Inside the industry: Will the agency sales model succeed?

Sometimes a buzzword is so ubiquitous that it’s easy to assume its subject will succeed, and today ‘agency model’ is one such example. Referring to the transition from retailers handling car sales to car makers doing so – paying retailers a handling fee rather than commission – it is, in its most boiled-down form, driven by car makers chasing greater profits. Yes, there are theoretical advantages to car buyers: the entire process, both online and in person, should be seamless and customer service consistent. And that shouldn’t be underestimated, as buying a car has often felt like entering the lion’s den. But the reality is that car makers hope to take more control of the sales process as a result, reducing and even removing discounting and better controlling the flow of supply and demand. The pandemic more than whet the appetite, as supply restriction led to price rises and consequently record profits across the board. There’s no question that the agency model can work. Tesla has shown it can, and now Polestar and Genesis are following suit. All three are relatively new brands, though, removing the need to transition from existing retailer arrangements. The real test will come when the likes of Mercedes-Benz, Stellantis, Volkswagen and eventually almost all the others join in. Success is far from certain. Of the potential pitfalls, two stand out. One is the threat of supply outpacing demand, as it did pre-pandemic; do car makers really have the discipline to close factories and hold pricing, especially if a rival is discounting? And the other is the quality of the retail operations they set up. Time and again, I’ve seen car makers’ bosses wrinkle their noses at the quality of their retailers. “You’re only as good as the people in the dealerships, and of course we have no control of them,” goes the line. But only a fool would underestimate the brilliance of the best and the difficulty of providing mega service across vast networks. Last weekend, I ended up in West London’s Westfield mall, where Genesis has a new outlet. It was empty, but perhaps they get too many badly dressed browsers, because a brief walk-around solicited nothing more than a grunt from the salesman; and a return visit eventually a talk about everything from range to suspension set-ups that still didn’t end with him taking my details or offering me a test drive. One experience shouldn’t define a brand. You might even argue that I should’ve been grateful for that superlow-pressure approach to sales. But Genesis will need to sharpen up even to hit its own modest sales targets. Scale those challenges to a volume brand and you will realise why an agency model might end up being easier to talk about than implement.