By staff reporters Zhu Shiyun and Nan Hao
Online retail websites in China are paving a wider sales path for new vehicles by catering to increasing numbers of "click-and-drive" car buyers.
Tmall, the retail division of e-commerce giant Alibaba, reported explosive growth for new-vehicle orders on the Chinese shopping-holiday Single's Day, November 11. Some 50,700 shoppers clicked a booking through its website, representing an estimated 500 percent increase from online demand on the same day in 2013.
Other retail websites reported similar spikes. A website that sells cars called Bitauto.com registered bookings for some 530,000 vehicles November 11, compared to around 90,000 cars on the same day 2013.
One auto industry analyst who asked not to be named said more Chinese consumers are switching from browsing inside dealer showrooms to browsing the web before clicking on a car of their choice. Many have found online shopping more efficient and effective than traveling from showroom to showroom in search of a new set of wheels.
Auto dealers and automakers have switched to web sales as well, the analyst said. In some cases, the competitive atmosphere has forced them to accept lower profits after cutting prices to drive sales. In the long run, though, dealers and automakers hope to make money on after-sales services.
Car dealers that operate some 8,000 showrooms across the country and sell more than 30 brands including BMW, Toyota and Volkswagen cars were in the forefront of Single's Day discounts on Tmall. At a Beijing dealer that sells Dongfeng Nissan cars, sales representatives worked until late on November 11 processing orders booked on the website.
Speedier Shopping
Before the online retail era, according to a sales manager at a Volkswagen dealership who asked not to be named, a typical auto shopper might visit a dealer showroom six times before finally making a purchase. Multiple visits were needed to test a car's performance, study its advantages and disadvantages, compare it with other vehicles, and haggle over price with a salesman, the manager said.
Today, the manager said, a shopper may visit a dealer showroom only three times before making a purchase. Speeding the process is the fact that shoppers can learn a lot about cars – features, performance levels and pricing – online. They can also read comments from other consumers who've bought or have experience with certain models. After researching online, the manager said, a car buyer usually "knows what (he or she) wants. They come just to test drive the car and talk about the price."
Online shoppers are also helped by Tmall, which provides special sales data to dealers. The data helps them stock their dealerships with the most marketable vehicles. The manager said some of this data tells dealers which models are in demand in specific geographical areas, thus helping them know what to stock and where in order to control distribution costs.
Negative Impact
Shopping may be convenient and sales easier, but car dealers are not necessarily celebrating the shift to online auto buying.
Because consumers can examine auto prices online, they often find it easier to bargain inside a showroom until a salesman caves in and accepts a lower price. Consumers can also surf the Internet for special promotions and discounts.
As a result, online retailing is cutting into dealer profits in China, a country where car sales rose around 14 percent between 2012 and 2013, and are likely to end 2014 with a 10 percent increase, according to China Association of Automobile Manufacturers. Dealers in recent years have also been hurt by car-ownership limits imposed by some cities in China seeking to control traffic congestion and pollution, said auto industry analysts.
Some dealers have even cut prices to below-wholesale levels in order to attract buyers, said the China Auto Dealer Chamber of Commerce. The chamber has urged dealers to end this practice, spelling out its plea in an open letter to the entire industry distributed November 17.
Losses were posted by some 38 percent of all auto dealers in China in 2012 and 30 percent in 2013, according to the industry consultancy J.D. Power.
A lot of dealerships are pinched because of their fixed costs for labor, real estate and financing, said Wu Yingqiu, founder of the car-selling website 5dcar.com. Dealers also spend a lot of money on marketing.
As a result, according to 5dcar.com, a dealer's fixed and marketing costs can eat up 30,000 yuan for every car sold for 100,000 yuan. Wu said his website's strives to help dealers cut costs by delivering cars to buyers' homes within seven days of an online booking.
Dealers have also tried to improve the bottom line by offering more after-sales services. Servicing vehicles equipped with on-board, smart-driving systems, for example, should provide a tidy revenue source for dealers. The goal is to transform every showroom facility into a complete vehicle shop and servicing center.
The Henan Province dealership China Harmony Auto Holding Ltd., which became the province's first BMW franchise in 2005, underwent a service-oriented makeover in 2013. It's now a company devoted to maintaining all kinds of cars.
Dealers are also selling their services along with cars through online retailers. For example, BMW and General Motors dealers offered service packages at discount prices November 11 on the Tmall website. Shortly after the sales began, these packages sold out.
The click-and-drive phenomenon has turned some automakers more responsive to dealers and consumers, too. Dongfeng Nissan, for example, launched a new business unit to manage e-commerce business. The unit is designed to improve communication with buyers of its vehicles, while cutting costs and improving marketing for dealers.
