Starting today Mercedes Benz India will not be shipping any cars to dealers and instead maintain the inventory of the new models in its books. The transition to the new retail strategy will help serve the customers better, make dealers financially more viable and help the company in a better alignment of production to the demand.
India is the fourth market after South Africa, Sweden and Austria where Mercedes has adopted the direct selling approach christened “Retail of the future.” This is by far the biggest thing I have done in my career. This will change the entire course of the company,” Martin Schwenk, MD & CEO, Mercedes Benz India. “We are the first market to be actively pursuing it together with the dealers. Many more markets will have similar models very soon.”
“From understanding the legal framework to the feasibility, the whole project involved getting the IT infrastructure ready, seamless integration of the systems to designing the whole framework,” he added.
The luxury car market leader that had been preparing for this transition since October 2019 and has invested Rs60 crore for the exercise. “Early in the year it had a Rs1,700 crore equity infusion by its parent company. The new system will help the company to reduce the inventory by 20-25 per cent between the dealers and the company.
Under the new arrangement, Mercedes dealers will now become franchise partners, carry zero inventory and will face zero market risk so that they can focus on local market development and growth. The current showroom infrastructure will continue to remain the same.
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.
At present, Mercedes has 22 dealer partners operating in 50 cities. The company doesn’t have any plans to add or reduce the retail footprint. Mercedes sold 4100 cars in the September quarter, making it the best quarter this year. It has a strong order book for new models but the semiconductor shortage has slowed the delivery, said Schwenk. It has a backlog of close to 1,500 models.