Group project advance ecommerce topic revolutions in car retail sales model

UNIVERSITY WORLD CLASS EDUCATION I EXECUTIVE SUMMARY Being described as a stand still industry since the 1980s because the automotive sales and distribution model has largely been the

MINISTRY OF EDUCATION AND TRAINING

V¥ HOA SEN FACULTY OF INTERNATIONAL TRADE AND LOGISTICS

GROUP PROJECT ADVANCE ECOMMERCE

Topic:

REVOLUTIONS IN CAR RETAIL SALES MODEL

Case study Tesla - example of Future Retail 9

Evaluate the overall success of selling car

VinFast Overview 16 VinFast business model 16

Customer Relationship Management plan 23

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I EXECUTIVE SUMMARY

Being described as a stand still industry since the 1980s because the automotive sales and distribution model has largely been the same despite technology revolutionising other industries Lately, this industry has surprised expert critics due to its strive to change and adapt with the circumstances Manufacturers in recent years have been looking for new ways

to respond to the needs and wants of consumers by using technology and reshaping their car sales model

In this assignment, we will introduce you to the revolutions in the car sales business model

as well as showing specific examples of the future in car retail sales through planning a strategy to develop the E-commerce model of VinFast - the first Vietnamese car manufacturer

The assignment will include 2 parts:

e Part 1: Introduce E-commerce in automotive industry and car supply chain

e Part 2: Plan a strategy to develop E-commerce model of Vinfast

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Pn PART 1

Automotive retail sales model

Car sales business models go through 3 structural changes since the 1980s:(1) physical stores; (2) Traditional website; (3) future retail Updating and improving a sales process for such a conventional industry like automotive is challenging Yet it is the manufacturers role to continue adapting and reshaping along with the market (Little & Arena, 2020)

Transition of retail structures

Dealer) ok ef * ® Own assets (cars)

a we ®< La) =) ›m Customers physical sales process to Manage and deliver

% Customers # Leaner dealer formats

ss 2 © Digital sales by dealer

hà Oe: W Online NSC direct sales

‘a

—————— ;

mm Direct on m Agency sales model

sales otek © Centralized, tiered

1 aoe] ces s network

Source: Arthur D Little analysis

Picture 1: 3 car retail sales model

(1) Physical stores

Physical store model is the very first model in the car sales industry In this model, manufacturers sell the majority of their vehicles to franchise dealerships Then, those vehicles will be sold to bricks and mortar retailers and customers will approach products through those retail sales It is easy to see that this model limits interaction between consumer and the OEM

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In this model, dealers play as independent entrepreneurs, manufacturers sell vehicles to them completely and they will then resell them to end customers Because dealers own these assets, therefore they will play the central role in pricing, marketing and sales

This kind of process in the sales and distribution process was ubiquitous in the 1980s, and the majority of the industry followed this model However, as time changes, technology has shifted the way the world shops as well as the way people interact with each other Gradually other industries have moved online, but the automotive sales and distribution model rarely takes any change Many experts commented: “The automotive industry as a whole has not adapted to the shift to only as quickly as many had predicted’

As there is a growing demand for online purchase, new technologies offer solutions to previous inefficiencies Physical store models fail to serve the demands of both consumers and manufacturers

(2) Traditional website

According to the 2019 Deloitte Global Auto Consumer Study, there is a significant proposition

of consumers now having become interested in purchasing cars online Finding new ways to serve the market demand is an evitable result This is how the 1st revolution occurred (Korn, 2021)

Dealers play a central role in this 1st transition as they begin to use websites in their car sales process In this model, consumers do not have to meet face to face with the seller to have basic information about the car they are about to buy Instead, they could go to dealers’ websites to research and decide which car they want Then, if they want to buy or have deeper information on car technologies or want a test drive, they still have to be present at the dealer’s showroom and transactions continue to occur as a traditional physical store model The picture below shows the car ownership cycle of this retail sales model

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Figure 1 The car ownership cycle

How the traditional cycle of car ownership limits interaction between the consumer and OEM

@ Discovery @ Consideration Purchase & Finance

“CC

‹“—C me

>) Delivery Se Ownership @ Service @ Repurchase

Picture 2: The car ownership cycle

Trending in 2001-2003, this model attracts high expectations and attention from many industry experts Typical leading companies in this era like carOder.com or cardealer.com receive millions dollars from venture capital However, these two companies then went bankrupt after just a few years of operation marked the failure of the Traditional website model

There are 3 reasons behind the failure of this model:

Firstly, the unsatisfying customer journey in the physical model, which is the most important factor affecting buying decisions, still has not been improved Purchasing through a dealership is a low trust, unpleasant, high stress and low transparency journey Buyers always feel like the price is not transparent and there is a sense that unnecessary costs have been added Moreover, high staff turnover in retail sales made it even more challenging to build relationships with sellers, especially when it comes to repurchase The below data indicate “What makes customers in automotive industry loyal” express the important of buying process (Hirsh et al., n.d.)

