Mercedes shifts retail sales structure in India to direct-to-customer model

German luxury carmaker Mercedes-Benz on Wednesday said it will shift its retail sales structure in India to a 'direct-to-customer model, under which it will own the entire stock of new cars for sale.

The move is aimed at bringing better financial health for its dealer partners while offering customers uniform transparent price, a wider choice of vehicles and a seamless purchasing experience.

The existing 125 dealers will operate as the company's franchise partners under the new structure termed as 'Retail of the Future' (ROTF), which will kick off in the fourth quarter this year.

India is the third country after Sweden and South Africa that Mercedes-Benz is adopting the new retail structure, wherein cars will be invoiced directly by Mercedes-Benz India (MB India) to customers and not by the franchise partners.

"What is happening is that we are moving from the traditional dealer model in which MB India is the wholesaler, the dealers are the retailers and customers buy from the dealer at a price the dealer defines," Mercedes-Benz India Managing Director & CEO Martin Schwenk told PTI.

In the new ROTF, he said MB India is the seller and the franchise partners will facilitate sales of the cars on behalf of the company.

"The invoice that the customer gets comes from MB India with a price MB India defines and fixes," he said, adding this model has not been tested previously in India and globally it is also a relatively new model.

"Mercedes has tested this model only in a few countries -- Sweden and South Africa, but it is not a mainstream model. So, we are also going into new terrain. We are in a very pioneering stage," Schwenk said.

Asked when the new retail structure would come into play, Schwenk said, "We will start by quarter four of this year. We are building up at the moment".

Elaborating how the new structure will be beneficial for customers, he said they will have access to a larger pool for a selection of cars available from a centralised stock now owned by MB India through the franchise partners, best prices directly from the company without having to negotiate, easier price comparison and complete transparency.

For the franchise partners, he said it offers them better financial health as they will carry zero inventory on their books besides mitigating their financial and operational risks, resulting in a profitable and sustainable business model.

"Franchise Partners continue as brand representatives, maintaining their strong connect with customers and striving to offer the best customer experience in the market. It also allows Mercedes-Benz to stay obsessed with customers and remain a future-ready pioneering brand, ahead of the curve," Schwenk said.

For the additional capital required for the new retail model, Schwenk said MB India will be utilising part of the fresh capital infusion of Rs 1,750 crore that it had received from parent Daimler AG in January this year.