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Old 14th August 2019, 14:50   #1
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Default Volkswagen finalises 3-prong India strategy, overhauls retail set up

Highlights

  • Reduce dealer footprint by almost 40%

  • Express outlet styled "compact pop-up showrooms" targeted at tier II, III & IV cities

  • Retail strategy focusing on retaining dealers by reducing financial burdens, especially with a view on upcoming launches and brewing competition

  • Move away from multifranchised to full fledged dealerships that have capacity to offer Sales, Service and Spares

Quote:

Volkswagen is overhauling its retail set up, especially those targeted at the non-metro buyers

Volkswagen will dramatically reduce its dealer count, erect compact showrooms in hinterlands and increase touchpoints to make the German auto brand more accessible to Indians.

Its Indian subsidiary, which has lined up investments of Rs 7,900 crore towards new product development, is overhauling its retail set up, especially those targeted at non-metro buyers.

Volkswagen’s (VW) dealer partners will open dozens of small stores called ‘pop-up stores’ that would be one-tenth the size of a regular showroom. The size of such stores would range between 2,000 square feet and 3,000 sq ft as against a regular showroom measuring 25,000-30,000 sq ft.

Such compact stores would house two cars as against 8-10 units accommodated in a regular showroom. The cost of erecting such a store would be Rs 55 lakh as compared to Rs 15-18 crore required for a regular metro store.

Stefen Knapp, Director (Passenger Cars), Volkswagen India, told Moneycontrol , “We started with 80 dealers, now we have 63 and we will take it to 50 eventually. We launched one pop-up store in Bengaluru and will open 30 such stores this year. The key focus for these stores is to have them in Tier II, III and even Tier IV cities. Volkswagen India is the first one to do so anywhere in the world. The real estate market is so expensive and you need to find such solutions.”

Volkswagen does not have large volume generating models since its entry price stands at Rs 5.71 lakh (ex-showroom) is much higher than that of Maruti Suzuki, Hyundai or Tata Motors at around Rs 2.94 lakh (ex-showroom).

Given the 23 percent sales decline last year (compared to a two percent industry growth) to just under 35,000 units, the pressure on VW dealers is higher than its rivals. The company has been struggling to keep dealers interested in its brand despite there being no launch of any breakthrough model since the past several years.

But with new models now less than a year away from launch, VW is keen to get its retail strategy in place without putting any additional financial strains on its existing dealers.

“We have higher digitisation in smaller showrooms than regular ones. We have only six-to-seven sales consultants as compared to 25 for a regular showroom. On an average, investors needs to sell only seven-to-nine units a month before the unit becomes profitable. We have a profitable dealer in Punjab, who sells six cars a month,” Knapp added.

More than 300 dealerships across players have shut shop in the last 10 months due to the on-going downturn. Dealers have been unable to meet their funding requirements due to a clampdown by banks. Despite the unusually high number of discounts, sales in July marked the sharpest fall in 19 years, according to data shared by the Society of India Automobile Manufacturers (SIAM).

The entry of new brands like MG Motors, Kia, Jawa and Benelli and a host electric vehicle startup companies have further compound the worries for established players as investors try to experiment with new auto brands based on incentives offered by companies.

“My network is 80 percent multi-franchised, which means if they see love for a competitor, their love for us sometimes get cold. But if they are a big entity, their love for us is pretty hot. These partners have a big employee base of 600-1,000. We will actually go to 95 full-fledged dealerships (service, sales and spare parts) at the same time and will increase the touchpoints to 110 to 150,” added Knapp.

Volkswagen’s Coimbatore-based dealer Ramani Group had three full-fledged showrooms in Salem, Madurai and Tirupur (all in Tamil Nadu). The dealer then added three more showrooms to improve scale from the VW brand itself.