80% 7.4% — Service Experience

Dealer Driven Manufacturer Driven

Picture 3: What makes customers in automotive industry loyal

Secondly, dealers also didn’t receive more benefits in this model compared to the old model The highly competitive environment between dealers made the prices inconsistent and force dealers to decrease the price to attract competitors’ customers Research show that, this phenomenon reduced dealers profit margin 1-3%

Thirdly, this model also has not solved the old problem of manufacturers Buying process is still through dealers so it puts substantial distance between the manufacturer and the consumer The consumer behavior data, which is vital for manufacturers to build strategy, have to go across too many layers It may reduce the trust of the information that manufacturers received

Despite the failure of the 1st generation, selling cars through the internet is far from dying This failure is just the opportunity for automotive retail sales to improve its weakness and move to a new horizon

(3) Future retail

This time, automotive is still on the Internet but websites are not owned by dealerships anymore Instead, manufacturers manage all distribution channels and sell directly to the customer Dealers do not own the vehicles and receive profit through the deviation between costs and revenue, they transform into agents who receive a premium-based compensation

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There are two ways that are followed by manufacturers in this era:

The first one is completely online Manufacturers will create a website not for research information only but allow customers to conduct transactions For example, Volvo’s newly unveiled electric C40 recharge compact SUV will only be available only If customers want a test drive, they will use AR/ VR technology

The second way in cars retail sales model is Omni-channel Customers still complete the purchase process through manufacturers’ websites, but they still need to go to the showroom

to check on the vehicles The showroom is not owned by a franchise dealership but the asset

of manufacturers For example, automotive upstarts like Tesla and Polestar are selling directly

to consumers through company-owned stores The consumer data will not be separated between channels but the car retail sales process becomes one ecosystem that provides a

360 degree view on consumer needs and wants (Automotive Industry: Vietnam's Passenger Vehicle Market | Driving, n.d.)

Case study Car Order - example of traditional website

CarOrder in January 1999 Brian Stafford is the founder of CarOrder.com just a car dealer who wanted to create a website to sell cars He also holds a master's degree in computer science from the University of Chicago (Brian Stafford (Businessman), n.d.)

2001 - Carorder went bankrupt after 2 years of slow selling

He also holds a master's degree in computer science from the University of Chicago After failing at Carorder, he worked for big companies, among them Diligent Corporation is a SaaS company - a company that allows

CarOrder's original purpose was to broker and sell cars through their website Using dealers

is the highlight Keep the price lower than the traditional because there is no cash on the table and operating costs while other consumer websites are struggling with too little sales and too high costs (Copeland, n.d.)

Some dealers have prejudices and want to put online sales on the black list because the big 3 supply cars for dealers to sell and they are afraid that they will not be able to compete with online sales because they have to pay for space and operating costs The big 3 also

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approved it in the same year and asked other dealers not to conduct transactions with online sales organizations (McWilliams, 2000)

This will make CarOrder no sales because dealers are the place to distribute cars for CarOrders to sell but now they are not operating, it will lead to no revenue and even less investment Finally, this led to the bankruptcy of CarOrder (CarOrdercom Shuts Down E-Commerce Site, Lays off 100 - Austin Business Journal, 2000)

Case study Tesla - example of Future Retail

Business Models: D2C (Direct To Customer) (do, 2021)

The product will be sold directly to customers through sales on the website, intermediary agents (dealer) with a variety of medals and features At that time, all Tesla showrooms will be closed (do, 2021)

This process below is a demo of the online car buying process on the official Tesla website:

Choose car models

Picture 4: Choose car models

Step 1: You can choose from many different car models on web page

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Selection of specification

Model S

Included s_ Quickest accelerating car in production today

348 200 1.99

Picture 5: Selection of specification

Step 2: There is a huge selection of specifications and you can upgrade them to

Add some more features

Full Self-Driving : Capability

~

® Pearl White Multi-Coat Included

All Black Included

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Step 3: You can design your own interior and exterior colors It is also possible to change other wheels and upgrade the autopilot mode

Card

Ordering

Order Your Model S

Est Delivery: 2-6 weeks

CONTINUE TO PAYMENT Fret Mame ae

or v

Vehicle Price $134,

leo Your Model S

Enter Account Details

Your Model S $135,940

Due Today $250

Due Today $250

Step 5: All you need to do is fill in your personal information and credit card

Automotive supply chain

This part introduce (1) Supply chain process and (2) After-sales service

(1) Supply chain process:

