Alibaba to Sell Cars at Vending Machines, and Luxury Brands Should Care

What’s the next big thing to fuel Chinese consumers’ e-shopping frenzy? Cars. Alibaba announced on August 2 that it plans to build China’s first automotive vending machine. Consumers now can enjoy the convenience of purchasing a car as easily as they “buy a can of coke.”

Consumers will be able to browse the selections on their phone, and click the ‘buy’ button and the car will be ready for pick up on the ground floor of the machine. The process simplifies the traditional dealership model by cutting the time it takes to buy a car down to a few minutes. The e-commerce giant hopes to turn the vending machine into a reality by the end of this year.

The concept of the car vending machine was first made possible by a Singaporean used-car company, Autobahn Motors, which built a 15-story showroom in Singapore in December 2016  that offers many luxury vehicles, including Bentleys, Ferraris and Lamborghinis.

For Alibaba, the automotive vending machine is an a development of the “new automotive retail model,” which was first introduced during Tmall’s “6.18” mid-year sale. According to Alibaba, this model connects all different players in the automobile trade, including car brands, 4s offline distributors, and customer service care providers, offering consumers a one-stop online shop.

The automotive retail model also incorporates Alibaba’s credit-scoring system, complete the e-commerce ecosystem that Alibaba envisions, offering an alternative paying model for consumers that don’t have enough credit to buy a car. Interested vehicle buyers can make the first 15 percent of their down payment with Sesame credit and pay the rest on a monthly basis.

This move by Alibaba signals its ambition for automobiles, possibly the next big category for Chinese e-commerce.

China’s ministry of commerce announced a new measure of the administration of automobile sales, effective on July 1, 2017, encouraging “vehicle sales and an after-sales service network” to promote innovation in the automobile circulation model. While a positive turn for many e-commerce channels who would like to offer deals directly to consumers, it will likely disrupt the traditional car dealership model. The demand, by Chinese consumers, for shopping online is also increasing. 77 percent of surveyed consumers said they are willing to buy cars online, according to a 2016 report by Capgemini Consulting.

Automobile brands are taking advantage of the e-commerce model. Maserati opened its flagship store on Tmall in March last year, and broke a new record when it sold 100 cars within 18 minutes. Italian luxury car brand Alfa Romeo followed suit, selling 350 Giulia Milano cars in 33 seconds with its own flash sale around the same time.

Despite the dazzling sales numbers, the Chinese media criticized the online flash sales as a pure marketing ploy. When Maserati released the SUV Levante 350hp exclusively online before it offered the model at local dealerships, it was a new stunt. And since it didn’t have a foundation of a reputation or prior sales, the vehicle was a good match for Tmall, which offered it the perfect promotional vehicle. It’s a better advertising channel than traditional media considering it has marketing impact and brings in sales numbers.

The rise in automobile e-commerce in China demonstrates the transformation of automobile buying in China and the way that consumers are quickly, and with more openness, moving from offline to online consumption. More luxury brands should take note of the trend and focus on how to deliver a seamless omni-channel experience for the increasingly savvy Chinese consumer.

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Automotive