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August 21, 2017

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Home » Business » Autotalk Special

Can car purchase be like buying a cola?

IMAGINE buying a car as easily as a can of Coca-Cola from a vending machine. Sound impossible? Perhaps not anymore.

E-commerce giant Alibaba Group is planning to have a “vending machine” selling new cars to Chinese consumers by the end of this year. Buyers will be able to choose a car via an app on their mobile phones, make an online payment and pick up the vehicle 20 minutes later from a storage facility.

Automotive vending is the latest chapter in the convergence of online and offline sales. It dovetails with new consumption patterns where shoppers prefer using mobile phones to buy what they want.

Alibaba announced the new plan last month, triggering some lively discussion among Chinese netizens. The company received about 7,700 posts and 500 replies on Sina Weibo after it posted a video about the car “vending” service.

“It represents not only a vending machine, but also a way to combine online and offline buying through the use of mobile apps,” said Fu Xingxing, a student from Tongji University. “Consumers will be able to pay online and pick up their new car. It shows that the Internet is profoundly changing our daily lives, including shopping patterns.”

He is among the millions of potential, mostly younger car buyers who seem fascinated by the new business model. About 60 percent of consumers born in 1990 or later said they would consider buying a car through online channels, according to a survey of 900 car owners and potential buyers conducted by market research firm Ipsos.

Alibaba is squarely targeting that generation of people, who use mobile phones in almost every facet of their lives and don’t necessarily need to “kick tires” before selecting a car.

“In the past, it took consumers a long time to make a final decision about purchasing a car,” said Yu Wei, general manager of the automotive division of Tmall, the online sales platform of Alibaba. “In the future, we aim to provide a flexible and convenient car-buying experience to young consumers through the use of the automotive vending machine.”

New retail strategy

The concept is part of the company’s new retail strategy focused on new car sales. Alibaba set up its automobile business unit more than two years ago and is now in partnership with up to 60 car brands in China.

During a sales campaign in June, more than 30,000 vehicles were sold online via Tmall within three days, according to Alibaba. That equates to a full-year sales number for many large car dealerships.

The idea of automotive vending machines has raised eyebrows. Some auto analysts regard it cautiously, saying the new business model has a long way to go in proving itself. They cite high operating costs related to facility sites, logistics and procurement. There are also considerations such as competition from traditional car dealers and complicated after-sales procedures.

Alibaba hasn’t revealed a specific location for its first auto vending machine.

“If it is located in the central area of a big city to attract customers, the facility will come at a huge cost,” said independent market observer Liu Xiaofeng.

Ye Sheng, auto research director at market research firm Ipsos, said traditional car dealers have certain advantages in terms of pricing and after-sales service.

“That’s because they have been working with car manufacturers for such a long time,” he said.

“And consumers may raise a lot of questions relating to matters such as license plates, car insurance and after-sales maintenance. Many customers will feel more comfortable with face-to-face communication provided by traditional car dealers.”

David Zhang, an independent automotive consultant, tends to take a similar view.

“Buying a car is much more complicated than simply buying a Coke or Sprite from a vending machine,” he said. “Consumers have more than 100 automotive brands to choose from, compared with a handful of soft drink brands.”

Zhang said he has seen vending machines selling mobile phones in airports.

“However, the life cycle of a car is much longer than that of a mobile phone,” he said. “Car owners hold onto a car for three to five years before buying a new one. Mobile phone users may change their handsets once a year.”

Tongji student Fu said he’s not surprised by all the online chatter about automotive vending.

“Anytime anything new appears, there’s always lots of discussion,” he said. “As a consumer, I just wait and see what happens before embracing any new trend. So far, e-commerce has delivered a lot of good changes.”


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