Lotus looks to “maintain a balance” between manufacturer and retailer with agency model

Lotus has become the first manufacturer in the UK to make the switch to an agency model, while also restructuring its retail network and launching a new e-commerce platform Lotus Drive.

In mid-January, Lotus completed the restructure of its UK retail network, with a full agency agreement now in place across 13 sites. In December 2021 it was announced that production of the Elise, Exige and Evora had ended, so the restructured UK network is in place ahead of the start of production of the Emira in the coming months.

Eleven of the 13 agency locations also operate as an authorised repairer, while the remaining two are supported by three standalone authorised repairer sites.

Motor Trader spoke to Geoff Dowding, Executive Director, Sales & Aftersales at Lotus to find out where this change leaves dealers and what Lotus is looking to achieve from an agency model.

Dowding placed emphasis on the digital side of the business but reminds us that the physical side of any purchasing experience is just as important. He said: “Showrooms are never going to go away. They are an essential part of the process. What we are doing here is creating an environment where we have one process. The customer can spend all their time in the showroom if they want and complete the transaction online or start the process online and complete the transaction in the showroom, or any combination of the two. The choice is available through showroom opening hours, but at the same time, 24 hours, seven days a week through the digital side of things. But it remains the same process each way. It’s the same transaction and it’s the same reference point. The showroom is the point of product experience and familiarisation.”

Lotus added on how dealers will make their money under the model: “Each agency will receive the same set fee depending on the model sold. The agents were made aware of what the fees were for the imminent models prior to becoming agents and we are confident that the model is rewarding for them.”

It is clear to Lotus that the online experience is important to the customer. Dowding used the analogy of banking to explain the change. He said: “Years ago, the only way in which you could transact with the bank was to go and queue up in working hours and outside of that it was a struggle. Today, you can communicate and work with your bank 24 hours a day, but if you need to go and see something for a little bit more in depth detail, you can also visit the branch.

“Motor retail really is no different. Some customers know exactly what they want, and the transaction online is all they need. For others they want to find out more, they want to touch the car and spend time with the product, and that is what the brand centre is for, it isn’t a sales negotiation centre. That’s the that’s the element that we’re taking out. The transaction is a single price point nationally.”

Lotus is looking to close the gap between customer and manufacturer and sees the agency model as the natural progression to this, even giving buyers the opportunity to pick up their car from the factory and get a tour. Dowding said: “As the EV world matures and develops, it won’t be long before there’s this rapid development taking place all the time. The relationship between manufacturer and customer is going to be much stronger because that’s how cars will be serviced and upgraded.

“We are providing an opportunity for people to get their car in different ways. So, we will deliver it to you, you can go to the brand centre and collect it locally, or you can come to the factory and immerse yourself in the bigger picture of our sports car factory.”

No doubt

Dowding talked on the element of doubt customers experience when it comes to car prices, where buyers are always asking themselves, could I have done better somewhere else? He said: “For some it’s not important to have convenience, they look for differentiation through price because they simply want the best deal.

“What we’re taking away is that doubt about whether I could have got a better deal somewhere else. And, we’ve taken out the intra brand competition. When you hand over a car to a third-party organisation, many of whom end up in competition with other dealers and that creates deals and those create opportunities. It’s about customers understanding how these things work and I don’t think many customers ever really understood why discounts came in peak periods. We’re eliminating that confusion. Our aim is to eliminate all of that to make the process clear and transparent. And if you buy the car from Edinburgh or buy the car from Exeter, it’s the same price. That’s the whole purpose.”

It can be seen as a gamble for Lotus. Although other manufacturers such as Mercedes and Nissan have talked about the possibility of agency models, Lotus is the first in the UK to make the switch.

Dowding said: “The journey is somewhat unknown. We have tried to approach this as a win-win situation. This is not about gaining benefit as a manufacturer or trying to benefit retail organisations. This is about maintaining a balance. The emphasis for the retail partner is more on product and the customer than it is on sales negotiation. But through the agency model, we have also taken away an enormous amount of liability from the retail partner. The retail partner is there to do the right thing for the customer and for our product.

“I think there will be work to do because we are dealing with organisations that have been used to working in a certain way for decades. We are asking them to work in a different way and they’re very up for and very willing to do that, but training is essential. Product knowledge is required, but now delivered in a supportive and consultative way, which is different to the hard sales negotiation approach of the last 70-80 years. It is going to be a cultural change. We know that things always go as planned, but we’ve got an open dialogue and we’re open to change if necessary.”