7 reasons why Maruti’s Nexa premium dealership strategy is wrong!

Maruti, India’s largest carmaker has launched a series of premium showrooms, called Nexa. Nexa is Maruti’s attempt to sell high price cars to cash rich customers, by offering more spacious, more detailed, more courteous and more premium showroom experience when they visit a Maruti showroom.

Looks good on paper, but Maruti doesn’t really have enough premium cars to sell at these Nexa premium showrooms. So I find this premium showroom strategy very confusing. As a consumer where should I go and when?

SX4 Cross in Denmark, spotted before it was launched in India

Consider these, there are my 7 reasons why Nexa is a bad idea at this moment:
1.       Initially it is said that only premium cars will be sold at Nexa. Definition of premium being cars priced above 8 lakhs. But most of Maruti’s models have their cheaper variants priced below 8 lakhs while top spec variants crossing 8 lakhs. So should I go to regular showroom for LXI/VDi variant and to Nexa for ZXi/ZDi?

2.       Most of the new launches like Baleno and SX4 cross are being routed to Nexa. But these are priced almost at par with other budget cars (Swift, Dzire, Ertiga). Baleno price range starts at 5 lakhs ex-showroom Delhi. So what is premium about it?

3.       Wont the dealers who invested in regular Maruti showroom feel cheated that new models are not being sold in their showrooms?

4.       Upselling is going to be a challenge. Suppose a customer walks in into regular Maruti showroom asking for Swift. Salesperson feels this guy has budget and interest to buy a Baleno. But now Baleno is being sold in a different showroom in other part of town. If sales person asks the prospect to go to Nexa, there is no guarantee that prospect will go all the way- he might book a car at a competitor showroom enroute. If Baleno was available in same roof, a more profitable sale could have been stuck on the spot.

5.       Overhead costs: Assume that it costs 5 lakh rupees per month to run a car showroom (rent, salary, maintenance expense etc). If a regular maruti showroom is selling say 100 cars per month, then they need to earn Rs 5000 per car to breakeven the operating costs. A premium showroom will have same or higher expense- but if premium showroom sells only 10 cars per month, then they need to earn Rs 50000 per car. As a consumer, would you may much more to a car against the promise of “premium experience? It is a tricky situation for Nexa- they need higher numbers to make profit, but higher number means more crowd and less differentiation between Nexa and regular Maruti showrooms. As a customer are you willing to pay more for a premium showroom experience (a welcome drink, less crowded showroom and an over courteous staff) for an ordinary car?

6.       Nexa showrooms are very few in number per city. Would you drive 20kms extra to a Nexa showroom for ‘premium’ experience or prefer to get your work done at a regular Maruti showroom/service centre near your home/office? Even for prospects, it is unnecessary confusion and extra traveling visiting dual showrooms.

7.       Nissan has done a smart move by selling Datsun inside Nissan showrooms. Maruti’s premium showroom concept would have worked well if they stick to the rule that only 10 lakh+ cars will be sold via Nexa. But Maruti is diluting Nexa by selling much cheaper cars also in nexa, thereby reducing gap between Nexa and rest of standard showrooms. In fact the overlapping price range will only add to confusion, rivalry among dealers.

I hope Maruti’s strategy pays off. But to make Nexa a success Maruti needs to produce more premium cars and try selling them to rich customers. Along with new showroom name, Maruti should have probably created a new subsidiary altogether (like how VW group has VW brand for cheaper variants and Audi brand for expensive/luxurious cars (though both brands may use same engines, production facilities etc)). Nevertheless, Maruti has been successful so far and I am sure they can make Nexa concept work. So best wishes to them.

Do share your thoughts on this topic.

Also read: Maruti Ciaz VXi+ Automatic review *  Tata Nano AMT vs Alto AMT * Ertiga VDi- review *