When Amazon launched in 1995, founder Jeff Bezos had a fairly modest goal. He wanted to disrupt the book selling business. Bookstores, by their very nature, were inefficient because customers were encouraged to browse, handle merchandise, and linger in stores without spending real money.
Amazon (AMZN) – Get a free report, by getting rid of brick-and-mortar stores, cut costs and decimated the industry. Two major bookstore chains, Borders Books and Waldenbooks, closed, while the industry’s remaining titan, Barnes & Noble, grew smaller and at times was at risk of going under.
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The bookstores were (and those that remain are) generally popular with their customers. Most people who work in or run bookstores have a passion for books and want to share it with customers. Despite that, Amazon’s convenience and prices caused thousands of brick-and-mortar bookstores to close.
While shopping in a bookstore is really pleasant. The same cannot be said for purchasing a car through the traditional dealership system.
“87% of American adults don’t like something about the process of buying a vehicle at a traditional car dealership,” according to a survey of 2,135 Americans over 18 years of age.
This is a situation that many companies have tried to solve and Amazon has decided to throw itself into the ring by creating an online market for cars in collaboration with Hyundai. (HYMTF) – Get a free report.
Image source: Getty Images
What is Amazon trying to do?
while carvana (CVNA) – Get a free report and other companies have sold used cars online, Amazon’s partnership with Hyundai will allow it to sell new cars as well as used ones. The partnership, however, goes beyond just selling cars.
“In 2024, car dealers will be able to sell vehicles in the US Amazon store for the first time, and Hyundai will be the first brand available for customers to purchase,” shared Amazon CEO Andy Jassy. in a blog post. “This new digital buying experience will make it easier for customers to buy a new car online and then pick it up or have it delivered to their local dealership at a time that suits them.”
This will put the car buying process online and skip the traditional negotiation process, but it won’t actually take the dealer out of it all. Amazon will not sell directly from the manufacturer. Instead, it will give Hyundai customers an easy way to buy from the company and offer Amazon customers access to used cars.
Diana Lee, CEO of Constellation, a global SaaS company with proprietary marketing fulfillment technology that works with most of the largest automotive companies, answered questions about the impact of the move in an email interview with TheStreet.
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Amazon tries to disrupt car sales (sort of)
The street: What cars will Amazon be able to sell?
Leeward: Amazon has the potential to sell new Hyundai vehicles, as well as used and certified pre-owned (CPO) Hyundais. Additionally, they may offer used and CPO vehicles of other makes and models.
The street: Does this blow up the current dealer model?
Leeward: Amazon cannot disrupt the current traditional new car sales model, where original equipment manufacturer (OEM) dealership franchises handle sales. Existing franchise agreements in the United States prohibit the direct sale of new cars through direct-to-consumer platforms that are not owned by the dealer. Distributors are responsible for owning their inventory and must operate within the limits of their franchise agreements.
The street: Will this end the days of “I need to talk to my boss” negotiations?
Leeward: By adopting a direct pricing model, Amazon could eliminate the need for negotiations and the phrase “I need to talk to my manager” when it comes to used vehicles.
The street: Will this create price transparency for consumers?
Leeward: Amazon’s involvement could lead to greater price transparency, with vehicles listed at a fixed price and less need for negotiations in the future.
The street: What barriers remain for Amazon?
Leeward: The main obstacle lies in the franchise agreements that prevail in the U.S. Unless OEMs enter into direct negotiations with Amazon on pricing and deal structure, dealers will not be allowed to sell new cars through the Amazon platform. Currently, most OEMs are hesitant to devalue their brand by allowing franchisees to engage in price competition on platforms like Amazon, where new cars can be sold below invoice, affecting profit margins. and the value of the brand.
The street: Will Tesla sell through Amazon?
Leeward: Tesla, with its current single pricing structure that involves no negotiations, could potentially sell through Amazon. However, they can choose not to do this to maintain control over the platform through which they purchase all their new cars.
