularly in mature markets.
For example, Mercedes-Benz plans to cut between 15 and 20 per cent of its dealerships in Germany. The company also says it aims for 80 per cent of all European sales to be made via an agency style model by 2025, like that already in operation within Australia.
About 20 of the European markets in which the brand operates will have adopted the agency-style sales model by 2025 (five have already been converted).‘Benz projects that 25 per cent of its sales will be concluded online by the middle of the decade.
Speaking to Automotive News Europe (ANE) this week, Mercedes-Benz CFO Harald Wilhelm said that the departure from a franchise-style sales model would significantly reduce distribution costs while allowing the firm to “rein in” dealer incentives.
“We want to have more proximity to the customer and, therefore, have better control over pricing. That is why we are moving from the current dealer role,” said Mr Wilhelm.
The cuts in Mercedes-Benz’s global dealer footprint are expected to be completed by 2025 with the German dealership reduction in place by 2028, said the brand’s vice president of communications and marketing, Bettina Fetzer.
“We need fewer large showrooms in mature markets. We will move away from large showrooms, especially when we move to direct sales,” Ms Fetzer told ANE.
Ms Fetzer said Mercedes-Benz’s high-end brands will have their own dedicated and branded outlets with a Maybach showroom in Shanghai, China, an AMG outlet in Dubai, UAE, and a G-Class Experience Centre in Austria that offers prospective customers off-road test drives.
“We have grown the network for our luxury brands by 30 per cent in recent years, and this is the direction we will keep on going,” added Ms Fetzer.
Last year, Daimler moved to list 25 dealerships for sale across Europe in the hope of generating €1 billion ($A1.51 billion) in cash. ANE’s report says the move was part of a broader cost-cutting plan announced by Mercedes-Benz chairperson Ola Kallenius in 2020 as the brand sought to reduce overall operational costs by 20 per cent.
Under an agency-style model – which already applies to Honda, Mercedes-Benz, Polestar and Tesla vehicles sold in Australia – manufacturers invoice customers directly and hold inventory, while dealers receive a fixed fee for every vehicle delivered.
“All of these efforts combined give us a competitive advantage, but the full leap comes when we combine that with direct sales. This gives us a direct management of the customer relationship, and we will know our customers even better,” Ms Fetzer said.
“Our customers are getting younger, wealthier, and more digital. They want to engage with us on multiple platforms, when and where they want to,” she added.
As reported by GoAuto earlier this week, an increasing number of manufacturers are turning to the agency sales model in Europe – the firms suggest that the switch to an agency-style sales model will provide greater control over the sales process.
Stellantis said it planned to move its Alfa Romeo, Citroen, DS, Fiat Professional, Lancia, Opel, Peugeot and Vauxhall brands to an agency-style model in Europe from June 2023.
Volkswagen Group uses an agency-style model to sell its VW ID and Audi e-tron BEVs, while the Cupra brand is moving to what ANE describes as “a non-genuine model”.
BMW and Mini could move to a direct-sales agency model in Europe by as early as 2024. However, BMW Australia says that at it has no such plans for our market (at this stage).