There is nothing a consumer won’t buy online today. Be it groceries, clothes, accessories, electronics, food; even the prospect of finding friendship and love has moved into the online universe. The trajectory or trends in demand is the barometer for supply but additionally instructs and directs innovation. As internet usage grew where consumers became more open to online and technological experiences without having to necessarily be tech-savvy; products and services also moved to the online sphere. In fact, businesses with a physical brick and mortar presence have also gone online to provide window-shopping services or opt-ins to online buying. It was only a natural progression that cars also found a vibrant marketplace online.
Various studies inform that more car buyers are willing to conduct part or all of the car-buying process online. With value added services offered by online car platforms like price negotiation, in-built financing options, paperwork, car inspection in case of used cars, and home deliveries, car buyers are more and more likely to sit at home and let the spoils come to them. A McKinsey study concluded that the average number of visits to auto dealerships has dropped from 5 to 1 over a period of 10 years. In another study, more than 60 percent of respondents (N=10,000) said they would be interested in buying a new car through an online auction. An iVendi Report found that 79 percent of prospective car buyers were open to using the internet to buy a car.
This is not to say that traditional dealerships are being replaced, but the market space is being expanded with more moving parts to play with. Global car manufacturers like Audi and Fiat have also launched online dealerships to have this option available for its customers. Audi launched a used cars platform where consumers can purchase, pay, register and get car delivery whilst on their mobile devices.
Seeing demand, online automotive trading platforms have recently become a hotbed for investments—the most recent in line is an $89 million investment of the online classified platform OLX into the online car marketplace Fronter Car Group (FCG) which has a strong presence in Asia including Pakistan. The FCG is a Berlin based startup that develops used car marketplaces in emerging markets. It launched its operations in Sep-16 and two years later has presence in over six markets.
Pakistan too is moving from classifieds for cars (Pakwheels, Carmudi etc.) to one-stop shop solutions with value-added services. FCG’s presence in Pakistan is through CarFirst. The global model facilitates car purchases by acting as the middleman and has physical infrastructure in place in the form of warehousing and storage capacity for inspection of cars being traded. The model also addresses the issue of financing by providing car financing solutions to consumers and SMEs who are underserved by traditional lenders.
Other similar deals in the industry involve nearly a $200 million investment by China’s ride sharing app Didi Chuxing into the Chinese car trading platform Renrenche. Another is a $60 million fund raising of Singapore’s Carro and a $19 million investment into Malaysia’s Carsome—both models similar to FCG.
For the average consumer, this technology may be the perfect tool to access services they may not have the time to do the traditional way. But it’s not to say that the physical marketplace will soon vanish. The launch of Audi City and BMW istore are recent examples that physical experiences can be transformative as well. Future markets for the average consumer will merge both the online and offline spaces with consumers moving from one platform to another seamlessly to access the best configuration of any service.
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