Planning -> suppliers -> manufacturer -> warehousing -> distribution (imported into Vietnam market) -> wholesale agents (retailers) - > consumer

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e Planning: this is the stage that will plan and organize activities, meetings to forecast the demand (clearly identify consumer demand to produce appropriately to avoid excess and inventory) Moreover, planning also include pricing and positioning of the product (the product will be produced for the social class, price is one of the important factors for businesses and consumers to determine competitiveness)

e Supplier: work with the product development department and always maintain the exchange and sharing of information at the highest level to reduce the time for the design and development phase

e Manufacturer: the manufacturer will very focused on production activities because this

is their profit making process Main production activities: * Product design: coming up with ideas to satisfy customers' wants * Process production: set up an automatic production model in conjunction with production staff to meet customer needs and calculate production time reasonably

e Warehouse: this is the stage where products will be managed and sorted at the warehouse for easy identification and shipping

e Distribution (imported into the Vietnamese market): the activity of providing products through dealers and retailers to bring cars to consumers For markets that cannot produce their own cars or have limited production, they will have to carry out logistics processes to import cars to the domestic market

e Wholesales agents (retailers): this is the intermediary between the producer and the consumer Automotive products will be located here so that consumers can review and experience the car models here

e Consumers: this is the end of the supply chain After making a decision, consumers can buy and own the car they want

(2) After-sales service include:

International supply chain consulting -> Factory logistics -> After-sales logistics

e International supply chain: customers will be consulted about the production and return process They will know where the car will be manufactured, how it will be transported, and where, when and where it will be delivered

e Factory logistics: vehicles that need to be repaired or serviced are transported from dealers to factory workshops for inspection and maintenance of the car

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e After-sales logistics: customer care department will be in charge of this logistics role They will take care and respond to requests thoughtfully, in addition, advise and introduce some promotions and incentives to stimulate consumer demand

Evaluate the overall success of selling car through Internet

Currently, after going through a prolonged epidemic period along with modern technology 4.0

is becoming more popular than ever, even car sales are gradually shifting from traditional sales to online sales After a few years, this will be really crazy because it is hard to imagine

a person spending a large amount of money from a few hundred million to several billion dong just to buy a car that they don't really touch, touch, experience and see it firsthand But in Vietnam, we and developed countries around the world have already applied this model and are gradually becoming a trend and buying and selling everything online will be the trend in the near future Over the past few years, many studies and publications have mentioned that customers are willing to buy cars, especially new ones, directly online Estimates range from

30 to 70 percent, with some even higher

To make it easier for customers to reference and purchase, online sites will simplify and simplify the steps as much as possible compared to the traditional way of requesting a customer's vehicle customers, filter customer requests for information on things like vehicle make, price range, make, minimum engine requirements, a most detailed way to provide customers with a list of car models that match their requirements In addition, these pages will always update information for customers so that customers only need a phone to view information anytime, anywhere, price list of each car model, invoice and information about each vehicle line Evaluation and experience of customers who have experienced and used

a certain car model, compared several models to each other to show the difference and how the difference, there are specific advice when car selection, all have the same purpose is to give customers the best choice for customers without having to spend too much time and effort to go to the car store, see the car a lot of

In addition to the benefits for customers, effective car sales pages for suppliers as well as auto dealers large and small, are also an opportunity for them to reach potential customers through millions of customers hits, millions of views in sales pages

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In Vietnam, there is a car buying and selling site Tinbanxe.vn, in just one year from 2019 -

2020, they can reach one million users in a month

ol Google Analytics Acquisition Overview

Continent % Vùng " Channel 2 Device ® 11 thg 10, 2020 - 11 thg 11,2 #

Người dùng Số phiên Tý lệ thoát Sõ lần mục tiêu hoản thành _ Thời gian trbinh trên trar

Acquisition Behavior Conversions

1,4 Ti Tie 1,0 Tr 84,1% 1,4 01:01 0,0% Không cóKffiôliqcó dữ

Nguồn / phương tỉ S8 phân Người dùng Người đăng mới ÿ lệ thoát mi Avg Sesslon Durat _ Tỷ lộ chuyển đổi Sổ fan mục tiêu h Giả trị mục tiêu

pooh / organic 00:01:00 0% a so

Picture 8: Number of users of tinbanxe.vn

Oto.com.vn The website has up to 6 million visits and 22 million visits per month The database is growing with 32,000 car listings and over 1,200 new user accounts every month Thanks to that, Oto.com.vn connects sellers and buyers in a simple way Above all, the attraction of Oto.com.vn lies in the large number of ads, fast updates and high accuracy