“So this dealer is getting a bigger reach but at a lesser expense. That’s the strategy we are adopting all over the country. These partners are bigger and therefore they have more synergies and economies of scale. They are also more loyal to us because they have a larger exposure to us,” Knapp explained.
Source: Moneycontrol
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Old 14th August 2019, 15:01   #2
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

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Originally Posted by pannags View Post
Highlights

  • Reduce dealer footprint by almost 40%

  • Express outlet styled "compact pop-up showrooms" targeted at tier II, III & IV cities

  • Retail strategy focusing on retaining dealers by reducing financial burdens, especially with a view on upcoming launches and brewing competition

  • Move away from multifranchised to full fledged dealerships that have capacity to offer Sales, Service and Spares

Another way to say shrink the showroom to meet the size of the product range and sales volume.

This makes sense for attracting new dealers. Existing dealers must be crying with the sunk costs.

As for multifranchise - I find this hard to believe. Big groups have multiple brands but no dealer outlet offers multiple brands. This hampers a lot of dealer opportunities

Last edited by khan_sultan : 14th August 2019 at 17:14. Reason: typo
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Old 14th August 2019, 15:08   #3
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

Most importantly - this strategy makes no mention of any quick introduction of current generation cars. Thats what is really causing them to struggle in the first place. People know that the Polo/Vento (and Skoda siblings) are old gen & not upto the mark of what is sold in their main markets. These are the volume cars & are priced at a premium over the others in the segment.

If that is to continue & same cars are to continue with different CUP EDITION, BOTTLE EDITION, PLATE EDITION, SPOON EDITION, MUG EDITION - then its not going to change the fortunes of this brand here.

They are walking the same line as Nissan pretty much. I think the best strategy for VAG (and Nissan) would be to just plan a graceful exit from the volume segments & use India as a manufacturing & export base by negotiating good financial deals with the finance ministry for Make In India projects.

The current strategy above can be summarized as "Our cars are not selling so we are closing the showrooms."

Last edited by Reinhard : 14th August 2019 at 15:31.
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Old 14th August 2019, 15:11   #4
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

Showrooms being compact is a good idea. But VW definitely needs to ramp up the service capacity. Most centers seem overloaded and short on space. If new models are planned this is critical.
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Old 14th August 2019, 15:15   #5
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

Mr Stefen Knapp,

Where is the new gen Polo, Jetta ?

PS - Hope he doesnt answer by saying " But we are launching the T-Roc "

Last edited by karan561 : 14th August 2019 at 15:16.
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Old 14th August 2019, 15:30   #6
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

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Originally Posted by karan561 View Post
Mr Stefen Knapp,

Where is the new gen Polo, Jetta ?

PS - Hope he doesnt answer by saying " But we are launching the T-Roc "
The Jetta will not be made in right hand drive. Volumes do not justify it
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Old 14th August 2019, 15:35   #7
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

Another case of dealers losing out due to poor product startegies by a car company. But some of them may be happy with this since they may anyway be incurring losses due to low sales from just 2 or 3 models in the entire line up

Atleast with the new strategy, the initial set up cost is mostly bearable and exit losses may not be significant given the low initial cost.

So would the pop up shops with a mere 2000 to 3000 sft also need to cater for service? Hoe is that even possible?
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Old 14th August 2019, 15:47   #8
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

They should also have mentioned "We have seen the error of our ways when it came to attitude and are now in correction mode. Our dealers, whom we had miseducated and indoctrinated will be sent to reeducation camps". And actions backing up and matching words.

More than the products it is this which holds back their sales. Often in the past I would wake up and think I should get a Vrs. After the first cup of coffee I would shake myself awake and wonder what I was thinking.

Regards
Sutripta
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Old 14th August 2019, 16:00   #9
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

Going by actual on the ground efforts in the last 10 years by VW, the below is the "Actual" 3 prong India strategy.

