will you buy your next car from Amazon?

The way consumers buy cars has changed dramatically in recent years. Where once you would visit five or six dealers before making a purchase, consumers today make less than two visits per sale. This change has largely been caused by the wealth of knowledge provided by the internet. What has not changed is that, no matter how long you spend researching, you will eventually have to visit a dealer to make the final purchase. But that might be about to change.

The phrase ‘you can buy anything on Amazon’ moved a step closer to reality in November when Amazon announced a partnership with Fiat. The deal allows Amazon to offer three of Italy’s best-selling cars, the Panda, 500, and 500L, as a fully online purchase. After selecting options, buyers are contacted with details on where they can collect their new vehicle. One-click ordering and Prime shipping aren't available yet, but your vehicle could be ready within two weeks of the initial click.

Amazon entering the automotive marketplace has long been expected. The retail world has seen a clear trend towards consumer convenience across almost every industry with Amazon at the forefront. Physical goods such as groceries and clothing are ordered online and delivered. The media industry has seen CDs and DVDs replaced with online streaming services such as Spotify and Netflix. Within almost every industry, brands have either adapted or suffered. John Lewis, one of the UK’s most iconic high street brands, now makes 40% of its sales online. UK online sales are approaching 20% of total retail sales with the trend toward online purchase showing no signs of stopping.

And the automotive industry… has largely stood still 🚗

New players such as Tesla are starting to shake up the traditional model by completely removing the dealer network from the equation. Stores are owned by the manufacturer and cars can be bought online without even visiting a store. Even established players are starting to embrace the move online. BMW recently launched an online sales tool where customers can configure a car through their website and send the specification to their local dealer.

This is a limited and well-controlled test for Amazon, but it is likely a sign of things to come. The deal is exclusive to Italy and limited to just three vehicles for now. However, this is a significant move for Fiat, perhaps most of all due to it potentially cutting their dealer network out of the equation. Details on exactly if and how dealers will be involved is unclear at this stage, but prices look to be competitive, suggesting dealer margins might have been sacrificed.

Competition to bring consumers cars at the best price and with more convenience is driving innovation. Retailers and manufacturers are going to need to ensure they focus on these two elements if they don't want to see sales move to online competitors. Amazon’s move to enter the marketplace could well see the balance start to tip in favour of online channels in the near future.

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