They stream by with that mall-induced vacant-eyed gaze, staggering like bag-carrying extras from The Walking Dead before snapping to attention with a look of bewilderment.

"What am I doing at a car dealership?" you can almost hear them say. "How far did I walk?"

The source of their confusion is the Mercedes me Store Markham at CF Markville mall near Toronto. Complete with half a dozen Mercedes models, a salesperson, a boutique and a coffee bar, the store is still raising eyebrows two months after it opened next door to the usual mall fixtures.

"People aren't expecting this," says Philipp von Witzendorff, vice-president and head of Toronto retail operations for Mercedes-Benz Canada. "It's still a little early to fully judge it, but we were really a little overwhelmed at the beginning with so many people coming in and it hasn't slowed down."

Despite all that attention, Mercedes is not expecting shoppers to pick up a new AMG GT Coupe after buying jeans at Hudson's Bay – the 5,600-square-foot store doesn't actually sell cars. Instead, it's part of a trend in the automotive business that has seen a Porsche boutique open in Square One, a Mississauga mall, and Genesis establish a storefront operation in downtown Toronto.

It's all part of a brave new world for auto retailing that must embrace the traditional with new thinking. The digital world has already changed the game: In 2000, the average car buyer visited about five dealerships before signing on the dotted line. Today, thanks to the internet, that's around two.

Stores such as the Markham one and the Genesis outlet are augmenting that evolution. In fact, Genesis is planning more such operations across Canada.

"The traditional car dealership must learn to evolve," says Andrew Tai, CEO of Motoinsight and Unhaggle.com. "You'll see more of a rebalancing in the next few years, more urban storefronts that are closer to customers, with more reliance on digital technology to facilitate the shopping process as opposed to the traditional dealerships.

"The dealership is not going away. But the dealers need to realize that the way customers shop [is] evolving ever more quickly."

For Mercedes, it's about expanding the pool of potential customers, including those who might never step inside a dealership.

"This gives the customer the opportunity to wander in and be amazed by the product and hang out without the pressure to buy," von Witzendorff says. "This way we can reach people who maybe aren't ready to buy, but when they are they'll remember that good experience they had here and how good it felt to sit in a Mercedes. Then, hopefully, that guy goes to the dealership or goes online."

That's exactly what's happening. On a recent Saturday, three shoppers stopped at the Mercedes store and went directly to the nearest dealership, conveniently located a few minutes away. The store has already produced sales.

Over at the Genesis store, prospective buyers can go a little further. They can take a test drive, trick out a car on an iPad and even complete the purchase online from home.

"The physical [dealership] is not going away, but there must be more," says Tai. "Customers are buying cars completely online and the proportion of customers who want to do that is rapidly increasing. Dealers who ignore that are doing so at their own peril."

Von Witzendorff agrees.

"If you don't do this kind of stuff, you're off the playing field," he says. "You've got to engage with your customers in all kinds of ways. We need to go where our customers [are], not the other way around. That's the one thing that has dramatically changed. It changed with the internet and this changes it more."

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