The age of agency
Justin O’Brien, chair of Surrey Business School, sees online sales as a clear and present danger to bricks and mortar retail. “Dealers selling new cars are very quickly going to be a done deal,” he says.
O’Brien points to Volkswagen, which in May announced it was transitioning sales of its all-electric ID marque to a direct-to-customer agency model. Customers will choose their preferred dealer/agent at the outset, which will organise the test drives, process the transaction and arrange the handover. The dealer does not sell the vehicle, however, as the price is set by Volkswagen. The agent receives a commission from Volkwagen for facilitating this service.
Without control of price negotiation, and with the primary customer relationship centralised, dealers are left without agency.
The model also leaves dealers lumbered with expensive retail space intrinsically tied to new car sales – yet no longer selling the cars. In effect they will become de facto servicing hubs, argues O’Brien, whose importance (and ability to make a profit) will only kick in after three years when the annual MOT cycle begins.
Even then, a hungry independent garage network will be waiting to battle dealers for custom at every turn – usually at significantly cheaper rates.
KPMG’s Burn believes dealer chiefs would be wise to follow a “hub and spoke” model, with just a few main sites centred strategically around transit hubs and a large network of smaller branches to fulfil servicing needs.
“Large dealers will increasingly try and mimic digital disruptors,” O’Brien suggests. “The increase in people using Zoom for example means that selling can become increasingly technologised.”