From the underplayed-news desk, Amazon last week formed a new partnership with Ford to sell cars online. It will expose local car dealer inventory, letting users buy online, then show up at their local dealer to pick up the keys. This has implications for the future of car shopping and dealers’ place in the world.
Before getting into those strategic and deeper angles, what are the specs of this collaboration? As noted, users can now find and shop for Ford cars and trucks on Amazon. They can go through most of the process of choosing their car, securing financing, transacting, registration, and all that fun stuff.
But rather than the direct-to-consumer model that was popularized in the Covid era – a la Carvana and its ilk – Amazon will display and sell the inventory of local dealerships, as noted. It will work with Ford national – giving it a logistically-simpler point of collaboration – but ingest and display local-dealer fare.
This is modeled after Amazon’s launch partner for its auto reseller program, Hyundai. Since the program launched last year, Hyundai has been the sole car maker. Ford now expands the program – not only in variety of cars, but in affordability: its addition brings certified used cars to Amazon for the first time.
Under the Surface
Back to the strategic stuff, this move has a lot more under the surface – some of it speculative (our job). The thing that stood out most to us was the car dealer involvement. From the user perspective, this could reduce friction and boost trust (big with car buying), given the locality of the car and of the transaction.
Beyond the user, there are key implications for dealers. Specifically, this collaboration could boost sales in that there’s more traffic/distribution for its listings. That distribution will happen at Amazon scale… which of course is diminished to a degree by locally segmented populations… but still valuable.
Scale will also be achieved on another level. Normally, dealers can only fulfill so much business at peak times due to the capacity of on-site sales reps (more on them in a bit). Meanwhile, non-peak times see those reps playing darts and talking about last weekend’s round of golf. This is classic legacy business.
Adding Amazon to the mix helps dealers not only unlock a larger inbound-sales surface area, but also scalability in the sales process. Sales will happen at the same rate of demand, rather than the rate of the physical on-lot presence of shift workers – call it just-in-time sales. This is classic Amazon.
Of course, you can’t rely entirely on streamlined and operationally-efficient online sales, as there are still customers who want a human touch (partially a generational dynamic). But being able to offer the option lets dealers capture the best of both worlds: high-touch on-lot sales and long-tail online sales.
Disintermediate while Disrupting
Back to “classic Amazon,” one aspect of this move isn’t classic Amazon. For one of the first times that we can remember, it’s actually helping local businesses rather than displacing them with shrewd logistics and margin compression. As Jeff Bezos used to say, chillingly, “Your margin is my opportunity.”
Of course, it’s still doing that: it wouldn’t be Amazon if it didn’t disintermediate while disrupting. But the question is, if not dealers, whom or what is it displacing? That brings us back to the sales rep. As far as we can tell, if there is anyone who loses in this new model, it’s the traditional fast-talking sales guy or gal.
That brings us to Amazon’s revenue model. Though details weren’t disclosed, it’s likely that Amazon is essentially acting as the sales rep for these sales. And as such, it is getting the commission that would otherwise go to a human rep. We’ll speculate further that it’s undercutting that commission rate.
In other words, Amazon is likely taking a lower commission than a sales rep would get. It can afford to do that with software economics (bits rather than atoms), while it also likely gets an affiliate fee on other elements it introduces, such as financing. Add it all up, and this is once again… classic Amazon.
We’ll watch closely to see if we’re on target in this wildly speculative exercise, and if other automakers join the program. While we’re feeling speculative, we’ll go ahead and predict that we see at least three more auto manufacturers join the program in 2026. Keep your eye on it, and hold us to that prediction.
Header image credit: Erik Mclean on Unsplash
