Amazon has found its latest conquest: selling cars. This follows its entries into massive new markets such as healthcare, advertising, and cloud computing. As we’ve examined in an ongoing thread, giants like Amazon have to shoot for massive targets and revenue diversification to maintain high-scale growth.
So what is its autos play? Announced about a year ago and launched this month, Amazon Autos will act as you might expect at the intersection of eCommerce and car shopping. In Amazon fashion, users will be able to search, browse, and filter their car preferences, adding yet another big category to its arsenal.
Inventory comes from local dealerships, making Amazon Autos more of a search engine than an end-to-end sales operation, with some perks (more on those in a bit). This makes it more like AutoTrader and less like Carvana. It’s launching with Hyundai in 48 U.S. cities, with more brands and cities to come.
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Palatable Purchase
Speaking of Carvana, it spiked in the Covid era and acclimated consumers to buying cars online – in some cases, sight unseen. Though its streamlined and disruptive approach has noteworthy aspects, the relevant variable here is the consumer acclimation piece, which could grease the wheels for Amazon.
In fact, Amazon Autos has a few things going for it. In addition to greater hunger and comfort levels for online auto shopping, Amazon has a certain degree of trust and user habit for all things eCommerce. Buying your next car online may seem dubious to some, but doing it on Amazon may be palatable.
To that end, Amazon is inserting itself in the process not just to locate your new car, but other parts of that consumers dread. In addition to avoiding salespeople (one reason for Carvana’s appeal), it offers transparent pricing – including taxes – and no haggling. That means no surprises nor hidden fees.
As another procedural bonus, Amazon helps secure financing which is part of the traditional auto-dealer process that consumers find sleazy and full of upsells (undercoating, anyone?). Amazon also facilitates all the paperwork, the ability to e-sign, and schedule your pickup. It even handles trade-ins.
Balance-Sheet Friendly
As for Amazon Autos’ revenue, the company doesn’t reveal particulars, but we presume an affiliate sales model. If accurate, this would let Amazon take a small cut of a large number of transactions (sound familiar?) without having to carry any inventory costs. It also gets to be the seller of record in each sale.
That last part indicates that whatever affiliate revenue share or commission Amazon is getting is likely being taken away from a local dealer (or salesperson). And that’s where Amazon Autos could be most disruptive, likely forcing local dealers to raise their game… which isn’t necessarily a bad thing.
Amazon Autos’ scalable and balance-sheet-friendly model also makes it a bit of a no-brainer. That brings us back to the point about revenue diversification and big verticals. Auto sales were inevitable for Amazon. The only looming question is how it disrupts local dealers and the ways they operate.
