The automobile industry is still majorly depending on the traditional procurement behavior which includes distribution franchisees that help the customers to choose a vehicle of their choice and buy them. This industry is one of the most competitive areas and has a large number of companies that compete with each other on various important issues related to the consumers like the design, speed, safety, brand value and pricing. A dealership was not only deal with sales however there are various other functions that it handled which may include warranty service, servicing, part sale and sales of branded accessories.
With the entry of Internet into various retail and brick and mortar online sales channel, almost all the commodities that can be procured from a store can be bought online now. Most of the commodities that are sold online are either price on the lower side or on the medium, however sales of vehicles is an area that requires large money transactions and also is a big decision for the consumer to make which may not be potentially feasible however still the Internet is flooded with information related to automobile and there are various websites that are offering services related to sales, promotions and comparisons of various vehicles. This research paper would help to evaluate the impact of Internet on the buying and selling behavior of consumers related to vehicle sales and procurement.
The Research Objectives
The prospects presented by the sheer size and current state of developments in online promotions and sales of vehicles, together with the issues of ownership, internalization, the location and potential hindrances that may be presented by current dealership related legislation and policy. On the basis of the above this study aims to explore the following issues in the context of impact of internet on vehicle sales and purchase.
1. The motives for automobile companies entering and investing in online sales and advertising.
2. The preferred modes of market entry including issues of ownership.
3. The possible impact to the traditional dealerships.
4. The consumer’s perspective.
Empirical Approaches that help to conduct a study and draw inferences on the basis of the accessed data can be divided into three types, viz.; case data analyses, micro-oriented econometric studies and aggregate analyses. All the above approaches have their own perspectives however in order to understand and apply the most applicable approach it is important to compare it along with the objectives of the research which is being conducted. The econometric approach that we have discussed over here may not be suitable in this case as the discussion over here is related to an industrial sector and the discussion is not based generally on the impact of Internet. The study that will be conducted on the basis of literature will be thoroughly exploratory and the factors will be explored on the basis of the research questions that we have defined to be answered by the end of the study. The framework of study would include regulatory, legislative variables, business operating conditions and socio political aspects of the impact of Internet on the sales and procurement of vehicles.
Based on the above consideration of empirical methods for conducting the research, mentioned below is the hypothesis and null hypothesis which will be evaluated during the course of this research.
H1 -The online activities of vehicle manufacturing companies is one of the major factors that impact consumer decisions related to procurement of automobile products.
H0 – The online activities of vehicle manufacturing companies is not one of the major factors that impact consumer decisions related to procurement of automobile products.
Limitations and Research Implications
This research is limited to the assessment of literature related to the impact of Internet on the sale and procurement of vehicles and any direct communication or survey from the consumer’s perspective is not a part of the study. The research as such will be helpful in evaluating the importance of Internet in the automobile industry and would also help to identify the factors that make the consumer reach the online sources in order to fulfil the requirements related to vehicle procurement.
Before assessing the literature related to online promotion and sale of vehicles, it would be beneficial to look at the revenue model of the traditional dealership method of sale and to compare the same with the online promotion and sales channel. One of the greatest sources of revenue for Vehicle dealerships in United States is the pre-finance that takes place. The cross selling of vehicle finance that takes place at the dealerships, not only adds to the profitability but also is one of the reasons why consumers are attracted towards contacting the dealerships in order to obtain finance for the vehicles that they choose, this is also one of the reasons that may impact the buyers to buy a particular brand of automobile. Hence, it is easy to understand that if there is any online channel which would provide this kind of facility without having the requirement to physically reach the dealership, then there will definitely be a probability for the customers to visit such a portal.
Virtual Dealerships and Online Financing Options
Capital One auto finance is one of the organizations that pioneered the online financing system and therefore there are able to attract the potential customers in advance, before they actually approach the dealerships to buy their favorite vehicle. The normal brick and mortar dealerships are majorly impacted by this fact as the consumers have pre-financing options and they are already able to arrange finance for the vehicle which impacts the revenue model of the traditional dealerships. Another similar set up PeopleFirst volunteered to provide extremely competitive rates on online financing of vehicle loans and refinancing of traditional loans, the strategy was to operate only online, thus saving costs related to infrastructure set up an employer management however the same was used in order to provide competitive rates of interests to people looking for vehicle finance.
