Amazon announced its entry into the automotive market with the launch of Amazon Autos, a platform that will initially offer Hyundai vehicles to US customers.
Amazon Autos works as a middleman between buyers and car manufacturers, allowing vehicle shoppers in 48 US cities to browse, order, finance, and schedule pickup of a new Hyundai vehicle from their local participating dealer directly on Amazon.
The new service allows customers to:
- Browse and search for available vehicles at their local dealer by make, model, trim, color, and features
- Get an instant valuation and trade in their existing vehicle toward the price of the new car
- See transparent, upfront pricing
- Secure financing or pay in full
- Complete the checkout process online
- Schedule a pick-up time at the dealership
Fan Jin, global head of Amazon Autos, said:
“With Amazon Autos, we’re bringing the simplicity and ease customers expect from Amazon to car shopping, one of their largest purchases, while offering dealers a new channel to connect with a broad audience… It’s still early for us and we welcome customer and dealer feedback as we continue to add new functionality, expand to additional brands, and iterate on the customer experience.”
Amazon says that the platform offers dealerships “a new sales channel that connects them with millions of Amazon customers” — but is that true? Are people currently looking for cars on Amazon?
To be fair, at one point, people only searched for books on Amazon, and now they search for literally all consumer products. So it's not unlikely that Amazon will create a market for vehicles on its marketplace as well.
However I've got to ask — what's in it for the car dealerships?
Let's be real about what's going to happen here…
- Amazon entices auto manufacturers to sell on its platform with the promise of new customers.
- Amazon leverages its relationships with initial partners to onboard other manufacturers.
- Suddenly it's hard to get noticed on Amazon Autos, so advertising is introduced and Amazon begins to take the dealers' margins.
- Amazon becomes a market leader in the automobile search space because they have more customers and inventory and better SEO than any individual dealer.
- Amazon pits the dealers, who are now reliant on Amazon Autos, against each other and forces them to undercut each other on price so that Amazon Autos has the lowest prices of any platform.
- Amazon eventually finds a way to bypass the dealers altogether, creating a direct-from-manufacturer model, like the kind that Tesla pioneered. Many US states prohibit automobile manufacturers from selling vehicles directly to consumers and require sales to occur through independently owned dealerships, but Amazon will lobby against those laws, alongside EV companies, and eventually have them changed.
- And/or Amazon will turn its Delivery Service Partners into “auto dealers” to skirt the laws, creating dealership relationships directly with the manufacturers in order to offer Free Prime Delivery of new vehicles.
- Dealerships will eventually find themselves asking, “Why the hell did I participate in Amazon Autos?” as they close their storefronts.
- “Your margin is my opportunity” — isn't that what Jeff Bezos always said? Now we can all watch in real time as Amazon makes dealership margin their opportunity, following their same playbook of leveraging 3rd party sellers' inventory and infrastructure to build their market share before entering the market directly themselves.
Is history lost on Hyundai and any other manufacturers that partner with Amazon?
Steven Suh, general sales manager of South Bay Hyundai, said:
“Listing our inventory on Amazon is a game-changer for how we connect with car buyers. It allows us to showcase our vehicles to millions of daily shoppers, while setting our pricing upfront. We can now reach a large local audience with the convenient and transparent experience customers expect when shopping with Amazon. Customers come in excited to pick up their new car and we can build on those customer relationships from there. This experience really positions dealers for success in the modernizing economy.”
Yes, it's definitely a gamechanger Steven — but at what cost?
Today Steven and his Hyundai dealership get to enjoy the easy profits of being an early adopter, without realizing that they're paving the way for Amazon to control their market. “We can build on those customer relationships from there,” he said. The same way that 3rd party Amazon sellers get to build on relationships with their customers? Think about that.
Am I wrong? Share your thoughts on my LinkedIn post.