The Implications of the Rollout of Agency:
Key takeaways from this year's Auto Retail conference
Recently, we had the pleasure of co-sponsoring this year’s Auto Retail Live conference in partnership with CitNow Group. The event was held by Auto Retail Network at the Hilton Hotel, Northampton on Thursday 26th January 2023.
This year’s conference was titled The Implications of the Rollout of Agency, and explored the latest developments in agency agreements, its financial impact and the long-term prospects for the auto retail landscape.
For those of you who couldn’t attend, we’ve pulled together a list of our key takeaways from the conference, allowing us to share our insight and predictions for 2023 and beyond.
With Retailers having less influence on vehicle price, they may have to re-evaluate their current business model to understand where their profitability lies. This could be in value-added products such as gap insurance or paint protection similar to the way add-ons are associated with flight bookings (extra legroom, baggage etc). It could be in the product/industry knowledge they offer to consumers; their physical presence to facilitate test drives and after sales or another element entirely, including the consolidation of their franchises. Either way, Retailers need to be clear on the point at which they earn their fees to maintain profitability.
The agency model is being marketed to consumers as the ‘easier choice.’ One haggle-free price. But will the ever-present part-exchange factor enable this to become a reality? In 2022, our proprietary BI service found that 41.7% of consumers experienced their part-exchange valuation being rejected at checkout, suggesting there may always be an element of negotiation when it comes to part-exchange. With so much uncertainty we wonder whether the one price message is oversimplifying the complexity of the agency agreement.
It’s clear that if brands choose not to opt for a single-price marketing approach, both OEMs and Retailers need to think carefully about how much of their agreement, terms and conditions they convey to their consumers. It’s about finding the right balance between transparency and too much information. By over-communicating the complexities, you could turn the consumer off and encourage them to buy a used vehicle instead.
A frictionless consumer journey is as key as it’s always been. Only now, with so much complexity, we also need to simplify that journey for our showroom teams, to avoid them instinctively prioritising a used sale where there are less restrictions. Though models will differ from contract to contract, both OEMs and Retailers need to find a way of managing and regulating dealer behaviour, to ensure the showroom split between new and used vehicles is presented seamlessly and effectively to consumers.
We believe education will play a significant part in this. By supporting showroom teams with the right education, we can empower them to deliver a personalised, enjoyable consumer experience, regardless of whether they are selling new or used stock, ultimately retaining sales talent and increasing staff buy-in.
With so much emphasis on the agency model increasing efficiency, it’s important that our technology reflects this. OEMs and Retailers should invest in technology that facilitates the effective communication of data and information, including integrated vehicle configurators, marketing consent, visibility of orders and pipeline. Information should always be visible, easily accessible and in the best of cases, updated in real-time for maximum efficiency. If technology providers can deliver on these seamless communications, (and we’ve proven they can), we could be looking at fewer technology providers going forward. Those that utilise partnerships and the seamless flow of data will be able to offer more to businesses with regards to full end-to-end and retention.
Tim Smith, who joined one of the panels on the day stated: “Technology is already starting to coalesce. It all comes down to data. How you carve it up. Who owns it? Who has access to it? How is it presented back to the consumer? Whether you use one system, or several becomes irrelevant, because if you can get the right data flowing from one to the other in the right format, compliantly of course, it can maximise efficiency AND consumer experience for OEMs, Retailers and consumers.”
Though it’s not entirely new, we are still in uncharted territory, and the agency approach is not for everyone. But it’s clear the models most likely to succeed will be the ones where OEMs and Retailers collaborate. Whether that means negotiating sales targets, or experiencing the model though a showroom lens, OEMs need to share knowledge and reasoning at every opportunity from C-suite and stakeholder level right through to showroom teams and administration.
It’s said that more will change over the next 5 years, than in the past 100. But we need to remember this is a long-term project. Too often we overestimate the short term and underestimate the long-term. It will take brands and Retailers time to evolve their chosen sales model to satisfy all parties. However, those that demonstrate proficient mobility and agility will be more likely to prosper during this shift.
A big thank you to all involved in creating such an informative and engaging event. If you’d like to learn how Automotive Transformation Group can support you through this time, you can find out more here, or recieve further insights by following our company page on LinkedIn.