According to an exclusive investigation by Car Dealer Magazine1, 18 car makers have already switched or are planning to switch to agency sales in the UK, while only eight have ruled it out completely. The rest are either silent or undecided. Agency sales model is coming and aims to significantly change the business model and large part of operations of a typical car dealership. The profitability, among other parameters, is under attack here. So how can a dealership adapt and protect its business?
The agency sales model is a new way of selling cars that is gaining popularity among car manufacturers and consumers. In this model, the car manufacturer sells the car directly to the customer via its own website, and the dealer acts as an agent who delivers the car and provides after-sales service. The dealer receives a fixed fee from the manufacturer for each car sold, instead of earning a margin from the sale price.
The agency sales model has several advantages for both the manufacturer and the customer. For the manufacturer, it allows them to control the pricing, distribution, and marketing of their cars, as well as to collect valuable customer data. For the customer, it offers a transparent, hassle-free, and consistent buying experience across different channels and locations.
However, the agency sales model also poses some challenges and risks for car dealers, who have to adjust their operating model and strategy to survive and thrive in this new environment.
So how can car dealers adapt to the agency sales model and maintain their profitability and relevance? Here are some recommendations based on best practices and expert opinions:
Focus on customer service and retention
The agency sales model reduces the dealer’s role in the sales process, but increases their role in the service process. Therefore, dealers need to focus on providing excellent customer service and building long-term relationships with their customers. This can help them generate repeat business, referrals, and loyalty. Dealers can also offer value-added services such as maintenance packages, accessories, insurance, and financing options to increase their revenue streams.
Embrace digital transformation
The agency sales model requires dealers to adopt digital tools and platforms to communicate and interact with their customers and manufacturers. Dealers need to invest in online presence, e-commerce capabilities, CRM systems, and data analytics to enhance their efficiency, effectiveness, and customer satisfaction. Dealers can also leverage social media, online reviews, and content marketing to increase their brand awareness and reputation.
Collaborate with manufacturers
The agency sales model changes the relationship between dealers and manufacturers from adversarial (or at least cautious and tense) to collaborative. Dealers need to work closely with their manufacturers to align their goals, strategies, and operations. Dealers can also benefit from the manufacturers’ support and resources in terms of training, marketing, technology, and incentives. Dealers should also provide feedback and insights to their manufacturers to help them improve their products and services.
Diversify your portfolio
The agency sales model may limit the dealer’s ability to negotiate prices and discounts with their customers and manufacturers. Therefore, dealers need to diversify their portfolio of brands and products to cater to different customer segments and preferences. Dealers can also explore new opportunities in the used car market, which is expected to grow in demand and profitability in the era of transformation towards electromobility.
The agency sales model is not a threat but an opportunity for car dealers who are willing to adapt and innovate. By following these recommendations, car dealers can create a competitive edge and a sustainable future in the changing automotive landscape.
Do you want to help with the digital transformation of your sales, marketing and aftersales care? Our consultants are happy to discuss your current issues. Contact us!