To this day I can't really figure out what it offered that the W211 and W164 at the time couldn't also deliver one way or another?! I think history will look on the entire R-Class thing in general as a definite flop!
It was developed at a time when there was a growing backlash against full size SUVs, and it was intended to mitigate the risk of declining sales. Softer in appearance, lower and less obvious, whilst retaining a slightly high driving position, tall cabin and mild offroad ability.
It was a time in which there were growing anti-SUV sentiments in the media and wider society. There were anti-SUV newspaper headlines, anti-SUV stickers being stuck on cars, and even SUVs being vandalised such was the feelings from some corners.
However it was also a time of quite significant growth for both full-size SUVs and growing popularity of softroaders, effectively replacing the boom in fulll-size and mini MPVs. The market could have gone either way continued growth or contraction or even collapse.
So Mercedes used the second generation ML platform and powertrains to spin off a full-size SUV (ML), plus a 7 seat full-size SUV (GL), and a softer alternative pitched as being pitched more towards luxury (R). It hedged it’s bets to cater for both dramatic growth and collapse.
It was highly unlikely that all three would be a success, as the market would go one way or the other. History tells us that the anti-SUV sentiment eventually faded - quite quickly in the end - and so it was the R-Class which became the relative “failure”.
I would not call it a flop or failure though, just like you wouldn’t say an unused insurance policy is a waste of time. It served it’s purpose perfectly, Mercedes expected continued growth - but could not be certain - and that’s what happened.