1. Summon a local Sticker-Walla and come up with a New Polo "Sports" Edition. (With the same 1000cc lump)
2. Import a revised bumper for the Polo (Will be called as the All-New Polo)
3. Import a revised headlamps and rear lights for the Polo (Will be called as Truely-All-New-Polo)
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Old 14th August 2019, 16:31   #10
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

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Originally Posted by abhishek46 View Post
Going by actual on the ground efforts in the last 10 years by VW, the below is the "Actual" 3 prong India strategy.

1. Summon a local Sticker-Walla and come up with a New Polo "Sports" Edition. (With the same 1000cc lump)
2. Import a revised bumper for the Polo (Will be called as the All-New Polo)
3. Import a revised headlamps and rear lights for the Polo (Will be called as Truely-All-New-Polo)


VW already has a 3 pronged investment strategy for India

1. Investment on a sticker printing machine to dole out stickers for their new editions
2. Invest on a sticker wallah to come up with new sticker designs so they can print using the investment made as per pt. 1
3. Invest on a good English dictionary so they can come up with new special edition names that they can use one after the other on their decade old products.

Das Auto!!!
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Old 14th August 2019, 17:16   #11
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

So, this is how they keep themselves busy these days! Looks like VW is out to provide some comic relief to the industry in these troubled times. Pity that a company which started with such fanciful marketing strategies to announce their Indian entry 10 years back has come to this. Funny, they are selling the same car still.



Pondering over their `multi pronged' strategy, I could never understand what prevented them from combining VW and Skoda dealers and service centers.
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Old 14th August 2019, 18:38   #12
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

"The key focus for these stores is to have them in Tier II, III and even Tier IV cities" and then the first pop-up store opens in Bangalore!
Idea is good. In my little town, the dealer from Mangalore has had such a pop-up sub dealership since many years.
But what we customers require is wider availability of service centres. Showroom contact is usually only once in a car's lifetime, when we buy the vehicle. For that, I dont mind going 60-100kms around my place. Whereas for service and emergency requirements, the contact is multiple times in a car's lifetime and I would like to have a service centre which is preferably within 10-15kms of my residence or office.
I feel VW and Skoda could have combined their service centres,while keeping their showrooms or pop up stores seperate. This way, they can open more service centres and also have enough volumes to be viable. Customers too might opt for their products, secure with the knowledge that there is a service center close by.
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Old 14th August 2019, 18:51   #13
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

As the saying goes, there is no problem in the car industry that a good car cannot solve. Dumb fools are primarily selling a decade-old line up. What they need is relevant, well-priced, competent new cars.
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Old 14th August 2019, 19:19   #14
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

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Originally Posted by GTO View Post
As the saying goes, there is no problem in the car industry that a good car cannot solve. Dumb fools are primarily selling a decade-old line up. What they need is relevant, well-priced, competent new cars.
Honestly, while VW is not giving India due attention, I can completely sympathise with them. The problem is that it's a cash strapped company after the dieselgate scam and to bring in quick cash, they're relying on more developed, less difficult markets. India being an extremely price sensitive and capital intensive market makes it very expensive and time consuming to develop a car from scratch here.

Although I do agree that they should make the facelifts and "editions" more significant.

Cheers!
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Old 14th August 2019, 21:18   #15
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Default Re: Volkswagen finalises 3-prong India strategy, overhauls retail set up

Volkswagen should have this three step strategy instead.
1. Fix your service centers. Stop fleecing your customers with unnecessary repairs. Build trust in your existing customers on the brand and the dealers.
2. Introduce new set of cars with the feature set matching to the segment leaders.
3. Go blaring again into the media and show your presence in Tier 2 markets. Lots of potential out there.

Volkswagen came into the market with a bang 10 years ago and they are yet to come out of that bang.
Don't know if they take our forum serious for the various issues reported on performance,breakdowns, fleecing, cheating et al. But, I'm sure they have taken one comment from this forum, "Vento has a timeless design" and they ensured to have all the cars from this stable look the same, with various sizes and proportions. It's high time they look themselves back and rework on their strategy and their fleet.
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