By DCB Editorial, May 23, 2022
You will own nothing and be happy. This is the underlying message the hierarchy at Mercedes Benz is telling its dealership network. OK, let’s take a step back. Mercedes-Benz is planning to cut 15-20 percent of its dealership network in Germany and about 10 percent globally, according to various news sources. The German car maker is switching to direct selling, which means the company is targeting the new internet-savvy-buying generation. Mercedes is essentially cutting out the middle man. In this case, Mercedes IS the middle man.
This type of business operation is often referred to as the agency model. The current retail business model requires dealers to buy stock directly from Mercedes, which the dealers then go on to sell. With the agency model, Mercedes takes on the cost of promotion, dealers would still make a profit, but it would be much smaller.
Volkswagen shifted to an agency model to promote the sale of electric cars. The Stellantis group recently canceled dealer contracts in favor of the agency sales model. Mercedes says the agency model approach allows for greater transparency for consumers.
One should never trust an automaker when they pull the transparency rabbit out of the hat.
Mercedes has been price-fixing and practicing anti-monopolistic dealings for years. The new agency model is about making more profits. It is also the first step to reducing the dealership network as more and more people opt to purchase new cars online. Dealerships will remain as nothing more than glorified collection points.
The least profitable dealers will be allowed to disappear. These defunct dealerships will own nothing and be happy.