Conversion rates for car sales are better under the agency model than the traditional franchise model, according to Polestar UK CEO Jonathan Goodman.
Talking on today’s Autocar Business webinar on the topic of the agency model, Goodman said he has seen a 10% to 13% conversion rate, with that figure based on a sale within 60 days of the first time a customer touches a Polestar (for example, in a showroom, a test drive).
“If you count every person walking into a dealer [for a franchised model], it’s probably about 10% conversion rate,” he said. “We’re a new brand and to be at that conversion rate as a new brand which isn’t very well known is a very healthy position. We’ve looking to increase that rate moving forward.”
However, Duncan McPhee, COO of Lookers, which uses Polestar’s agency model alongside the franchise model for other brands, said there hasn’t been a marked change at Lookers: “We’ve not seen much of a difference looking at conversion on the franchise model where customer deals with us directly compared to that of an online model. There’s not a huge difference."
He added: “But we have seen an uplift on customers taking finance online. That conversion has definitely improved but not the conversion for enquiry to sale.”
The agency model, in which a car has a fixed price and a customer places an order directly with a car maker (often online), which then provides a fixed commission to the relevant local retailer, lives and dies by customer experience, said Goodman, McPhee and the seminar’s third speaker, Tony Whitehorn, automotive consultant at Endiva, who previously worked for Hyundai and Toyota.
Whitehorn said: “All the research shows consumers like [the agency model]. Consumers don’t enjoy going into dealerships and haggling. And we now buy a lot of things online. With the agency model, you can do it online, and then a retailer can deliver the car. The customer will drive this change, and the customer wants transparency and surety.”
McPhee added: “It’s a very simple, transparent model. Customers like ease and to have transparency. It’s very, very profitable. It’s about delivering better customer experience, reducing distribution costs in the network and having a more transparent way of interacting with customers.”