Online shopping prompts Mercedes to redesign its showrooms

Mercedes-Benz has unveiled a digital-focused store redesign aimed at dialing down the high-pressure, transactional experience that has defined auto retail.

The luxury automaker is also experimenting with alternative formats, including small-footprint showrooms in retail centers and service-only sites. Automakers are giving their retail strategies a rethink in response to the emergence of online car-shopping and direct-sales competitors, notably luxury segment leader Tesla.

"We are moving away from traditional big locations to add small, lifestyle formats where people can walk in, see a product, get some information," Mercedes-Benz USA CEO Dimitris Psillakis told Automotive News.

A prototype for that boutique concept has opened in an upscale Atlanta-area mixed-use development.

The 2,000-square-foot store, operated by retailer RBM of Alpharetta, displays just two vehicles and primarily introduces the brand to curious shoppers.

"You show products, but it's not a place where you go and kick tires. There is no aftersales," Psillakis said, referring to a service department.

David Ellis, general manager at RBM of Alpharetta, described the concept as a "show and tell."

Product specialists, called brand ambassadors, educate walk-ins on Mercedes vehicles and technology using digital displays. Test drives are offered, and customers can even configure a new Mercedes in-store. But paperwork and delivery are completed at RBM's nearby dealership.

The concept helps Mercedes "market to a customer who might not be familiar with new product and pricing of a Mercedes," Ellis said.

The retail outpost is a lead generator, RBM says. In about a year of operation, it is driving about 70 to 80 leads a month, of which about three to five convert into sales.

"We get our name out to people who wouldn't know that our dealership is 2 miles away," Ellis said. "People walk into that store wanting to know what it is."

Mercedes is not the first and won't be the last to consider alternatives to the expensive Taj Mahal-like all-in-one dealerships. Tesla and, more recently, Polestar use compact shopping center-based locations to push their electric vehicles.

Sports car maker Porsche has launched a loungelike retail concept called Studios that showcases local art installations along with 911s and offers customization kits and brand merchandise.

The popularity of online shopping along with pandemic-era supply shortages are driving the rethink of the traditional dealership format with sprawling lots.

Psillakis said future stores will have a smaller footprint, lean on technology to showcase product and better meld the online and in-store shopping experiences. Mercedes is introducing a dealership design program called MB EVolution that will move its retailers more in this direction.

The new look, which is heavy on digital displays, is a nod to the surge in omnichannel sales, as some of the nation's top public dealership groups report that at least half of their transactions involve some online activity. It is the brand's first major store redesign in more than a decade.

"We want to ensure that the transition from online to offline is as seamless as possible," said Frank Diertl, Mercedes-Benz USA vice president of retail network development.

The interior-focused redesign taps into another retail industry trend: Shopping is about more than a purchase.

"MB EVolution is a focus on the experience, not on the transaction," Diertl said. "The product, and the experience of understanding that product, take center stage."

Psillakis said MB EVolution will allow dealers to show products digitally in an immersive way.

"We're moving away from the big stockyards for vehicles so we don't need huge parking lots for products," he said.

The days of dealerships stockpiling 120 days of inventory are over, agreed Jeff Aiosa, owner of Mercedes-Benz of New London in Connecticut.

"Thirty to 45 days of inventory is the new normal," Aiosa said. "We're shifting away from a push distribution system to a pull distribution system."

About a quarter of the brand's 383 dealerships are in various stages of making the interior-focused design overhaul.

"We would expect that every dealership would, latest by 2027, have the EVolution standard," Diertl said.

The redesign creates an open-layout showroom with walnut wood and black furnishings. The store is anchored by what is called the Main Stage, which features a high-resolution digital display to showcase new models, features and technology.

"The Main Stage allows you to reconfigure your showroom to focus on a particular product," Diertl said.

California Mercedes dealer Ash Zaki adopted the new design as part of his store build-outs in South San Francisco and Oakland.

The CEO of Euromotors Auto Group described the layout as "consumer-friendly and designed for casual consultations where you're standing up and talking to a customer around a table or desk."

At his nearly 120,000-square-foot South San Francisco store, service advisers, salespeople and sales managers share floor space with the customer lounge and display cars.

The floor plan "provides a line-of-sight communication between employees," Zaki told Automotive News. "The customer is less likely to get lost between service and sales."

But not all dealers are enthusiastic about making potentially seven-figure investments in a store redesign, especially as surging interest rates threaten to chill demand for new cars.

One West Coast dealer said updating his two Mercedes stores to the new image standard would cost about $1 million. That's hard to justify when store remodels don't sell cars, said the dealer, who requested he not be identified.

"We need to invest money in expanding our service capacity, not dramatically revamping the front end," the retailer said.

The dealer also questioned the practicality of a "cafe-style" open layout as the automaker strives to target more upscale customers.

"A Starbucks experience doesn't work when you're trying to sell a $100,000 car," he said. "Luxury shoppers want a Four Seasons environment."