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Car makers go online to lure buyers
June 20, 2011, Monday
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INNOVATION in the Chinese auto industry has ranged from vehicle design to technological applications. Now, initiative is also moving to the sales side of the business.
Italian luxury sports car maker Lamborghini recently opened an official online shop on Taobao.com, China's largest online shopping portal. It's the first time such an exalted auto brand has resorted to the Internet as a marketing tool.
The move raised a lot of eyebrows, not only because the idea of buying such a high-powered car on line carried a certain cachet of excitement but also because the several million dollar price tag of a Lamborghini could set the record for a single transaction among the 800 million goods sold on Taobao.
Lamborghinizm.tmall.com offers up to five Lamborghini models, priced at between 3 million yuan (US$462,000) and 5 million yuan in standard versions. The cars don't have to be ordered as they do if purchased through dealerships. They are already manufactured and ready to go. That's very attractive to Chinese consumers who always want their new cars "right now."
What's more, online buyers are offered options, such as paying a small deposit online or taking delivery of their cars in other cities. Lamborghinis bought online promise the same warranties and after-sale service as those bought in dealerships.
China is not only the largest car market in the world, but also one of the most competitive. China also has the world's largest pool of Internet users. It was only a matter of time, then, that these two realms would intersect.
"Most of these innovative ideas are based on the Internet, where car makers are attracted by a growing population of online users," said Klaus Paur, managing director for China at Synovate Motorearch in Shanghai. "Indeed, we can observe a generational shift in China, where more and more young and Internet-savvy people are entering the market as first-time automobile buyers."
Although Lamborghini may be the most eye-popping example, other car makers also are using the Internet to sell autos.
Toyota, Nissan, Hyundai, Volvo, Audi and BMW advertise models online, according to Taobao. The auto sales were set up by Hangzhou-based dealer Zhejiang Hecheng Auto Co Ltd.
China domestic carmaker Geely also has stepped in the Internet market with an official online retail store for its Global Eagle models.
The vast Internet market has been given an impetus by the group-buying trend, and auto makers have been quick to seize that opportunity.
Last September, 200 Mercedes-Benz smart models were snapped up by buyers within three-and-a-half hours after a batch of the small cars was advertised for a group sale on Taobao. Consumers who snapped up the offer at a price of 135,000 yuan bought the cars for 41,000 yuan less than its original price.
The offer, originally planned to last for 21 days, attracted 300,000 online visitors within 24 hours, and the first car was sold just 24 seconds after the ad appeared.
According to Taobao, sales revenue of online vehicle shopping in the first five months of this year exceeded 10 million yuan. During Taobao's recent third-year anniversary promotion, an online buyer placed an order for a 1.1 million yuan Audi A8 luxury sedan.
As recently as April 18, three Audi models were snapped up by buyers through online retail shops, with all money paid up front.
Taobao estimated that the number of online shops for car brands would reach more than 30 in the not-too-distant future.
However, it's not always easy to dig out consumers' pocket by simply presenting introduction or pictures on TV or computer screen.
Using the Internet to sell cars presents auto makers with new marketing challenges. After all, it's hard to replace the experience of going into a dealership where you can sit in a car, take it for a test spin and experience first-hand what you are buying.
Then, too, the Internet leaves a lot of room for mischief. When Lamborghini's online shop first appeared, more than 5,000 orders were placed soon after. They all proved to be bogus.
The car agents said netizens were just having a bit of a thrill, placing orders for cars they could never hope to afford.
"It is not so much the purchase price as the complexity of the decision itself that requires the attention of car buyers," Paur said. "There are elements such as engine size, equipment options, operating costs and maintenance to be considered. In making a final decision, most consumers still rely on a physical experience, such as a test drive."
According one survey, most of the customers who buy cars online do so after first visiting a dealership to see the vehicles and get information from authorized sales representatives.
Of course, dealers don't necessarily lose anything because they are the people behind the online selling. The Internet simply gives them a new channel to attract consumers.
Still, online selling requires good prices, so the dealers often have to resort to discounts to online purchasers.
Netizen shoppers also often find they don't have the same range of optional features and model choices when buying cars online.
Then, too, many online shoppers fear that after-sale services won't be as good as when autos are purchased from dealers. They lose that face-to-face assurance.
"Delivery and maintenance of cars is a complex process that needs an appropriate organizational and infrastructure support," said Paur.
Lamborghini hasn't sold a single sports car yet online, but its online retail site has generated a lot of publicity, which is good in terms of brand image.
