Mercedes Benz to sell cars in India directly to buyers via franchise

The invoicing to be done in the name of the company instead of dealers

Now you can buy a car directly from Mercedes Benz. The luxury car market leader has introduced a direct to customer sales model for the first time in India as it seeks to better the buying experience, the company said on Wednesday. It’s a first by a luxury car company in India and will pave the way for more companies toeing the line, said analysts and dealers.

Termed ‘Retail of the Future’ (ROTF), it is a win-win situation for customers, the company and its franchise partners. Under the new retail models,  Mercedes-Benz India will own the entire stock of cars, sell them via appointed franchise partners, invoice the new cars to the customers directly, process the order and fulfill them, offering one transparent price and purchasing experience for customers.

The new business model will be applicable for new car sales. Separate business lines including customer service, pre-owned cars and allied businesses remains unchanged under the new model.

“The ROTF will enhance the buying experience for the customers and help our franchise partners,” Martin Schwenk, Managing Director and CEO, Mercedes-Benz India. “We are not changing our footprint in any way.  We are just integrating the whole process for the customers,” said adding that the new model will help the company leverage its network a lot better. The other two markets where Mercedes has a similar model are Sweden and South Africa, he said.  

The luxury car market has been hit hard in the last couple of years. This in turn has hit the dealers hard. A high cost of capital and low sales have forced several of them to shut shops, said Puneet Gupta, associate director, I.H.S Markit, a sales forecasting and market research firm. “While customers will benefit from unified pricing and better buying experience, it will be of greater benefit for dealers as it takes off the burden of funding the inventory,” he said.

For someone who is buying a Mercedes, it is only when the invoicing is done will the changes be discernible. The invoicing will be done in the name of the company and not the dealer partner, as is the case today. Also, one gets to choose from a wider pool – be it trims or colors. For instance, if a particular variant or color is not available at a dealership, the centralized warehouse managed by the company can get the car delivery facilitated through some other franchise partner making the buying experience hassle free, explained Schwenk.

It would also offer best prices directly from the company without having to negotiate and lead to easier price comparison, seamless and simplified purchase process, complete transparency, sale and, and save time and effort, Mercedes claimed.

“It (the new business model) de-risks our business and allows us to focus on our core function—sales and marketing better. It takes away the headache of inventory management,” said Mohan Mariwala, Managing Director and CEO, Auto Hangar – one of the largest Mercedes dealers which will now act as a franchise partner for the company. It improves the overall efficiency, they would allocate the cars. The pricing will be the same across the country.  There are no hidden charges and fine prints, he said. 

Instead of dealer margin, franchise partners will now earn a commission. This frees up our working capital. Any kind of inventory lying with a dealer attracts anywhere close to 9 to 11 per cent, said Mariwala.

The primary roles and responsibilities of the Mercedes’ franchises will include establishing and maintaining customer contacts, development of the market and facilitating the sale of Mercedes-Benz models.  They will continue local retail marketing activities and also be responsible for lead generation and management. Current showroom infrastructure will continue to remain the same.

This long-term strategic move will strengthen the company's customer focus by introducing a fundamental transition in the retail business in the market. It also will deliver a win- win solution for both customers and franchise partners, underscoring Mercedes India’s clear vision for a future which is sustainable, empowering and digital, he said.  

According to Schwenk, the advent of new sales channel have brought sweeping changes in customers’ aspirations and requirements and introducing  RoTF is a firm step towards establishing an ecosystem that is customer obsessed. It empowers customers to have a hassle-free and completely transparent customer journey, experienced never before.