The biggest name in online retail is looking to get into the car business. When it comes to online shopping there is no greater juggernaut than Amazon.com. Wouldn’t it be great to buy car, just like you buy anything esle? That’s not likely to happen in the near future.
As of now, Amazon Vehicles is a great comparison tool for research purposes. But buying a car is not like buying a book, a sweatshirt, or a tablet. As cool as it sounds to “one click” and have a brand new car delivered to your house, the actual process is more complicated.
Here are some of the major logistical, financial and legal hurdles Amazon has to cross before it can really disrupt the car buying game.
The biggest obstacle for online vehicle sales is the fact that America has well-entrenched dealership franchise laws, that prevents anyone other than an approved dealer to sell a manufacturer’s new car to a customer.
In order for Amazon to sell you a new Honda, for example, they would have to be an authorized dealer, and they would need to do so in every state. These laws are often written to protect local dealers from too much competition in the region. If you thought the Tesla battles for direct sales met resistance, the fight for Amazon Vehicles will be even more intense.
Amazon does have is a lot of capital and resources so they could theoretically be an authorized dealer nationwide, even in the unlikely scenario that every state altered the franchise laws to accommodate Amazon, that is only half the battle.
If we suppose that some miracle happens and Amazon is now allowed to sell vehicles via their website like a traditional car dealer, where are they going to keep the cars?
Vehicles take up a lot more space than your standard small items that are housed in their massive warehouses. These vehicles need to be purchased from the manufacturer, insured, prepped, and able to be delivered. Amazon will need large vehicle lots for every brand they sell in every state. That is a huge investment without having the facility for a traditional dealership.
There is also the question of service and warranty claims. Unlike Tesla, Amazon can’t fix their cars via the cloud. Most franchise agreements dictate that the dealerships provide service facilities and this would be a prohibitively expensive investment for the online retailer.
The last barrier to selling you a car online is the transaction itself. If you want a Kindle Fire, you put it in your cart, select your shipping and it’s done. Amazon bills your major credit card and you get your item. They don’t care if you have an 800 FICO score or a 500 score, your financial risk profile has nothing to do with your ability to purchase relatively inexpensive things.
Most people don’t buy a car with a credit card and the vast majority of buyers don’t have the liquid assets available to purchase a new or used car with cash. This means that in order for Amazon to sell you a car, you would need to get approved for a finance or lease. This would require them to either have a captive finance arm, or become a broker for major lenders.
While Amazon might not be able to sell you a car directly, Amazon Vehicles could be the next major connection point between buyers and sellers. Most of us have made a purchase through Amazon, but bought through a cooperating vendor that utilizes the platform as a listing site.
Dealerships could post local deals on specific makes and models targeted to consumers that are researching that car in that market region. If you are getting information on the newest Toyota, you could see a special for an end-of-model-year lease deal. The dealer would then compensate Amazon for the individual lead or pay for some sort of subscription service to advertise on the site. This would be a much lower risk and relatively easy revenue generator for Amazon.
Most millennial car buyers prefer to use mobile apps to assist with vehicle purchases. Since Amazon is one of the most popular mobile shopping sites, the opportunity is there to utilize this platform to shop for car deals as well.
This would mean that Amazon would essentially be the next TrueCar as a major lead generator, that works for the dealers with car buyers still having to visit the showroom.
Amazon Vehicles could also provide a serious alternative for used car listing sites like Craigslist and eBay Motors. Individual sellers could post a car for sale and connect with buyers in their area or nationwide. Buyers can have access to a used car listing and consumer reviews side by side.
By utilizing Amazon Vehicles as an intermediary car buying app, they can take a chunk of the marketplace without all the difficulty of actually selling a car.
For Amazon to operate like a car dealership, there is far too much risk and the relative profit margin on a new vehicle is much lower compared to smaller less expensive products. Amazon is a shopping destination and Amazon Vehicles as of now is really just a way to drive more traffic to the site and increase impulse spending.
If you are looking up reliability ratings on Consumer Reports you aren’t tempted by the latest sale on North Face jackets. When someone researches a car on Amazon Vehicles, the company’s massive market research data can target specific sales to key demographic buyers of certain vehicles.
Amazon’s primary motivation is to be your primary stop for researching any product you could buy. They could muster the resources and maybe get enough lobbying leverage to really change the way cars are sold in America, but it would be a long and expensive campaign. Or they could offer a tool to take you away from your go-to car site just so you can spend more money on Amazon.com.