The current economic situation has made it clear that moving to a sustainable sales model is no longer just an option for original equipment manufacturers (OEMs) and dealerships, but rather an obligation. However, there is not much time left for implementation.
Intensifying pressure for change in automotive sales
Reasons to change the sales model have existed for some time in the form of changing customer expectations. Customers today want a seamless buying experience across online and offline worlds, an individualized dialogue with the brand, and cross-channel price transparency. Even more, in the context of the COVID-19 pandemic, increasing pressures regarding competition, costs, and margins are finally forcing OEMs and dealerships to rethink their sales structure and models.
New sales models in the fast lane
In the B2C sector, market participants such as Tesla have relied from the very beginning on the concept of offering online sales with strategically placed showrooms. In contrast, many established OEMs still rely heavily on traditional, three-tiered sales, but this is no longer enough because:
Outdated, decentralized IT system landscapes prevent uniform use of sales channels
Current retail processes cannot alone achieve the end-to-end experience customers want
Storage of customer data in silos makes consistent customer interaction difficult
Tying capital up in inventory increases the risk for dealers
A margin-driven, dealer-focused price war leads to drawn-out price negotiations on the customer side.
In the short term, however, the goal should not be to replace the dealer network that has developed over time with a direct online sales channel, but to rather run different sales models in parallel in order to balance organizational and technical challenges and use existing dealer assets.
A solution for the future: the agency sales model
By combining OEM-steered online sales with traditional retail sales, the agency model succeeds in a balancing act: It makes optimal use of the existing dealer infrastructures and digital sales to deliver benefits for all parties. For the first time, such an ecosystem across all distribution levels enables OEMs to achieve a 360-degree view of the customer, in addition to lower sales costs and new revenue streams. This paves the way not only for an innovative, customer-centric, omnichannel sales process, but also for a target-oriented approach and transparent reporting.
In this model, dealers evolve from pure offline salespeople into agents while continuing to provide the face that customers see. OEMs, meanwhile, start to interact directly with customers as they become responsible for the sales transaction. New challenges arise as OEMs take over processes and workflows from dealers, as well as assets and risks (e.g. Capital commitment, stock management). This shift in responsibilities protects the existence of dealer networks, especially in times of crisis.
Traditional and new OEMs already successful with initial approaches
The agency model is already up and running in the fleet business. In addition to pioneers such as Tesla, established OEMs such as Volkswagen, Polestar, and Mercedes, as well as Chinese OEMs such as Geely are now investing successfully in agency sales. So far, this is happening with an exclusive focus on electric vehicles (EVs) and private, individual customers (B2C). Read more about digital sales of EVs in our blog post.
Consumer feedback: greater price transparency and a seamless sales process
Capgemini Invent recently conducted a global survey with 6,000 consumers from six of the most important global automotive markets (China, UK, Germany, Spain, France, and Sweden). The findings show that it is not only OEMs and dealers who benefit from the agency sales model but also consumers.
Figure 1: Extract from the results of our Capgemini Invent consumer studyA cross-channel sales process, universal price consistency, and the possibility of buying directly from manufacturers’ websites can be optimally implemented with the agency sales model. OEMs can not only set prices, but also define specific targeted online incentives for customers. In addition, consistent prices reduce intra-brand competition. This is beneficial for both dealers and customers. Dealers can differentiate themselves based on overall experience, with improved consultation and service quality, rather than just on prices. As a result, customers no longer feel under pressure to compare offers from third-party providers such as Mobile or Carwow.
Mastering sales model transformation with the Capgemini Invent Agency Sales Framework
Based on the results of our global study and our long experience with complex sales and digital transformations in the automotive industry, we have developed the Capgemini Invent Agency Sales Framework (see Figure 2). It aims to accompany OEMs through every phase of their transformation, supporting them in working with markets and dealers, and helping to overcome potential obstacles.
Our framework highlights six principles that will help OEMs to gain a lasting competitive advantage and deal with the varying requirements of numerous stakeholders.
Figure 2: The Capgemini Invent Agency Sales FrameworkStructure your strategic path towards a hybrid sales model, with parallel use of different sales models, to create a customer-centric ecosystem.
Specify functional, organizational, and technical capabilities and roles to design an agency-specific target operating model.
Step up with a clear investment plan to reduce cost and remunerate agents sustainably.
Synchronize relevant processes to enhance digitalization and to fully commit to a omnichannel sales approach.
Strengthen partner involvement and integration to define a path towards shared success.
Scale with a standardized approach to modularize market needs and generate international synergies, but also leverage efficiencies.
It is time to be bold
By daring to transform parts of their sales models to agency sales, OEMs can boost sales and secure a clear advantage in the market. Moving to an agency model is an attractive option for OEMs, and increasingly, they may have little option but to do so.
OEMs that respond quickly by embracing agency sales have the chance to test this omnichannel model for selected markets or vehicle models. Starting with a specific product, such as EVs, offers large OEMs and dealers the possibility of gaining experience with the new sales model while reducing risks on both sides.
The early buy-in and integration of dealers is indispensable. Watch out for our second blog, where we will discuss the results of our exclusive interviews with dealers and share their opinions on the transformation towards agency sales.
This blog has been co-authored by Anne Junge, Charlotte Schindler, Annika Wittig, and Nepomuk Kessler. Please get in touch if you have questions or need further information. We look forward to exchanging ideas on this particularly current topic.
For more insights, please also read our recently published Agency Sales Model Point of View.