What we know and don't know about agency

The future with agency is uncertain

Auto Retail Network (ARN)’s Agency Conference in January provided very few solid answers to the future of the Agency Model – predicting the future is never a certain business – but provided a valuable framework for senior leaders in the automotive retail industry trying to consider what Agency might mean for them.

The organisers drew together panels of experts from a range of disciplines – legal, finance, marketing, and consultancy alongside senior industry figures Mark Raban, CEO of Lookers Group and Stephen Hill, Finance Director of Inchcape Group to provide an incredibly holistic view of what such change might mean and give us an outline of the key questions that will need answering in the coming months.

Underpinning the huge concern the automotive industry has with this change is the fact that the entire concept still feels quite vague. It may be good, it may be bad, it may be whatever dealerships can get from it or it may be whatever OEMs can push upon them. Or it may be all of the above and more. Agency though – big A Agency as opposed to agency as a rebranding exercise does have very tight legal definitions as explained by Lain Larkins of Radius Law.

If a brand wants to set prices – as seen with Mercedes “one price” advertising campaign – then agreements between manufacturers and dealers must satisfy all of these definitions. Larkins has now seen many agency contracts that have been tabled – some of which purport to be true Agency but in his opinion are not.

Most purchases still involve part exchange – these though would still be under the control of the dealership, thus eroding the concept of “one price.” And how does one price work from a car dealer's point of view? What about quarter-end targets and other moments when price flexibility is a level to drive performance? Will these targets be done away with?

How will consumers view this change – all their rights under agency would be now against the manufacturer – a faceless foreign multinational, not the family dealer in their town? Will this concern them or not? The scope of authority will have to be defined and even conversations with consumers might have to be scripted/controlled to ensure agents and their employees are operating within parameters.

Complicating things further – this shift is being driven by individual companies rather than a legislative change across the board. OEMs will move at different speeds and agree to different contracts. How does this affect the multi-franchise dealer who may be operating under an agency model for some franchises, but not others? Where does their focus go? And of course, what will happen to the significant amounts of physical space that will be freed up under this model? Any business will need either compensating for this or to find an alternative revenue source for it: will out-of-town dealerships become multi-purpose destinations with coffee shops/gyms and other facilities?

One lived experience example of Agency came from James Voortman at the Australian Automotive Dealers Association and it was not a reassuring one. In Australia, the wounds caused by Mercedes's rollout of agency with its dealer are only now beginning to heal: huge harm has been done. Perhaps like all change, learnings will have been made and the UK will be the beneficiary of these hard-learned lessons.

The UK is still an early test bed model globally speaking for Agency, and no doubt more lessons will be learned. OEMs themselves were conspicuously absent from the panels: without the major protagonists, delegates did what they could to get a firm sense of what they stood to lose or gain under agreements that in many cases have yet to be thrashed out.

RWA has worked across multiple industries through a time of major changes, including nationwide funding and commissioning reforms that impacted nearly one thousand branches of our pharmacy customers.

We are agnostic observers of these shifts: our sole duty remains to deliver our customers the cutting-edge insights and operational data they need to drive success whatever their relationship with manufacturers. We are talking closely with our 30+ dealer group customers to understand how the changes may impact them and how we can support all the new operating processes. If you would like to talk to us about how data analytics can increase your performance both now and in the future, please contact us here or email auto@realworldanalytics.com.