Agency agreements: What’s in it for the retailer?

  07 November 2021

Beechdale Alfa Romeo

A huge amount has already been said and, no doubt, will be said about agency agreements, but this week’s interviews with Stellantis CEOs Jean-Philippe Imparato at Alfa Romeo and Beatrice Foucher from DS made one thing abundantly clear: the switch from a franchised to an agency model is all about saving the manufacturer money.

Yes, fixed pricing is touted as something agency brings that the consumer wants (providing a single online offer), but what was hammered home was the complete necessity to counteract the increasing manufacturing costs from electrification, safety advancements and connectivity systems.

While no exact figure was given for the saving that will come from agency, the saving that’s expected to be needed on a supermini overall, according to Mr Imparato, was around €10,000.

What was fascinating, or perhaps worrying if you’re a retailer, was the complete lack of what, in the switch to an agency model, was in it for the retailer.

The customer receives a simple online pricing system; the manufacturer cuts costs. But what does the dealer get?

Ms Foucher was keen to point out that investors would no longer carry the stock costs, and other brand-related costs would move to the manufacturer, but that doesn’t mean anything without knowing what the handling fee will be for selling a car, and the resultant profitability.

However, I suspect that from the fact that only two thirds of the Alfa and DS networks were invited to the event last week to hear about the agency plans, and the fact that the one third left out weren’t even told about the event, the one advantage will be in an increased throughput per dealer.

For the retailers staying with the brands, there are, in this case, a least a couple of worrying points beyond Stellantis’s stated need to cut costs from the distribution model.

The first is that including used cars in an agency model in future wasn’t ruled out. For the moment, the agency model will only cover new cars. But Mr Imparato spoke about the importance of improving residual values. And if a manufacturer feels like exerting more control in this area in future, then what’s to stop them getting involved – especially if they now own the customer.

The second point is more of a personal opinion. If a manufacturer was going to make what they see as a very significant change to the way cars are sold, I’d want to have done as much research as possible into other brands that had done the same thing. I’d want to have all the relevant information, and certainly the most significant information, before I made a decision to move to an agency model.

When asked how DS would handle the issue of any potential loss of goodwill within retail business when the customer moves over to the manufacturer – something that is not only an ongoing legal case in Australia between Mercedes and its network but also being talked about by retailers around the world – Ms Boucher was not aware of the case and neither was UK brand boss Jules Tilstone.

If this much-talked about (at retailer level) case hasn’t been thought of, what else has been missed?

One final point. So far in all the agency chat, none of the manufacturers have talked about going fully direct and cutting out retailers completely. Every single one, including Alfa Romeo and DS, have said they still want and need dealers to talk to customers, demonstrate what’s on offer and sell the cars.

However, as more than one retailer has pointed out to me recently, with the sale contract moving from customer to dealer over to customer to manufacturer (in a legal sense) how will manufacturers handle customer complaints and enquiries without taking on lots of staff to do this? Because taking on staff is something that goes directly against the cost saving idea that manufacturers think agency will bring.

Tristan Young

Editorial Director

Auto Retail Network

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