How agency sales models can benefit manufacturers and dealers

How agency sales models can benefit manufacturers and dealers

May 11, 2021

Our Automotive Sales News series – Part 2

Sales model design plays a central role in becoming a successful, high-performing automotive company. However, little has changed over the past decades in the fundamental layouts of sales models among leading OEMs. In this volume of Automotive Sales News, we analyze ways in which OEMs and their retail partners can jointly enhance their sales model performance.

When examining the sales models used by car manufacturers today, it's evident that little has changed over the last few decades. Most OEMs still rely on independent partners to lead their retail operations, usually through physical dealerships.

"The adaptation of current sales models is crucial for OEMs and car dealerships. For both it is necessary to pilot new sales models and rethink the existing ones. An agency model is a very promising option that cannot be ignored by established OEMs."
Portrait of Jan-Philipp Hasenberg
Senior Partner
Hamburg Office, Central Europe

In recent years, new automotive OEMs have shown that purchasing cars can be as convenient and easy as ordering a book online. These manufacturers with direct, online-focused sales models have a considerable advantage over incumbent OEMs with traditional, indirect brick-and-mortar models. Reduced costs and a better understanding of and communication with customers are the key benefits realized in direct, online-focused models.

Consequently, incumbent automotive manufacturers have started to question their sales models, with ambitious goals to decrease Cost of Distribution being one of the key drivers. In fact, OEMs with a direct and online-focused sales model can achieve Cost of Distribution below 10% of gross revenue, whereas incumbent manufacturers range between 25 and 30%. The question is: how can OEMs and dealers optimize their current sales model to benefit from some of the potential provided by direct and online-focused sales models?

We found the agency sales model to be the best answer. Acting as a "golden mean" between direct and indirect sales, agency models allow OEMs and dealers to benefit from a more centralized sales model, creating efficiencies in the overall system. Altogether, the Cost of Distribution for OEMs can be decreased by 1-2% points in the short-term and up to 10% points in the long-term.

To achieve these benefits, however, several aspects need to be considered, including model specification, legal limitations, current dealer contracts and market-specific timing. The opportunities and risks for OEMs and dealers are considerable. Hence, choosing the right type of agency model for the right market is critical.

Based on our comprehensive market insights and participation in industry lighthouse projects, we are proven experts in sales model design and rollout preparation. To learn more about how an agency model can decrease Cost of Distribution, download our latest publication or get in touch with us.

NEXT UP: How rethinking used car strategy can impact the overall business success of OEMs and their sales partners.

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