On agency, “nobody has facts, everybody has opinions”
“Does anyone know how it’s going to work? No. Nobody has the facts. What we do have, is opinions. Often contradictory ones. So let’s discuss”. That’s how event host Johan Verbois framed the Remarketing Forum segment on Distribution, and more specifically, on the pros and cons of the agency model, which is now permeating and permutating the dealership networks.
For those who don’t know about the agency model but by now are too afraid to ask: it’s when OEMs want to take over the direct relationships with the end customers that their dealers have, turning them into mere agents.
Not set in stone
Kicking off the proceedings was Luis Maria Pérez-Serrano (Head of Remarketing & Mobility Consulting at TÜV Süd). He presented a clear picture of an unclear situation: “The agency model is not yet set in stone. Some OEMs are sticking with their traditional distribution model. Others are going for a mixed model – distribution for ICEs, agency for EVs.” And crucially: “The issue of whether used cars will be managed via the dealership or the agency model is not yet resolved.”
On the face of it, the agency model is a demotion that dealers would not be happy with. But the system does provide some advantages for them, said Mr Pérez-Serrano. Including commission-based income, allowing for better planning of income; risk reduction by taking vehicles off balance (and increasing company value by as much as 12%); and higher leverage to invest elsewhere – for example in remarketing. In fact, “used cars and aftersales could turn into the real core business of the dealers when they become agents.”
Conflicts of interest
Michel van Roon (Co-Founder of GO Remarketing Solutions, pictured) delved deeper into used-car strategies within the agency context. One of the crucial questions OEMs have to ask themselves: Do they want to offer an integrated deal to the customer, or a split one?
In the former case, they follow the customer journey all the way to the used-car phase. In the latter, the remarketing is left to others. Turns out there is no easy answer to this question, and the path towards a solution is strewn with conflicts of interest, costs of complexity and conflicts of mindset between OEMs, agents and third parties.
OEM and agents are bound together by the nature of the job. But they’re also on opposite sides of the seesaw with power and profit on either side. It can seem like an unsolvable problem. “Is there a solution? Probably. But to find it, we have to take a practical, 360-degree view on used-car strategies”, Mr van Roon concluded.
Dr. Christof Engelskirchen (Chief Economist at Autovista) asked the question: “Can OEMs control the used-car market by extending the agency model?”
He contextualized the move towards agency by framing it within the OEMs’ push towards omnichannel marketing, where seamlessness and fixed prices (“no haggling!”) are crucial. It’s a push with a plethora of potential pain points, including a shedload of complexity, cost and risk landing at the doorstep of the OEMs, and the danger that dealers-turned-agents lose their entrepreneurial edge, ultimately with negative consequences for the OEM itself.
Coming to the end of a considerably longer list of objections, Dr. Engelskirchen said: “You’ve probably guessed I don’t think this is the model for the future. There are already problems with agency in the new-car business. And I see few benefits and higher risk for the used-car business.”
In a closing Q&A session with all speakers, Mr. Pérez-Serrano said: “The introduction of the agency model clearly is the biggest disruption that we’ll see in the remarketing industry in the short term. More and more OEMs will be rolling it out. But its true impact won’t be felt until the used-vehicle supply shortage resolves, and their prices soften.”
Click here for more on the first segment of the Remarketing Forum about Electrification.
Click here for more on the third segment of the Remarketing Forum on Digitalisation.
The Remarketing Forum concluded with a gala dinner and the Remarketing Awards - more here.
Image: Benjamin Brolet