E-commerce has disrupted countless businesses across the world. Bookstores, department stores and shopping malls have all been affected by the change in consumer habits, and those that fail to keep up have retrenched and filed for bankruptcy. However, there are industries that still lag behind in e-commerce, which presents a huge opportunity for growth.
Automotive e-commerce, in particular, has only recently begun its steep upward trajectory, with hundreds of millions of dollars going into funding a number of online automotive marketplaces in Asia and North America. Early on, direct online C2C or consumer-to-consumer selling occurred on classified platforms such as Craigslist in the U.S. Only recently have auto e-commerce sites and marketplaces emerged and gained significant traction, even offering financing options that include novated lease.
The most obvious reason for the shift in purchasing habits is the general population’s familiarity and comfort with technology. Forbes reported that millennials, who grew up with the internet and make more purchasing decisions online, will make up 40% of the automotive market by 2020. The report also concluded based on data provided by L2, a business research firm that benchmarks brands’ digital IQs, that “automotive brands are still struggling to catch up to consumer expectations.”
This means that in the near future auto brands, car dealerships and other intermediaries will have to integrate traditional marketing tactics with better online presence to reach this new generation of consumers. Having an informational website isn’t enough; most well-known auto brands now run multiple social media accounts and organize campaigns to keep their fans involved and engaged.
California-based Tesla leads the industry when it comes to direct-to-consumer e-commerce. Its website boasts that “ordering your Tesla is just like any buying experience on the Internet.” Tesla allows users to purchase or pre-order a car online and customize its appearance and options, to have it delivered or picked up at the nearest service center. There are even specialists that customers can contact to answer questions regarding financing, trading in a car, installing home charging equipment, and delivery day logistics. As of April 2018, only Ford, General Motors and Hyundai have begun offering online solutions to “streamline the car buying experience.”
While Tesla’s website serves the purposes of an online storefront, online automotive marketplaces for used cars are replacing traditional dealerships. They offer transparency and convenience, even providing a one-stop shop where buyers can purchase a car, along with other essential after-sale care services. Singapore-based automotive marketplace Carro, for instance, also offers car financing, insurance brokerage, and road-side assistance through its Genie Financial Services unit, which is said to have facilitated $100 million in loans in 2017.
Auto marketplaces are attracting a huge flow of investments in Asia. In May 2018, TechCrunch reported that Carro “closed a $60 million Series B round to scale its business in Southeast Asia.” In comparison, Malaysia-based iCar Asia raised $19 million in November 2017, Carsome raised a $19 million Series B, Carmudi raised $10 million, while BeliMobilGue in Indonesia raised $3.7 million, and Toyota-backed Indian automobile marketplace Droom raised $30 million.
Last year, Carro’s marketplace platform handled transactions totaling upwards of $250 million, a small fraction of the global e-commerce automotive aftermarket valued at $32.723 billion in 2016. Carro’s proprietary pricing algorithms, which is used to inspect and evaluate vehicles, is especially valuable for the used-car sales market in Asia. This is due to the industry’s “lack of a cohesive framework for assessing collateral values and various competing companies utilize different standards,” as reported by Auto Finance News. Despite the intense competition, there is much room for growth, as the global e-commerce automotive aftermarket is predicted to have a 24.2% CAGR (compound annual growth rate) from 2017 to 2025.
Cars.com — one of the largest automotive classified sites in North America — differentiates itself through trusted expert content, expansive dealership network, on-the-lot mobile features, comprehensive pricing and research tools, and its database of consumer reviews. Launched in 1998, Cars.com has recently ramped up digital ad spending, invested in big data analysis and artificial intelligence, and acquired two Chicago-based tech companies that specialize in advertising and e-commerce in order to stay relevant in today’s automotive e-commerce market. Having acquired the tech companies, Cars.com now offer website creation and maintenance services, features that “improve the company’s ability to chart the impact that its online platforms have on sales at the dealership level.”
Cars.com CEO Alex Vetter said in a recent interview, “Dealer Inspire’s and Launch Digital Marketing’s technologies are squarely situated in the fastest-growing segments for dealer investment – their own brands. Their suite of products broadens our current capabilities, and when fully integrated with the Cars.com online marketplace, will offer dealers the most sophisticated and sought-after digital solutions to grow their business and improve operating efficiencies. These products will create a unique end-to-end car shopping experience for consumers, and an even smoother transition from research to transaction.”
Even Facebook wants a piece of the pie. Not only has Facebook Marketplace included a vehicles category for buying and selling used cars online in Canada and the UK, it has also partnered with Motors.co.uk so that the site’s listings will appear in Facebook Marketplace. Potential car buyers can communicate directly with dealers using Messenger, via live chat providers or through lead forms. Annelies Jansen, global director of Marketplace Partnerships at Facebook, has announced that the vehicles category on Marketplace has continued to grow as one of its most popular categories.