Luxury brands up service level as competition grows

Mercedes-Benz will offer 140,000 person-days worth of training to dealers this year, an increase of 40 percent over last year, according to the company.

It will add more than 75 authorized dealerships in China this year, with 45 percent of them in third- and fourth-tier cities.

Charles Mills, vice-president for global retail experience under JD Power and Associates, said that luxury car brands need to improve retail experience and service quality because of the high expectations of customers.

"The premium brand by definition has to provide customers a more complete ownership experience than just the product," he said.

He noted that in many Chinese dealerships - both premium brands and volume brands - people still have a transaction-based experience, where a salesperson or service agent performs a checklist of tasks that the brand or the dealer has assigned them.

"From a premium perspective, that's not where and how we create a deep, lasting relationship with customers," he said.

After-sales market

The potential for revenue from after-sales service is another reason why manufacturers are increasingly investing in dealer training, said Ye Sheng, auto research director of Ipsos in China.

During a time of slowing market growth and mounting price pressure, new car sales are not as profitable as before, but the market for after-sales services will continue to be robust, with double-digit growth expected annually in the next few years, Ye said.

To cash in on the surging segment, the number of independent repair shops and car care shops has mushroomed in China, creating direct competition for services from traditional authorized dealerships known as 4S shops.

In terms of volume brands, the 4S shops account for half the market share in after-sales businesses today and for luxury brands, the traditional dealerships still hold about 80 percent market share, yet the proportion will decline in the future, Ye said.

To keep the customers, dealerships need to provide fast services with transparent prices as well as "thoughtful, individualized services", he said.

Mills, of JD Power, also emphasized the importance of creating a highly individualized experience.

"Retail around the world - not just automotive, but fashion, furniture, computers - is going more and more toward individualization," he said.

"It's about you having a very different experience than the person next to you. It is where customers want us to go."