The Strategist

E-commerce starts to shape future of car retailing

01/25/2017 - 15:00

Ford’s lending division invested in AutoFi – a startup, engaged in development of technologies for on-line purchase of cars. Amount of the investment is not disclosed. According to the automaker, the company will use AutoFi’s software, so that clients can buy cars Ford or Lincoln without leaving the house.

Robert Couse-Baker
Robert Couse-Baker
All a client needs to make a purchase is to go to a dealer’s website, choose a favorite car in any configuration, and order insurance. Then, required set of documents will be delivered to the customer’s home. After signing, the car can be picked up from the retailer. In addition, customers will be able to get a loan online, selecting the most favorable conditions.

It is also noted that AutoFi only offers a customers - dealers communication platform, and does not provide lending services. In addition, the start-up gets a cut from each transaction. The new service will allow simplifying the buying process. According to Ford, the first experiments will take place in Ohio salons. However, the automaker has no intention to go full online. "Many of the same customers still want to touch and see a real vehicle before signing the contract," - noted the company.

The world car retail has not changed for more than 100 years. During all this time, dealers have been using quite simple a marketing model - customer visits several dealers, chooses a car, talks to a consultant, takes a test drive, and, finally, gets the car. However, advent of e-commerce makes this system look obsolete in the target audience’s eyes. 

In this regard, online car sales may become a breakthrough step in the automotive business. It would give the audience a convenient tool to choose and buy the complex product, and significantly reduce time of purchase.

Now, there are two possible directions for development of online car sales.

The good old model with small alterations

First, a customer books a car online, with possible pre-payment (for example, 1%). Then, they go to the dealer’s office for all other necessary procedures, such as signing documents, subscribe to insurance etc. Basically, this is just the same old marketing model, and participation of the Internet is negligible.

Full online

The second option is a complex car sale without leaving home. It could be the same principle that works for many other products, from food to expensive clothing. In this case, the buyer enters a "virtual showroom" without any communication with the seller, which often only irritates the future car owner (distinctive feature of millennials).

The buyer chooses the car, its complete set, color, accessories, applies for a loan, insurance, and picks out the most convenient way of payment. Delivery to home or office may be an additional bonus.

Generally, the prospects look quite optimistic. In the US, for example, car sales set a record at the end of last year. Number of cars sold in the country grew by 0.4% to 17.55 million, according to Autodata Corp.’s data

Sales growth has been driven by positive situation in the US economy, availability of loans and substantial discounts from the car manufacturers.

This upturn in the US car sales has been noted for the seventh year in a row, which is the longest period of growth since the Second World War."Overall, the year was excellent, - noted senior analyst at Kelley Blue Book Alec Gutierrez. However, stocks of dealers exceeded demand by the end of the year, which prompted them to offer discounts."

The car retail market is quite conservative, and unlikely we can expect dramatic changes in the near future. Classic car dealers will be the most popular way to buy a car for quite some time. Yet, development of e-commerce in the car industry will certainly make the process of purchase faster and more convenient.