Across industries, manufacturers are engaging in direct-to-consumer sales. Automaker, too, are moving away from the wholesale model. Examples are Daimler's European direct sales ambitions, Volkswagen's IDX direct sales model and Volvo's announced plans to sell all vehicles online and direct by 2030.
For all these manufacturers, direct sales are the response to new consumer expectations.
More than 80 percent of consumers say they would rather see fixed prices and a buying process as simple as the experience they are used to from e-commerce, which includes the option of new kinds of car ownership.
It's obvious why automotive manufacturers also like direct sales. They get a proper, direct relationship with the end customer, giving them first-hand access to customer preferences.
That is something manufacturers have never really had until now. Given that data-driven revenues are forecast to grow to 5.5 times their current size by 2025, direct sales provide more value than the limited data they currently manage.
An Accenture analysis has shown that an automaker can increase margin by up to 3 percentage points by selling direct to consumers, which potentially translates into billions of dollars added to their bottom lines.
Direct sales help manufacturers manage the rise of third-party platforms. They can negotiate terms from a more powerful position and build offerings that are competitive. For most manufacturers, a different kind of "agency" model will likely offer a more compelling solution.
Under this model, the manufacturer becomes the retailer while the dealer remains the physical touchpoint with the customer.
A pure form of the agency model -- the genuine agency -- is being pursued by Daimler, Smart, Volvo and others.
The dealer-turned-agent receives a commission on each sale but owns no stock and no longer individually sets prices or discounts.
In turn, the dealer is exempted from all significant commercial risks and is no longer burdened with administrative tasks such as billing and payment.
Other automakers such as VW have opted for the non-genuine agency model.
The rights of the automaker are limited as dealers may still grant small discounts at their own discretion. But as dealers do not receive exemption from all commercial risks, the automaker's liabilities are also smaller.
Many experts seem to prefer the genuine agency model because of its clearer allocation of rights and risks and its greater economic potential.
The upcoming reform of the European block exemption regulations may soon make it difficult to run wholesale and agency models in parallel, thereby forcing automakers to either stay with the traditional wholesale model or fully embrace the agency model.
Automakers that opt for the agency model will impose significant change on their dealers -- something that many of them dislike.
A recent survey shows that 27 percent of dealers believe the agency model will make them too reliant on the commission the manufacturer is willing to pay. In addition, 31 percent of dealers doubted that manufacturers will be capable of effectively running a consumer-facing business.
