Car retailing is an increasing challenge with the steady decline in the size of dealer networks. Those that continue to operate are looking at ways of improving profitability. The internet has suffered from difficulties in this sector, as evidenced by the departure of companies such as Autoquake and Tesco Cars.
To compare the offline and online sales of Cars consideration of the potential reach of consumers is required, looking at the growth of the internet and potential customer base. Internet usage has grown from 16 million users in 1995 to 3,035 million users in 2014.
The use of Smart Phones for web search is growing at an immense rate. In countries such as Africa where Internet coverage is sparse, data usage is being pushed by organisations such as Huawei and their $25 mobile phone campaign. This shift will mean that smartphone technology will be the platform of the future in testing, purchasing, and servicing cars.
Table of Contents
1. Introduction
2. Description & Comparison of offline and online retail environments for cars
2.1 Description
2.1.1. Supply Chain for Offline and Online Environment for Cars
2.1.2. Examples of Online Automotive Organisations
2.1.3. Re-intermediation
2.1.4. Quasi Online and Offline
2.1.5. Traditional Bricks and Mortar Dealerships
2.2. Comparison
2.2.1. Product and Service Innovation
2.2.2 Technology
2.2.3. Social and Behavioural issues
3. Analysis of value creation in e-business
3.1 Amit & Zott’s Value Creation Model for Cars
4. Recommendations for three significant omprovements
4.1 Improvement Consumer Use Online Purchasing 1
4.2 Improvement Consumer Use Online Purchasing 2
4.3 Improvement Consumer Use Online Purchasing 3
5. Conclusion
List of References
Appendices
Executive summary
Consumers shop online for goal oriented and experiential reasons. Online shopping, including accessibility/convenience, selection, and information availability is compared to offline retail for Cars.
The group look at: why; how; when; and where people shop. Happy or locked in customers are repeat customers but our friends may influence and vice-versa. If the retailer is trustworthy, customers need to consider what security cons prevail and will the product delivered be correct.
Finally, the group predict the future of online shopping for cars.
1. Introduction
Shopping online is a regular activity for millions of people globally. Over $1 trillion was spent online in retail in 2012. This does not include the amount spent on travel or buying business services. Approximately 10% of all worldwide shopping is online, with predictions that this will double by 2015. The global economy now depends on Internet shopping. Until recently, the US dominated online retail, but gradually other parts of the world are catching up. In Europe, 10% of all retail is online, in the UK 13%. Meanwhile, Asia-Pacific has come to represent a third of all online sales.
What is online retail? An e-business firm is an organisation that derives a significant proportion (at least 10% according to Amit & Zott) of its revenues from Internet transactions. Moving from an offline (bricks and mortar) retail environment to an online virtual shopping experience highlights several points. Internet shopping turns shopping into an anywhere anytime activity; social media matters; desire to buy a car online is increasing (but with conditions) and shoppers want flexibility in buying options.
Car retailing is an increasing challenge with the steady decline in the size of dealer networks. Those that continue to operate are looking at ways of improving profitability. The internet has suffered from difficulties in this sector as evidenced by the departure of companies such as Autoquake and Tesco Cars (Mintel, 2012).
To compare the offline and online sales of Cars consideration of the potential reach of consumers is required, looking at the growth of the internet and potential customer base. Internet usage has grown from 16 million users in 1995 to 3,035 million users (42% of the world population) in 2014 (Appendix 1).
The use of Smart Phones for web search is growing at an immense rate. In countries such as Africa where Internet coverage is sparse, data usage is being pushed by organisations such as Huawei and their $25 mobile phone campaign. This shift will mean that smartphone technology will be the platform of the future in testing, purchasing, and servicing cars.
2. Description & Comparison of offline and online retail environments for cars
The automotive market is a high-ticket sector that has invested strongly on the Internet resulting in both disintermediation, and re-intermediation of the value system for cars (Benjamin and Wigand & Janssen and Sol, 2002). Auto retailing is a global multi-billion dollar industry in sales and services.
2.1 Description
2.1.1. Supply Chain for Offline and Online Environment for Cars
Offline Search
Obtaining price information for cars is difficult offline compared to online. Dealers are aware that searching in the marketplace is more costly than searching on the Internet and typically charge higher prices. Consumers who search for cost information in the marketplace need to visit a larger number of dealers to obtain prices than those retrieved through online search processes (Kuruzovich, et al., 2008).
Online Search
Independent Online Buying Services (OBSs) are considered to be the pioneers of online automotive retailing. Their primary role is that of referral intermediaries, selling vehicles to consumers through dealer referrals (Kuruzovich, et al., 2008). OBSs such as CarsDirect.com and Autobytel.com are forming significant impacts within this industry. For this paper, the group considered Autobytel.com only for Amit & Zott for this reason.
