Amazon Expands Operations to Include Automobile Sales
At Carvana's headquarters, top execs are gathering around with a sense of awe, as the glass-topped table's surface resembles the tumultuous waters of Jurassic Park, due to the news that the dominant figure in the online retail world, Amazon, has decided to venture into the car selling sector. This morning, Amazon announced its partnership with Hyundai to sell vehicles directly to consumers online.
At present, potential car buyers in 48 U.S. cities can now browse available vehicles from local dealers on Amazon, through the Amazon Auto program. According to Amazon, shoppers can search for cars based on their preferred brand, model, trim, color, and features, and can view "clear-cut, straightforward pricing" for their potential purchase. Users will also receive an immediate trade-in evaluation for their current vehicle, provided by an "impartial third party," which can be directly deducted from their new car's cost. Amazon will offer financing options or allow for full payment upfront, and customers can choose a pick-up time at their local dealer.
The cities chosen for the initial launch encompass: Atlanta, Austin, Baltimore, Beaumont-Port Arthur, Birmingham, Boston, Champaign/Springfield, Charlotte, Chicago, Cincinnati, Cleveland, Columbia, Columbus, Dallas, Denver, El Paso, Fond Du Lac, Ft. Myers/Naples, Harrisburg-Lancaster-Lebanon-York, Harrisonburg, Hartford, Houston, Indianapolis, Jacksonville, Los Angeles, Miami, Milwaukee, Minneapolis-St. Paul, Nashville, New York, Orlando, Philadelphia, Phoenix, Pittsburgh, Portland, Providence, Raleigh-Durham, Salt Lake City, San Antonio, San Diego, San Francisco, Seattle, Sheboygan, Springfield, St. Louis, Tampa, W. Palm Beach, Washington D.C.
Amazon plans to broaden its offerings to additional regions next year, and while it has commenced operations with Hyundai, it has expressed intentions to collaborate with other manufacturers in the future. For now, the service is exclusively geared towards new vehicles. There has been no clarification regarding a future expansion into the used car market.
The deal between Amazon and Hyundai dealers holds an evident appeal for both parties. For Hyundai dealerships, this agreement grants access to a wider pool of potential shoppers through Amazon's vast popularity, without the need to maintain its own online platform and inventory.
Furthermore, present-day car dealership websites antagonize rather than facilitate a smooth online shopping experience. Research from CarGurus reveals that 69% of shoppers desire to conduct a greater portion of the buying process remotely, but the majority of car dealership websites are inadequate in this regard. A study of top car dealership websites found that most violated basic performance standards, while research from ShiftDigital revealed that many sites dissuade shoppers with unattractive language and prompts.
Amazon, on the other hand, benefits from this agreement by diving into high-income sales without the need to allocate storage space for inventory or wrestle with logistics.
Automotive financing is a significant revenue source. As of now, American consumers collectively owe a staggering $1.626 trillion to auto lenders, according to the Federal Reserve Bank of New York. Much of this debt is tied up in subprime loans, which car dealerships are notorious for coercing car buyers into, resulting in consumers paying unnecessarily excessive amounts. Most car loans facilitated through a dealership are backed by a partnering bank or financial institution, but it's common for dealerships to add an additional 1-2% to the interest rate as a means of exploiting their captive audience.
As stated on the Amazon Auto help pages, financing will initially be handled by the dealership, with Amazon serving as the intermediary for the transaction, thus Amazon provides no guarantees regarding the available annual percentage rates (APR) on the loans.
While the online car sales sector presents numerous challenges, as evidenced by Amazon's slow progress in this domain, Amazon might reap benefits simply by minimizing the direct involvement of car dealerships. Most individuals find car dealerships annoying, while Amazon's platform has become so familiar to shoppers that it may help alleviate some of the challenges in the buying process. On the other hand, it's bound to become bothersome when purchasing a pack of paper towels and receiving promotions for a Hyundai Elantra.
In the tech-driven future, Amazon's foray into car selling technology through partnerships with manufacturers like Hyundai is set to revolutionize the online vehicle purchasing experience. With the growing trend of consumers preferring a more remote buying process, tech-savvy dealerships might need to adapt their online platforms to remain competitive.
As technology advances, it's likely that Amazon's involvement in the car selling sector could lead to a decrease in the prevalence of subprime loans, providing more fair financing options for consumers in the future.