It's really a matter of striking the right balance between being innovative and maintaining the kind of standards and services that build an effective marketing machine.
Italian luxury sports car maker Lamborghini recently opened an official online shop on Taobao.com, China's largest online shopping portal. It's the first time such an exalted auto brand has resorted to the Internet as a marketing tool.
The move raised a lot of eyebrows, not only because the idea of buying such a high-powered car on line carried a certain cachet of excitement but also because the several million dollar price tag of a Lamborghini could set the record for a single transaction among the 800 million goods sold on Taobao.
Lamborghinizm.tmall.com offers up to five Lamborghini models, priced at between 3 million yuan (US$462,000) and 5 million yuan in standard versions. The cars don't have to be ordered as they do if purchased through dealerships. They are already manufactured and ready to go. That's very attractive to Chinese consumers who always want their new cars "right now."
What's more, online buyers are offered options, such as paying a small deposit online or taking delivery of their cars in other cities. Lamborghinis bought online promise the same warranties and after-sale service as those bought in dealerships.
China is not only the largest car market in the world, but also one of the most competitive. China also has the world's largest pool of Internet users. It was only a matter of time, then, that these two realms would intersect.
"Most of these innovative ideas are based on the Internet, where car makers are attracted by a growing population of online users," said Klaus Paur, managing director for China at Synovate Motorearch in Shanghai. "Indeed, we can observe a generational shift in China, where more and more young and Internet-savvy people are entering the market as first-time automobile buyers."
Although Lamborghini may be the most eye-popping example, other car makers also are using the Internet to sell autos.
Toyota, Nissan, Hyundai, Volvo, Audi and BMW advertise models online, according to Taobao. The auto sales were set up by Hangzhou-based dealer Zhejiang Hecheng Auto Co Ltd.
China domestic carmaker Geely also has stepped in the Internet market with an official online retail store for its Global Eagle models.
The vast Internet market has been given an impetus by the group-buying trend, and auto makers have been quick to seize that opportunity.
Last September, 200 Mercedes-Benz smart models were snapped up by buyers within three-and-a-half hours after a batch of the small cars was advertised for a group sale on Taobao. Consumers who snapped up the offer at a price of 135,000 yuan bought the cars for 41,000 yuan less than its original price.
The offer, originally planned to last for 21 days, attracted 300,000 online visitors within 24 hours, and the first car was sold just 24 seconds after the ad appeared.
According to Taobao, sales revenue of online vehicle shopping in the first five months of this year exceeded 10 million yuan. During Taobao's recent third-year anniversary promotion, an online buyer placed an order for a 1.1 million yuan Audi A8 luxury sedan.
As recently as April 18, three Audi models were snapped up by buyers through online retail shops, with all money paid up front.
Taobao estimated that the number of online shops for car brands would reach more than 30 in the not-too-distant future.
However, it's not always easy to dig out consumers' pocket by simply presenting introduction or pictures on TV or computer screen.
Using the Internet to sell cars presents auto makers with new marketing challenges. After all, it's hard to replace the experience of going into a dealership where you can sit in a car, take it for a test spin and experience first-hand what you are buying.
Then, too, the Internet leaves a lot of room for mischief. When Lamborghini's online shop first appeared, more than 5,000 orders were placed soon after. They all proved to be bogus.
The car agents said netizens were just having a bit of a thrill, placing orders for cars they could never hope to afford.
"It is not so much the purchase price as the complexity of the decision itself that requires the attention of car buyers," Paur said. "There are elements such as engine size, equipment options, operating costs and maintenance to be considered. In making a final decision, most consumers still rely on a physical experience, such as a test drive."
According one survey, most of the customers who buy cars online do so after first visiting a dealership to see the vehicles and get information from authorized sales representatives.
Of course, dealers don't necessarily lose anything because they are the people behind the online selling. The Internet simply gives them a new channel to attract consumers.
Still, online selling requires good prices, so the dealers often have to resort to discounts to online purchasers.
Netizen shoppers also often find they don't have the same range of optional features and model choices when buying cars online.
Then, too, many online shoppers fear that after-sale services won't be as good as when autos are purchased from dealers. They lose that face-to-face assurance.
"Delivery and maintenance of cars is a complex process that needs an appropriate organizational and infrastructure support," said Paur.
Lamborghini hasn't sold a single sports car yet online, but its online retail site has generated a lot of publicity, which is good in terms of brand image.
It's really a matter of striking the right balance between being innovative and maintaining the kind of standards and services that build an effective marketing machine.
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