Mercedes-Benz is in the process of revamping its global sales structure, but its South African branches have already undergone the transformation, along with Sweden and India. The German automaker is adopting a direct-to-customer model whereby it will own the entire stock of new cars for sale, rather than the dealerships.
The company has not cut out dealer partners, rather it is ensuring that all Mercedes-Benz vehicles are sold at uniform prices and with a more seamless customer journey. In addition, the brand has said that its new sales model holds financial advantages for dealerships as they will now operate as franchises of Mercedes-Benz.
Formex Industries is a direct supplier to Mercedes-Benz. The automotive components and assemblies that we manufacture are sold to the German automaker in South Africa. The vehicles manufactured in East London, Eastern Cape, use locally-manufactured components from various companies, including Formex.
Mercedes-Benz ensuring transparent prices
The adoption of the new sales strategy will ensure that all customers have price transparency and a wider selection of vehicles to choose from. As dealers now operate as franchises, additional on-the-road fees and extra costs will be standardised across the board. New vehicle sales will be invoiced directly by Mercedes-Benz, not the dealership.
In retail terms, Mercedes-Benz used to act as the wholesaler and the dealerships were the retailers, whereby they could set their own prices and payment structures. Now, Mercedes-Benz acts as the direct seller, through its franchises, which become facilitators of the sale on behalf of the brand. Prices are now defined by the parent company, as well as additional costs and extras.
New sales structure benefits the customer
So far, the new sales structure is working in South Africa, even though it is not a mainstream model. The customer benefits by getting access to a larger pool of vehicles, not just those in stock at each dealership. Having one centralised stock allows customers to pick their perfect car and have it delivered to them, rather than settling for one that happens to be in-store at their nearest Mercedes-Benz dealership.
This also facilitates easier price comparisons and complete transparency when buying a luxury vehicle from the brand. It also means that dealerships now carry no inventory on their books, besides operational materials and stocks. This should result in a more sustainable business model for franchisees.
Mercedes-Benz will still rely on the dealerships to act as direct brand representatives and to maintain their valuable connections with customers. The new sales structure will ultimately deliver a better customer experience with seamless service. “With [this new sales] model, the car dealers become customer experience and delivery agents and thus can focus even more on ensuring a superior customer journey, from product exploration to handover,” explains Daimler chief executive officer Ola Kallenius.
The global rollout of the new sales structure will take around five years to complete. It is intended to prepare Mercedes-Benz for the future of retail for electric vehicles (EVs). Being competitive in the future is all about setting up working models and structures now. This strategy will allow the automaker to move into the world of e-commerce and online vehicle sales with greater ease.
Formex Industries is a metal forming and assembly company that supplies a variety of complex products to the local automotive industry and the export market. The company is based in the Nelson Mandela Bay metropole, South Africa’s foremost region for automotive manufacturing and export.
Formex is a supplier with over 80% black ownership, of which more than 40% are black women. The company is owned by Deneb Investments Limited – a subsidiary of Hosken Consolidated Investments Limited (HCI) – one of South Africa’s biggest true B-BBEE companies listed on the Johannesburg Stock Exchange (JSE).
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