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Sunday, 19 July 2015

New car-buying website - how will it affect dealers?

In an article rather sensationally entitled Website plans to leave car showrooms in the dust, the Financial Times* reports the launch of a new car-buying website, Carwow (slogan: "Let car dealers compete over you"), which it describes as doing for the new car market what Expedia has done for travel. It will farm out consumers' requirements to dealers, who will make a best and final offer, and the website will take a commission of £250 from the dealer. That doesn't sound to me as if it will leave showrooms in the dust.

Bemoaning the fact that the Internet has never taken off as a platform for selling new cars, while for second-hand cars it it suggests that the Internet is very widely-used, the FT mentions the deterrent effect of the 14-day cooling-off period for distance selling transactions. Given the enormous drop in value of a car the instant it is first registered, then driven away from the dealer's premises, this is more than a deterrent: it must be almost a complete block. Add to that the fact that people still, rather quaintly, like to look at cars, sit in them, and take test drives - none of these matters for which the Internet is well-adapted - and I think you have your reason. That's not to say that online sales will never take off, just that they will remain a small proportion, for the time being at least.

Anyway, even for second-hand cars it must be true to say that the Internet is used as an advertising medium rather than an e-commerce platform, and on that basis the new-car market isn't far behind. The FT article notes other changes in the market, citing "Apple-style" outlets where consumers can look at the cars and engage with non-sales staff to learn about them before buying online (thus creating the distance-selling problems that dealers are understandably worried about).

The dealer system as we know it might be a long way from perfect, and there are surely more efficient ways to get cars to buyers, but it still seems to be the best choice for a way to handle new car sales. Will Carwow make much difference? Actually, it looks as if it might help the present dealer network model, perhaps even giving it a boost which will help it to stave off a shift towards full e-commerce. So long, of course, as it doesn't get too carried away like TrueCar in the States.

* The FT is usually a model of sober reporting, but the headline-writer has got a bit carried away here, like his or her predecessor (it can't have been the same person, it's too long ago, 30 years to be precise) who headed an editorial comment on the block exemption "Feather beds on wheels". Obviously very memorable, if it has stuck this long in mine!

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1 comment:

  1. Hi Peter,

    My names is James Hind, I'm the founder/CEO of carwow.

    Very interesting analysis. We weren't overly happy with the headline they used, but appreciate it's to grab attention.

    We don't aim to replace dealerships whatsoever, as you said, we want to help the existing dealer network. We believe that by making the buying process more transparent and enjoyable for consumers that it will lead to more new car sales.

    Our system promotes the dealers who give the best buying experience, so we want to reward those dealers who deserve to sell more cars, which helps them, the consumer and the manufacturer.

    Regarding distance selling, we see that most of our users still visit the dealership, so distant selling is relatively rare. Through carwow you can't buy a car online either, you contact or visit the dealer to buy through them.