Is Amazon Tiptoeing Into The Car-Dealership Business? Expert Weighs In
Bill Chidley, partner at retail and automotive design agency ChangeUp, shares insights with PSFK on why the used-car market, and a potential 'Whole Foods-style disruptive move,' should have the industry keeping the e-tailer on watch
In July, Hyundai became the first automotive manufacturer to launch a digital showroom on Amazon.com, fueling speculation that the online retailing giant could one day sell vehicles just like it does books, electronics and groceries.
Selling cars, however, isn’t such an easy business to dive into. Remember the legal hurdles and court battles Tesla slogged through for years to get its showrooms, and eventually dealerships, established? Some of those same issues face Amazon if new vehicle sales to consumers are pursued.
PSFK spoke with Bill Chidley, partner at ChangeUp, a retail design agency that has created automotive dealership experiences and retail design programs for Mazda, Honda and Porsche, about the nation's biggest online retailer's car aspirations. Childey unpacks Amazon’s automotive retailing opportunities and challenges, the significance of Hyundai’s launch and what’s motivating the online giant to form partnerships with car brands.
Hyundai Realized That Car Shopping Starts Online—And On Amazon
Hyundai is one of the first brands “to act on insights that have been widely available to all brands for a few years,” Chidley said. “Today, car shopping begins online, and the majority of product searches of all varieties start on Amazon—it is a natural portal for automobiles.”
“As vehicles in the mass segments achieve parity in performance, quality and overall value, the shopping experience is more critical to win customers to your brand—and the easiest experiences usually win. Hyundai's digital showroom allows consumers to browse and compare cars the same way they would any other product offered on Amazon,” he said.
“Each vehicle includes Amazon's signature star rating and owner reviews,” he said. “It’s a very analytical way of shopping versus a sensory experience a person might have with an actual car at a dealership, showing there are advantages and disadvantages to both channels.”
And the two should co-exist, Chidley said. As for the pluses and minuses of digital versus physical car shopping, it's more of “an ‘and' than an ‘either/or' purchasing scenario.”
No doubt online car shopping holds increasing convenience appeal. “Shoppers want to achieve as much as possible online to be efficient—from narrowing consideration, to selecting a specific vehicle from local inventory, to doing the financing,” he said.
“But the dealership is still key to closing the sale because the test-drive is make-or-break for the decision, especially for couples.”
And even with Hyundai's streamlined purchase approach, with most forms filled out online, “a dealer visit is still needed for delivery and to establish a service relationship,” even more so as in-car technology increases in complexity,” Chidley said. These days, “Shoppers want and need a more intensive product-delivery experience and a place to go for help, like the Apple Genius Bar.”
Amazon Faces ‘Click-To-Buy' Hurdles Since A Car Can't Be Delivered By Fedex
So what does that mean for the option to click to buy a vehicle from Amazon? What is the chance of it becoming a reality given the current laws protecting dealers?
“The dealer lobby is very powerful, and I doubt that there will be any significant changes in laws that will enable a click-to-buy that cuts out dealer revenue from the sale,” Chidley said. OEM’s need a healthy dealer body as a face-to-face brand ambassador and for warranties and service. Dealers are also fundamental to a robust CPO (certified pre-owned) market that keeps residual values strong for competitive leasing.”
For Amazon to begin selling new cars could take years—if it ever happens, Chidley said. That’s not to say vehicle sales are out of the realm of possibility, but it would require extra infrastructure since a car can’t be delivered by UPS or Fedex.
Most Vulnerable To Amazon? The Pre-Owned Auto Market
By contrast, Amazon may pose the biggest threat to the pre-owned market, and could cut into both dealer volume at sites like Autotrader and Cars.com, he said.
If Amazon aims at being more than a digital marketplace for other car sellers, accordingly to Chidley it “would need to have a physical presence to ultimately win. I could see an eventual acquisition, like CarMax or Carvana as a Whole Foods-style disruptive move.”
Lead image: Amazon online shopping stock photo from PeoGeo/Shutterstock