Here’s Why Amazon Is Looking To Sell Cars Online

A few months after it launched Amazon Vehicles, Amazon (NASDAQ:AMZN) is now reportedly looking to sell cars online in Italy. Reports suggest that the company has partnered with Fiat Chrylser to sell the latter’s three models online on Amazon’s website in Italy. Under this arrangement after making their decision online, buyers will be contacted by Amazon to decide on a dealer where they can finalize their purchase and pick the car. The new and used car market is pegged at $ 1.2 trillion, and Amazon now appears to be getting serious about generating revenues from the segment. An increasing number of consumers are looking to bypass dealerships and research and buy their vehicles online. Amazon Vehicles allows users to do this research, and they could be attracted to the online buying option, especially if promotional discounts are offered. Bypassing dealers could be difficult in the U.S. as franchisee laws prevent new car sales online. However, Amazon can connect buyers with dealers and help identify the best deals, making the pain of haggling across dealers easier. The company will benefit by earning commission on the deals made through its website.  With high real estate costs, dealerships are shrinking their store space and companies are looking at digitization for interacting with customers. Amazon is looking to take advantage of this trend and expand the scope of Amazon Vehicles, which could become a solid revenue driver for the company in the long term.

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Broadening The Scope Of Amazon Vehicles

While consumers might welcome the idea of being able to buy a car online, after necessary research and reviews, it would be difficult to entirely eliminate dealerships. Most vehicles require after-sales service and replacement of parts, for which the dealership network is essential. Tesla is able to sell its cars online since the post-sale service requirements of its electric vehicles are limited. However, an increasing number of consumers are looking to buy vehicles online. A 2015 survey by Accenture reveals that most consumers do online research before visiting a dealership to help them make the car buying decision. 75% of the drivers polled by this survey also said that they would consider conducting the entire car buying process online, including financing, price negotiation, back office paper work and home delivery. This survey indicates that digital technology is influencing auto car markets, and if the partnership with Fiat is successful, Amazon could potentially partner with other automakers for a similar offering. Amazon definitely has higher ambitions for its vehicle research and reviews website Amazon Vehicles, and while it now appears to be experimenting with selling cars online, a wider roll-out cannot be ruled out. The company has already taken several steps which will aid this venture in future, such as partnering with Hyundai to bring cars to consumer’s location for a test drive and the integration of Amazon Echo with Hyundai cars.

As the auto industry undergoes a transformation with connected cars, electric cars, self-driving vehicles and ride sharing dominating the industry, the impact of digitization on this industry will be huge. It is likely that traditional car dealerships will also undergo a transition and buying cars online can become the new norm. With its current experiment in Italy, Amazon will be well poised to capture this trend in future.

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