Marketplace’s role in the changing car business – How car marketplaces serve their customers in the future
The car market is undergoing a big change now. Digitalization and change in powertrain have been current issues already for a while, but the effects of the Covid-19 crisis and the Ukraine war have speeded up the transition. New car sale is taking a leap in car distribution. The old business model, where car dealers are selling the cars to the consumers is turning to an agency model. Car manufacturers are about to shorten the distance between them and consumers, and dealers’ roles will change. Car manufacturers, original-equipment-manufacturer, OEMs will get a better hold of the sales process and access to the consumer.
18-30% of Nordic car buyers considered another way of acquiring a car than buying
Consumer behavior is also changing. The internet is no longer only a tool for searching for information, the whole buying journey is made online. Another question is if people are still buying cars instead of leasing, renting, or sharing. Schibsted produced the Nordic Car buyer Study 2022, where more than 4000 Nordic consumers, who had acquired a car within the last 12 months, answered questions regarding car buying. The Nordic Car Buyer Study 2022 showed that 18-30% of Nordic car buyers considered another way of acquiring a car than buying. The subscription-based car acquisition is still a very marginal way for consumers to acquire a car, but there is a growing interest in that.
Car marketplaces now, especially in Finland, focus on listing used cars on sale. The marketplace offers a place where the consumer can find a suitable car and contact the customer via the marketplace. As the whole car industry is going through a change, also marketplaces need to adapt and ensure their place in the sales process also in the future.
All online marketplaces’ target is to offer the seller a large audience and help increase profitability by cutting operational and marketing costs. Online marketplaces can be placed in three different categories:
- By the target audience.
- By their focus
- By the management approach.
The target audience is telling who is selling to whom. The Business-to-consumer (B2C) marketplace is the most popular online marketplace model today also in the car marketplaces. Dealers sell the cars to individual consumers. A Peer-to-peer (P2P) marketplace is a model where individuals are offering products or services to other individuals. This is also very common in car marketplaces; consumers can sell their cars directly to another consumer in the marketplace.
The Business-to-business (B2B) marketplace is bringing together organizations and vendors. Often these kinds of marketplaces are now auction-based. Dealers, who get unsuitable exchange cars for their car range, sell the car directly to another dealer. Also, new services where a consumer can sell their car in the auction to a car dealer (C2B) are finding their place in the marketplace world.
The focus of the marketplace can be horizontal or vertical. Horizontal marketplaces are like department stores. They are fulfilling customers’ needs in various situations. For example, Amazon offers consumers clothes, electronics, and almost everything. Vertical marketplaces focus on certain categories or sectors, for example, cars.
Car marketplaces in the Nordics are focusing on vertical but can be part of a horizontal marketplace. For example, Finn.no in Norway is a horizontal marketplace. The consumer can find used clothes for their children, next holiday new apartment or car for them, but when it comes to the car section of Finn.no, the approach is very vertical. The supply, the filters, and everything in the Finn.no car section are built to focus on cars. There is a big advantage to focusing also horizontally in the future, as the consumers’ insight can also be gathered in the different needs than only when there is a need for a new car.
The third category is the management approach. The marketplace can be fully managed, where marketplace owners control the whole sales process. Most likely there are fees or commissions the seller usually needs to pay. A lightly managed marketplace usually keeps the focus on the customer and manages the marketplace so the customer can use the platform trusting everything goes right. Owners of the marketplace make background checks or require a certain return policy. The unmanaged marketplace is usually a peer-to-peer marketplace. The owner of the marketplace does not involve themselves in supervising the marketplace. Usually, the credibility of the user is given by other users for example with a review or rating system.
Car marketplaces are heading to be fully managed marketplaces in the future.
The change car dealers are going through is big. The new car sale is changing to the agency model, consumer behavior is changing online and from owning to subscribing, and car marketplaces are aiming for a bigger share of the used car sales process.
Most of the car marketplaces in the Nordics are now lightly managed. The marketplace is offering a platform to bring together a buyer and seller but when it comes to the trade of the car, the marketplace is not involved. The sales process only starts in the marketplace. This is changing in the future. Some of the car marketplaces are already offering the possibility to make purchases straight in the marketplace, but there is more. When a car changes owner there is a typical need for car finance, insurance, and car delivery. The dealers are taking care of the process now, but the marketplaces are developing their services in that direction too. Car marketplaces are heading to be fully managed marketplaces in the future.
Refereces:
Arateg (2022). The main types of marketplaces. Which one should you choose? [online]. Available at:https://arateg.com/blog/types-of-%D0%B5-marketplaces [Referred: 13th July 2022.]
Automotive News Europe (2022) Ukraine parts shortages put 15% of European auto output at risk, an analyst says. [online]. (March 15th 2022).Available at:https://europe.autonews.com/suppliers/ukraine-parts-shortages-put-15-european-auto-output-risk-analyst-says [Referred 11th July 2022].
Cecra (2022). Non genuine agency contracts are potentially an anti-competitive practice [online]. Available at:https://www.cecra.eu/news [Referred: 8th December 2022.]
Schibsted Media Group (2022). Car Buyers’ Journey 2022, A report on Finnish car buyers’ opinions, expectations, and behavior when acquiring cars. [online]