image

The Street

Volkswagen to drive sales online, but ‘can’t send cars in the mail’

The German carmaker is looking to sell cars online in Europe, in a bid to increase efficiency in its dealer network. Its relationship with the dealers is still stuck in 2002, when they were banned from selling online

PUBLISHED : Wednesday, 11 October, 2017, 1:46pm
UPDATED : Wednesday, 11 October, 2017, 1:47pm

By Jonathan Braude

Volkswagen AG, the world’s second-largest carmaker, is preparing to push sales online, as internet commerce spreads to the market for new cars around the old continent.

Volkswagen aims to increase profitability and efficiency at its 3,000-dealer European distribution network by an average 10 per cent, VW brand sales chief Juergen Stackmann told German reporters in Munich. However, a spokeswoman told TheStreet Tuesday, that the company is not planning to shrink its dealer network, insisting it wants to work with dealers to improve sales.

“We can’t send cars through the post, like Amazon,” she said. “They’re too big. Even if the customer wants to buy online, we need the dealers to be in the picture.”

Volkswagen shares were marked 1.21 per cent lower late afternoon in Frankfurt, compared to a 0.14 per cent decline for the DAX performance index benchmark, and changing hands at €146.5 each.

Volkswagen, which was once at the forefront of the car-industry’s fight-back against online sales, now recognises that customers’ needs have changed and it has to adapt to a digital world.

The spokeswoman said that to do so it needs to modernise its dealer contracts, which date back to 2002 or 2003. It wants to encourage more entrepreneurship among its dealer network, allow them to hire experienced car salesmen without forcing them to go through a full salesman’s “scholarship” programme; relate their margins to the success of their sales teams instead of giving all dealers the same blanket incentives; and install online sales channels that go through the dealer network.

There will also be what the spokeswoman described as a “consumer-centric” digitalisation programme, which would, in effect, network the network. Whereas in the past customer information and sales history were the property of individual dealers, Volkswagen now plans to upgrade its IT systems, to introduce what it calls collaborative smart data. Dealers would share customer data as part of what the spokeswoman called “a big community.”

Where Volkswagen does seem ready to bypass its existing dealerships it is in the establishment of a direct sales reservation agency for corporate vehicle fleets. It already has such an agency in Germany and is now preparing to roll out a similar system or systems for the wider European market.

While the move to digital marketing could transform sales at the company, it would not be its first experiment in online sales. Earlier this year, VW Canada launched an e-commerce platform to sell the electric e-Golf model to fans, who committed C$1,000 (US$800) apiece to securing their share of the e-Golf bound for Canada in 2017. They also appointed a dealer where they would pick up the car and complete the payment.

In a statement at the time, head of digital marketing at VW Canada Jordan Gracey explained: “The case has demonstrated the demand for electric vehicles, the interest in a more digitally-enabled buying experience and an additional benefit of encouraging more dealers to invest in electric car infrastructure.

“At the same time, we have saved a significant amount of money that would typically have been allocated to the development of a large campaign focused on promotion and customer acquisition. We were able to find interested prospects and intenders and got them out of market quickly and cost-effectively.”

Read the original article at The Street

business-article-page