Changing sales processes: agency & online  

With the onset of COVID-19, dealer groups had to advance their plans to sell vehicles online. Many dealers successfully adapted their strategy to this new environment.

Indeed, as noted in the section on digital retail, many dealers took the opportunity to invest in or accelerate their online sales journeys. Data from Google, also shared in the digital retail section, highlights that consumer preference shifted to online retail, while also emphasising the additional time prospective buyers had to research their next purchase.

As outlined in the forecasts section, the UK new and used car markets remain weak relative to 2019. However, there was an initial strong V-shaped recovery in the short term, which was echoed across global markets, such as China, US and Europe. While potentially a result of pent-up demand and, with the risk that this demand is not sustainable particularly considering further regional and national lockdowns, consumers are looking for alternative sales processes. Consumers and NSCs are looking for change; both Mercedes-Benz and PSA have announced that 25% of global sales will be online by 2025. 

There are potentially several possible pros and cons relating to the agency model.

On the positive side, removing the issues of working capital and trapped cash caused by holding vehicle stock is likely to create a more flexible and less risky business approach for the dealer. Customers may benefit from not having to haggle with the dealer and online sales are likely to go up. The manufacturer has greater opportunity to create a direct-to-customer relationship, while the dealer remains part of the customer journey.

There are, however, some potential negatives. In the early stages of the implementation, the NSC and dealer could be in direct competition, as seen in New Zealand with the Toyota Drive Happy agency model. Some dealers suggested a profit decline of around 30% due to competing with the NSC. 

The Australian Automotive Dealer Association has highlighted some issues. CEO James Voortman said: “How does the trade-in work?  Will there still be sales targets?  Will compensation be offered for facilities which may no longer be fit for purpose? OEMs are yet to provide details with information on how agency models will address these concerns. Given they are as accustomed to the traditional dealership model as dealers are, perhaps they don’t yet have the answers, and these ‘toe-in-the-water’ beginnings will be as much a learning exercise for them as for dealers.” 

The agency model is still in its infancy and there will be solutions for most of these issues; however, more clarity is required from the OEMs on how this model will work. In Europe, VW is looking to undertake the agency model initially with just its electric vehicles. As already indicated in an early section of this document, dealers should be preparing a strategy for further sales to move online and the potential requirements to respond to the agency model.