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Mercedes has a busy schedule ahead as it aims to reduce the number of entry-level cars from seven to four in a bid to pursue higher profit margins with bigger, more expensive cars. To make this happen, the German luxury brand has decided to invest more than 75 percent of vehicles from the above C-Class segment, so it doesn’t rely too much on compact models. Another major change will occur in the distribution network.
The three-pointed star is focused on increasing the number of direct sales by introducing this “agency” model in 15 additional markets by mid-decade compared to just five today. If all goes according to plan, 80 percent of the volume achieved in Europe will be through direct sales by 2025. Reducing this role will allow Mercedes not only more control but also reduce distribution costs.
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By the way, its distribution network will be overhauled by cutting 10 percent of dealers worldwide by 2025. Three years later, showrooms in Germany will be reduced by 20 percent. European Automotive News citing Bettina Fetzer, vice president of communications and marketing, as saying Mercedes needs fewer large dealers in mature markets. However, new outlets are being added in China. In addition, special showrooms for AMG, Maybach, and G-Class are also on the agenda.
Meanwhile, Mercedes expects online sales to gain traction in the coming years, so much so that by 2025, one in four shoppers will buy their next car with the click of a mouse. Fetzer mentions that “customers are getting younger, richer, and increasingly digital.” As a result, they are more willing to shop online than to go to one of the 6,500 dealers worldwide. In the domestic market, the company operates around 1,000 outlets.
At the same time, Mercedes is pushing further into luxury territory with the Maybach SL, electric G-Class, and the Mythos line of ultra-limited specialty cars. The shortage of microchips has been a blessing in disguise as companies make more money by prioritizing distribution of semiconductors to more luxurious cars.
Even though sales volume had to suffer, profits remained healthy. This suggests Mercedes could concentrate more on bigger and more luxurious vehicles to the detriment of its compact offering.
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