by Richard Robinson, Chief Operating Officer

The dialogue surrounding moves to an agency distribution model continues to gain momentum as more OEMs announce plans to move to a model that would see manufacturers control the distribution and pricing of their cars to a large extent. The current thinking is that existing franchised networks would be scaled back significantly, and remaining dealers would provide fulfilment and aftersales functions.

OEMs are looking to the agency model to take costs out of the distribution channel. Additionally, it would enable OEMs to have greater control over product pricing (discounts) the sale of added-value services, including finance, part-exchanges and immediate access to the end car-buyer. While such a model’s initial focus would be new cars, used vehicles are also a possibility.

The positives for dealers are less clear, with costs savings on stocking the most apparent.

At the heart of potential change is likely to be the expiry of the current Vertical Block Exemption Regulation 330/2010 (VBER) in May this year. The National Franchised Dealers Association (NFDA) responded to the Competition and Markets Authority (CMA’s) Retained Vertical Agreements Block Exemption Regulation Consultation, citing the automotive retail sector’s “crucial” role to the economy and consumer welfare and provision of almost 600,000 jobs.

To date, the outcome of the CMA’s consultation is unclear. Nevertheless, OEMs continue to announce plans pursuing agency models. Stellantis announced pan-European plans to scrap existing contracts for its 14 brands after 1 June 2023. It is a move that would see its premium brands, including Alfa Romeo, Lancia and DS, move to an agency model, in which the automaker owns the stock rather than the franchised dealer.

The Implications for dealers

Dealer networks have been shrinking for many years; agency models are likely to accelerate this process. The shift facing a proportion of franchised dealers towards becoming independent retailers is evident. The increasing focus on used cars by franchised dealers has provided a trial run in many ways.

As an example, the decision announced in July by Peter Vardy Group to leave the Vauxhall franchise network and launch its own Carz Supermarkets brand at six former franchised sites across Scotland provides a template.

Dealers have traditionally operated with a short-term focus, reacting to hit targets and juggling the here-and-now challenges. None of this should change, but an eye to the future has merit, adding longer-term strategies.

At the heart of such an approach has to be retaining customers. Alongside a high quality, well-utilised CRM system should sit a proactive approach to aftersales in the showroom, online and through call centre activity. Aftersales is critical to keeping customers engaged and happy to keep coming back; service counts.

I am sure this will require an evolution of the relationships dealers have with key suppliers and the shift to technology to optimise processes and controls. As an industry, we need to be ever leaner, releasing our most valuable resource, people, to ensure that the human touch makes all of the difference.

To leverage the aftersales opportunities, services need to be fairly priced, accessible, transparent and promoted positively from F&I experts to service advisors.

Automotive retailers’ agility is well known, but we need not wait until change happens. We can see the wind of change building and now’s the time for retailers to address strategic and operational issues and create a new sustainable model. At the heart of it has to be a simple principle.

Be Vital to Customers and Their Needs