Dealerships have always been integral function of financing and procurement of vehicles however despite the major convenience and preference of consumers towards online counterparts, there are various franchisees laws that are in favor of dealerships and have protected them since a long time now. Although, the franchisee laws restrict the local providers of products, however Virtual dealerships have been quite successful in providing vehicles in areas where a dealership of that particular product is not available and the results show that highly competitive pricing is available through Virtual dealerships as they can save on the distribution costs which are almost 29% of the sales price of the product.
Impact of the changing trends
The traditional dealership approach is gradually declining as the automotive companies are realizing the fact that with heavy advertising and marketing over the Internet they can reach the customers before the customers themselves decide evaluate the products launched by them. Data comparison is another important tool that makes a difference to the customers, as they use the online services in order to gather information and compare the products and their prices based on the features that are offered. There are lot of methodologies that can be used in order to conduct targeted data mining to promote specific products to the customers based on their preferences and searches that they have done in the past. There are various advanced information and communication technologies that are not available to the consumers in a traditional dealership; moreover an unbiased comparison with one of the competitors offering another product at the same price cannot be made. The success of online marketing campaigns can be understood by the fact that a major media research company reported that expenditure on online marketing for cars is approximately 8% of the total spend on marketing.
Convenience to the consumers
As discussed before, the spread of various dealerships and the types of products available are widely spread across United States due to which it becomes very difficult for the consumers to reach and evaluate the product of their choice in order to buy the same. Moreover, it is very difficult for the companies to launch products across the American geography at once, and also it is difficult to create awareness among potential customers about their products however with the use of Internet they can easily promote and launch their product everywhere so that it can be researched and evaluated by interested customers. From the consumer’s point of view this is sheer convenience, as they do not have to go anywhere neither in order to see the product and know about its features and nor to apply for finance in order to plan their procurement. Hence, not only the companies, the consumers are also driving this behavior of enhanced marketing and advertising of vehicles online; Takahashi (2008) mentioned a case study of Toyota, and how it started facing a decline due to immature Internet campaigns in the beginning however with time they improve this area and once again they were able to meet the expectations of the consumers.
Results and Analysis
Few major points that have been discussed above provide a fair idea of the impact of Internet on consumers, when it comes to vehicle procurement; it would be beneficial to discuss these points one by one and conduct an analysis to derive the required inferences. If we look and analyze the motives of the automobile companies that are frequently exploring the Internet market, it would be clear that due to geographical and population constraints, this is a clear attempt to reach as much as market as possible and to create that first impact on the consumers before they actually ran approach any competitor’s product in the same range and similar facilities. The concept of virtual dealership is also helping to find customers who would look for finance options and would be ready to apply and obtain the opportunity to avail finance online and choose the products accordingly. Secondly, the literature clarifies that Internet proves to be one of the greatest methods of market entry and regardless of the geography it is possible for any brand to take complete ownership of its campaigns online and take them forward in order to generate required market. And it is quite clear through the above, that the traditional dealerships are getting adversely impacted due to the various facilities over the Internet that provide the consumers not only quick and abundantly available information but also provides great convenience and cost savings. Lastly, from the consumer’s point of view this is the best option as it provides the customers the facility to compare various products and then choose the one which actually matches the requirement.
Based on the discussion and the review of literature, it is quite clear that Internet has definitely majorly impacted the way consumers procure vehicles today. There are various facilities that are provided through the online option that not only echoed the customers to use a lot of information while comparing the products but also helps them to track the cost and performance of already procured vehicles. Hence, on the basis of above observations it is clear that the hypothesis holds true and “the online activities of vehicle manufacturing companies is one of the major factors that impact consumer decisions related to procurement of automobile products”.
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