Online retail websites in China are paving a wider sales path for new vehicles by catering to increasing numbers of "click-and-drive" car buyers.
Tmall, the retail division of e-commerce giant Alibaba, reported explosive growth for new-vehicle orders on the Chinese shopping-holiday Single's Day, November 11. Some 50,700 shoppers clicked a booking through its website, representing an estimated 500 percent increase from online demand on the same day in 2013.
Other retail websites reported similar spikes. A website that sells cars called Bitauto.com registered bookings for some 530,000 vehicles November 11, compared to around 90,000 cars on the same day 2013.
One auto industry analyst who asked not to be named said more Chinese consumers are switching from browsing inside dealer showrooms to browsing the web before clicking on a car of their choice. Many have found online shopping more efficient and effective than traveling from showroom to showroom in search of a new set of wheels.
Auto dealers and automakers have switched to web sales as well, the analyst said. In some cases, the competitive atmosphere has forced them to accept lower profits after cutting prices to drive sales. In the long run, though, dealers and automakers hope to make money on after-sales services.
Car dealers that operate some 8,000 showrooms across the country and sell more than 30 brands including BMW, Toyota and Volkswagen cars were in the forefront of Single's Day discounts on Tmall. At a Beijing dealer that sells Dongfeng Nissan cars, sales representatives worked until late on November 11 processing orders booked on the website.
Speedier Shopping
Before the online retail era, according to a sales manager at a Volkswagen dealership who asked not to be named, a typical auto shopper might visit a dealer showroom six times before finally making a purchase. Multiple visits were needed to test a car's performance, study its advantages and disadvantages, compare it with other vehicles, and haggle over price with a salesman, the manager said.
Today, the manager said, a shopper may visit a dealer showroom only three times before making a purchase. Speeding the process is the fact that shoppers can learn a lot about cars – features, performance levels and pricing – online. They can also read comments from other consumers who've bought or have experience with certain models. After researching online, the manager said, a car buyer usually "knows what (he or she) wants. They come just to test drive the car and talk about the price."
Online shoppers are also helped by Tmall, which provides special sales data to dealers. The data helps them stock their dealerships with the most marketable vehicles. The manager said some of this data tells dealers which models are in demand in specific geographical areas, thus helping them know what to stock and where in order to control distribution costs.
Negative Impact
Shopping may be convenient and sales easier, but car dealers are not necessarily celebrating the shift to online auto buying.
Because consumers can examine auto prices online, they often find it easier to bargain inside a showroom until a salesman caves in and accepts a lower price. Consumers can also surf the Internet for special promotions and discounts.
As a result, online retailing is cutting into dealer profits in China, a country where car sales rose around 14 percent between 2012 and 2013, and are likely to end 2014 with a 10 percent increase, according to China Association of Automobile Manufacturers. Dealers in recent years have also been hurt by car-ownership limits imposed by some cities in China seeking to control traffic congestion and pollution, said auto industry analysts.
Some dealers have even cut prices to below-wholesale levels in order to attract buyers, said the China Auto Dealer Chamber of Commerce. The chamber has urged dealers to end this practice, spelling out its plea in an open letter to the entire industry distributed November 17.
Losses were posted by some 38 percent of all auto dealers in China in 2012 and 30 percent in 2013, according to the industry consultancy J.D. Power.
A lot of dealerships are pinched because of their fixed costs for labor, real estate and financing, said Wu Yingqiu, founder of the car-selling website 5dcar.com. Dealers also spend a lot of money on marketing.
As a result, according to 5dcar.com, a dealer's fixed and marketing costs can eat up 30,000 yuan for every car sold for 100,000 yuan. Wu said his website's strives to help dealers cut costs by delivering cars to buyers' homes within seven days of an online booking.
Dealers have also tried to improve the bottom line by offering more after-sales services. Servicing vehicles equipped with on-board, smart-driving systems, for example, should provide a tidy revenue source for dealers. The goal is to transform every showroom facility into a complete vehicle shop and servicing center.
The Henan Province dealership China Harmony Auto Holding Ltd., which became the province's first BMW franchise in 2005, underwent a service-oriented makeover in 2013. It's now a company devoted to maintaining all kinds of cars.
Dealers are also selling their services along with cars through online retailers. For example, BMW and General Motors dealers offered service packages at discount prices November 11 on the Tmall website. Shortly after the sales began, these packages sold out.
The click-and-drive phenomenon has turned some automakers more responsive to dealers and consumers, too. Dongfeng Nissan, for example, launched a new business unit to manage e-commerce business. The unit is designed to improve communication with buyers of its vehicles, while cutting costs and improving marketing for dealers.
Resource:
Auto Dealers Adjust to Click and Drive Trend
Auto Dealers Adjust to Click and Drive Trend
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