VW sees new German dealer pact as Europe blueprint
Volkswagen believes it has a blueprint that could pave the way for a renegotiation of its more than 3,000 European auto dealers contracts. The optimism comes after VW reached a deal with its German retailers that includes the introduction of a new retail strategy.
VW said on Wednesday it renewed contracts at 1,000 sales points in its domestic market. The new deals take effect in April 2020, immediately following the expiration of the old contracts, which VW decided last year against extending.
"Volkswagen and its partner associations have reached an agreement on the new dealership contracts for Germany,” tweeted VW brand sales chief Juergen Stackmann. “I see this as the basis for further European discussions."
In October last year, Volkswagen said it aimed to reduce the size of its European dealer network and introduce an online portal as it adjusts to changing consumer habits.
Until recently, automakers focused on developing, producing and marketing their vehicles, leaving the customer relationship to be maintained entirely by their dealer partners -- an approach industry analysts have criticized.
By comparison, the foundation of most tech companies is monetizing data, turning this customer knowledge into revenue. Electric car maker Tesla even decided to challenge U.S. franchise laws and build a its own chain of retail outlets.
“We will be working even more closely together to create a consistent customer experience through our all touchpoints with the Volkswagen brand,” said Volkswagen Germany sales chief Thomas Zahn in a statement, adding that the new contracts formed the basis for the brand's electrification and digitalization strategy.
Dirk Weddigen von Knapp, head of the VW and Audi dealer association in Germany, said the agreement ensured that dealers would remain a core pillar of the automotive industry.
“Through the greater cooperation with the manufacturer we can secure our common business model against external competitors,” he said in a statement.
Only recently have executives from incumbent auto brands embraced the idea of new digital business models such as car-sharing that are built around a customer's changing mobility needs. Other services are also in development, such as granting access to a car's trunk for package deliveries.
Meanwhile dealers themselves have suffered from perception problems, with survey participants describing a visit as enjoyable as seeing the dentist. Foot traffic has gone down and customers don't want to travel to city outskirts to look at cars, leading to new retail formats such as pop-up stores in downtown areas.
Today, experts argue in favor of one a consistent approach that seamlessly unites a customer's virtual and physical shopping experience. They call this an “online-to-offline” strategy, by which digital and brick-and-mortar showrooms work together to lure customers rather than compete against each other.
One key advantage is a higher rate of loyalty as customers never have to bother looking elsewhere for their various needs, whether its buying, leasing or sharing a car, purchasing insurance, arranging financing or simply getting replacement parts and maintenance.
A prerequisite of these so-called “ecosystems,” however, is access to a customer's data and knowledge of their preferences via a digital footprint.
“Exploiting the potential offered by digitalization, for example more efficient advertising through data analytics, supports our common ecosystem in the future,” dealer association president Wedding von Knapp said.