Amazon’s foray into the automotive sector in August 2016 sent the existing players scuttling for cover. It started operating Amazon Automotive for parts and accessories and Amazon Vehicle to find “reviews, specs, images, and more” for old and new cars alike. According to the Adam Goetsch, Amazon Automotive’s Director, their motive is to provide support for potential buyers through for an informed decision making.
With this, Amazon has welcomed dealers and OEMs into its online portal. And this is as disruptive gets for automotive industry.
Amazon is a lucrative and resourceful platform for both dealers and customers.
For dealers, it is a portal to dispense and advertise their products in a tried and tested medium. Benefits are such:
- Amazon account covers their digital presence which costs them around $40/month whereas having their own web site would cost them several thousand a year. Besides the cost for website creation, Amazon has a ready traffic while a new website will struggle for some time and will need high investment before it sees any visitors.
- Amazon’s presence is digital but followed widely. For dealers to have an Amazon account and a centre for the products, the maintenance cost would come around $20,000/year. For a traditional dealership, the cost of a showroom or storage for the products would be five times as much.
- From the traditional brick-and-mortar space, Amazon is an excuse for the dealers to jump into the virtual space, where the customers (at least 300 million) are, which has the potential to expand the customer base.
Benefit for customers
Customers will have access to Amazon’s vast inventory consisting of images, details, and reviews, among others, and all in one place. They can research, compare, and read reviews of new vehicles and old to make their research informative and useful. If they want, they can even book for test drives from the web site.
Offline or online, Amazon’s goal is to make sure that they have everything so that the visitors don’t have to look for other options. Their service seems to be pointing to that direction, too.
Customers can save on the salesman fee. For example, salesman commission is 1-3% per vehicle. But in the early years, its working model seems to target the do-it-yourself (DIY) customers, at least when it comes to parts and accessories. Though this customer base is not that vast, it is still a significant 25% of the US automotive aftermarket. Amazon could try to move on to B2B customers, specially installers or independent garages.
By providing a profitable platform, Amazon is sure to woo both customers and dealers. But it still has a lot to accomplish before it knocks eBay, the most popular online web site for used cars with 160 million registered users, off its throne. While eBay has also been busy in the recent time by buying companies like WeGoLook and Cargigi along with partnership with TrueCar, Amazon is still a force to reckon with.
Amazon’s deals are unique and have immense appeal to dealers and customers alike. As automotive is a great revenue generator, it has been aggressive and determined in its approach to expand its reach. Though its effect is undeniable, it will be interesting to see how it will use it for its advantage in the future.
Sachi Mulmi is a researcher with Frost & Sullivan. She can be reached at firstname.lastname@example.org
Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at email@example.com | +603 6204 5830