Business Capgemini

Will car manufacturers pay the price of Amazonification?

December 2, 2016

Have you ever wondered why consumers aren’t buying their next car on Amazon? The effect of Amazon and a handful of other global e-commerce sites on almost every market segment has been astonishing. They’ve raised the expectations of consumers across the board: from guaranteed delivery times, payment processing protection, benchmarked lower prices, to an endless stream of peer reviews, grades, and commentary. The ‘Amazonification’ of commerce means that more consumers than ever are comfortable with taking their custom online. But not all: despite the huge appetite for online purchasing, the market for car sales has never truly broken out of the physical experience. 

Amazonification happens when manufacturers and retailers fail to understand how consumers want to be served online. Almost overnight, their efforts to migrate sales online will be surpassed by a third party, who can then dominate and dictate commercial terms. The same retailers and manufacturers are then expected to step into line – to accept these terms and the market dominance of a third party. The more complex and mature this third party becomes, its consumers raise their expectations, until only the Amazons and Ali Babas of this world have the technology, engineers, and experience to satisfy them. 

Analyzing the online buyer behavior 

Against this background, Capgemini recently conducted a survey looking at the online sales trends for cars in Germany, the USA, and China. Since consumers in these countries are already purchasing parts, accessories, insurance, servicing, and financing online, what were the barriers holding them back from making the purchase of their next car online? And what are the risks facing manufacturers who fail to listen to customer needs at this stage of the market’s development? 

It showed that a large majority, some 72% of consumers, are already willing to buy a new car online. On average, they preferred manufacturer brand portals, and showed little trust in technology companies when it came to buying cars. However, this average was brought up by figures from US respondents. 

In both Germany and China, the first preference was for third party online car dealerships, rather than the car makers themselves, with 64% and 58% respectively. This suggests that despite a lack of trust in existing technology companies to sell them a car, consumers are still happy transacting through third party companies online. The question then becomes: why choose a third party over the car brand itself?

Who’s getting ahead in online car sales? 

Amazon, like the other e-commerce giants, offer range, convenience, and balance. They are trusted to provide generous discounts and to drive down prices through competition, as well as developing every more elaborate means to empower the consumer. Customers want the same benefits from online car sales. The offers of price discounts, comparisons, and time savings are going to be crucial, and customer support has to be ubiquitous and comprehensive. Not all car manufacturers have the global expertise to deliver these benefits, which is why they run the risk of Amazonification.  

This year saw the launch of Amazon Vehicles, which used the same interface as other Amazon departments but allows you to browse thousands of different car models. Although Amazon Vehicles won’t let you buy a car directly from the website, it does give you the full specification, shares user reviews, and lets you compare a model’s strengths, value, and changes from previous editions. It’s not hard to imagine the final step in this strategy being imminent. AliBaba already offer a car sales portal, and several other players are building up their reputation and capability. What can car manufacturers hope to offer consumers to avoid being cornered? 

How manufacturers can meet car buyers’ expectations online

To head off the e-commerce giants, it’s clear that automotive companies have to move quickly. In a sector where R&D projects span years, sometimes decades, this isn’t always easy. One way that they can deliver where e-commerce players can’t, is by leveraging their physical presence effectively. The survey found that 82% of buyers are resistant to online car purchase because they wanted to physically experience the product or take a test drive. 

Vehicle brands can use existing infrastructure to work alongside online portals, creating an integrated experience. This could be through combining pop-up stores with virtual and augmented reality, having live agents online, and working with events teams. Having a single, consistent brand presence offline and online will help. 

The survey also revealed that many car buyers are concerned about losing out on price negotiation when migrating online. The experience of haggling adds a sense of value and of personalized influence, which is hard to replicate online. Manufacturers can go some way towards recreating this through smarter pricing; integrating negotiation modules to the transaction and showing real transparency over price comparisons. 

Another area where e-commerce giants excel is in data security and payment processing. Thanks to their mature systems, they have had the opportunity to test and develop secure, seamless, and trusted payment routes. This gives them an edge, especially with large payments, but does this trust extend to the full cost of a new vehicle? In China, for example, 50% of respondents said lack of trust in data security would stop them making a full online purchase of a car. 

Car brands have to move fast to learn the lessons that e-commerce players have already mastered. They must reach best-in-class for security solutions, gaining trust in data protection and payment safety. This has to be done in synchrony with brand awareness, so consumers are aware of the levels of security being integrated.  

You can read the full report here


By Ed Chipperfield 

Ed Chipperfield is a British journalist specializing in science and technology, and has contributed stories to the BBC, Sunday Times and Men’s Health. 

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