In addition to OBSs, there are also: Manufacturer Websites; Dealer Websites and Newspaper Websites for the retail market.
Framework for Search online versus offline
The framework detailed in Appendix 2 compares the search and product evaluation of the offline and online market. Search alone both offline and online results in purchasing the vehicle at the dealership. However combined with product evaluation this can result in a purchase with an individual reseller and/or a dealer. The future is naturally to move to the Tesla model with fully automated retail (discussed in further detail later).
Supply Chain Offline –v- Online
Supply Chain Management is a flow of information in order to achieve optimal production to satisfy customer needs at the lowest costs. The Bullwhip effect occurs when demand variability is magnified as information moves back to the start and potentially not with the correct information.
Supply Chain Offline
Volvo in the mid-1990s had excessive stocks of green/eco cars. The sales department in response to this offered deals to sell them. However nobody had told the manufacturing department. That department miss-read the increase in sales as a sign that consumers had started to like green/eco cars, and they increased production. Basing orders on incorrect forecasting around run rates distorted the information and actual demand. This is one of the most influential causes of inefficiency in any supply chain (Economist, 2002).
The supply chain of global manufacturers is complicated and without online and real-time systems would be virtually impossible to manufacture and manage stock.
Supply Chain Online
Online information links all aspects of supply chain within an e-Business. This replacement of physical business processes with electronic ones, in theory, can greatly assist in reducing the bullwhip effect. Electronic Data Interchange (EDI) develops a forecasting system consisting of customer demands and supplier inventory, as well as market fluctuations. Barcode and point of sale data creates an instant log of customer preferences and behaviour. This efficiency reduces order sizes and price fluctuations therefore further reducing the bullwhip effect. Add to the mix Radio Frequency Identification (RFID) technology which can send product data from an item to a reader further allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously (John Wiley & Sons Inc, 2011).
Offline –v- Online Comparison:
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Figure 1 Supply Chain Process Offline and Online
2.1.2. Examples of Online Automotive Organisations
Manufacturers, such as Vauxhall and Ford, have begun to sell directly to consumers, bypassing the traditional dealer networks (disintermediation) (Molesworth M, 2002).
Conversion from an online comparison-shopper to an online buyer with full merchant services is still small for the automotive industry. Only one company facilitated full merchant services check out and delivery of new cars online. With its fast and convenient online shopping features, more and more consumers prefer one click/buy it now features. The group considered how “Bobbi” buys this product online. For the Tesla S it is a car made to order, via a fully automated service:
Abbildung in dieser Leseprobe nicht enthaltenFigure 4Tesla Order to Delivery Process (Tesla Automotive, 2011)
For new vehicles Tesla Motor Company: https://my.teslamotors.com/en_GB/order facilitates purchases online with their fully automated merchant services offering (Tesla, 2015). Therefore, the entire process is automated. In the second-hand market, a consumer can buy a car with full checkout facility via eBay. Autobytel.com also sells cars via financing deals, which means an automated service with a car being delivered to your door without merchant services facilities.
2.1.3. Re-intermediation
Re-intermediation has resulted in new types of intermediaries. Aggregators such as Autobytel.com aggregate comprehensive online buyer’s guides. Another example of this is Jamjar.com, who sells a variety of cars and handles fulfilment. Autobytel.com is to cars what Comparethemarket.com is to insurance/energy retailers.
2.1.4. Quasi Online and Offline
The newly launched online sales of BMW i3 electric car allows the consumer to create personalised car specifications online. Followed by a sales request submission (i.e. the entire process is online until a checkout button is needed, as there are no merchant service facilities online).
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Figure 5 BMW Website Extract (BMW, 2015)
2.1.5. Traditional Bricks and Mortar Dealerships
Traditional dealerships are also using the Internet. Design of sites is for information provision rather than direct selling. Classified services have also transferred to online services via sites such as www.autotrader.com (Molesworth M, 2002).
However, a number of people are still offline who either have no internet provision or consider the security and privacy issues as an inhibiting factor.
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Figure 6 Reynolds, J (2010). E-Business A Management Perspective. New York: Oxford University Press. 120.
Ironically most consumers believe that if there is no online presence in the form of a website then the business is not real. Many traditional bricks and mortar car retailers are discovering that what has worked for so long offline does not work online.
For example, the Audi City dealership in London is a front leader of online trends. This is the smallest Audi dealership in the UK displaying only a few cars; however it has the highest footfall. “It is a digital store, provides a brand experience and you have an unlimited way of configuring your car...so as you click, it is live in front of you and it is very easy to go 'over budget'...and very different from going through a brochure and looking at physical cars” (Leggett., 2013).
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