Why Automotive Dealerships should be scared of Amazon too...
In April this year, Global e-commerce giant Amazon confirmed it will be launching retail operations in Australia, sending a collective shiver down the spine of local retailers.
The company, which released Amazon Web Services in Australia in 2012 and a Kindle Store on Amazon.com.au in 2013 now has around 1,000 employees in the country.
In a brief statement the company said "The next step is to bring a retail offering to Australia, and we are making those plans now."
While a launch date is yet to be confirmed, speculation suggests it will be in September 2017 with reports the company will set up a 93,000 square metre fulfillment warehouse along Australia's east coast.
Amazon said they will initially focus on "low prices, vast selection and fast delivery" however it is unclear if the company's Prime Now service – known for fulfilling deliveries in major cities within an hour – will launch locally.
Following the announcement, Australian retailers traded lower on the ASX, with companies such as Woolworths, JB HiFi, Harvey Norman and Wesfarmers all impacted.
While this is bad news for high street retailers, the entry of Amazon into Australia also raises questions for the more than 5,000 small and independent car dealers across the country.
Here are three reasons why Amazon's entry into Australia could be bad news for independent Automotive retailers...
Brands now going direct to consumer on Amazon marketplace
Report circulated recently that Nike was set to join Under Armour and Adidas and setup its own Amazon presence, cutting out the middleman and selling direct to consumers.
The deal which could could boost Nike's wholesale revenue by $300 million to $500 million annually will give the company more control over retail channels and branding and could inspire other brands who do not yet have partnerships to follow suit.
While Amazon is initially targeting fashion and sporting goods brands in it's direct to consumer push, it wont be long before car manufacturers start to experiment with the platform, cutting out dealerships and effectively turning them into big, expensive car parks.
Amazon has admitted it will launch online car sales in Europe this year
Amazon has confirmed it has started to recruit car sales executives ahead of a scheme to pilot online car sales in the UK this year.
German trade magazine Automobilwoche this month revealed that industry specialist Christoph Moeller had been put in charge of Amazon's European business with car makers. The company plans to run the business out of Luxembourg and is looking at Britain as its probable pilot market, where it often trials new business models before rolling them out to the US and other markets.
Amazon is already actively making loans to its marketplace traders and may be able to offer attractive loans on new cars in the future to its Amazon Prime Members. Other sources said is was likely that Amazon would offer long-term lease cars.
Amazon trialed selling small Fiats in Italy last year, with some success, but given the logistical obstacles of selling a vehicle, will likely have to work with an established car distributor to deliver the car. Will this last mile of automotive retailing be the primary business model of dealerships into the future?
Alexa voice will emerge as the ultimate direct to consumer automotive channel
Automakers are pairing up with big tech companies such as Google, Uber and Amazon in the race to build a self driving vehicle fleet but until that arrives, big tech companies have started to weave their software into your car.
One example of this is Alexa, Amazon's voice-enabled intelligent personal assistant which is now available in some models of BMW, Hyundai, and Ford. With just a few spoken commands, owners can check the fuel and charge levels of their cars and issue commands from home such as “Alexa, ask Blue Link to start my Santa Fe.”
While consumer demand for virtual assistants such as Alexa remains a niche, the market is growing fast. Currently, a few thousand owners routinely use Alexa commands each month but Alexa-enabled devices have grown quicker than many industry onlookers expected since their launch in 2014. Industry experts now forecast that 35.6 million Americans will use a voice-activated-assistant device at least once a month in 2017 - a 129% jump over last year.
While Alexa can now only be used outside the car to operate some basic vehicle functions such as locking the doors, later this year Volkswagen and Ford will let drivers use Alexa's assistant functions while inside the car.
As auto brands expand on the set of "skills" for Alexa-enabled devices, it wont be long before your car starts asking if you are ready to trade up to a newer model, opening up a brand new direct to consumer channel for manufacturers and further pushing automotive dealerships further away from the end customer.
