Al­ter­na­tive ve­hi­cle sales chan­nels emerge, rid­ing in­dus­try re­form and tech­nol­ogy

China Daily (Hong Kong) - - BUSINESS - By WANG ZHUOQIONG and LI FUSHENG

The ball is now in the con­sumer’s court.”

Ev­ery­one knows e-com­merce and mod­ern re­tail have trans­formed shop­ping in China, but not many are aware that the same in­no­va­tive spirit is revving up a rev­o­lu­tion in au­to­mo­tive sales in the world’s largest car mar­ket.

These days, su­per­mar­kets are not just for shop­ping for gro­ceries and house­hold items. You can drive a brand new Maserati, Cadil­lac, BMW, Mercedes Benz or Audi off the su­per­mar­ket shelf.

If that sounds like too much work still, how about go­ing on­line and or­der­ing a Porsche for ex­press home de­liv­ery next day?

This is not fan­tasy but the re­al­ity of the world of e-com­merce and dig­i­tal tech­nolo­gies like big data, and a con­se­quence of re­form, re­struc­tur­ing and mod­ern­iza­tion of the auto sales sec­tor.

At Sun­ing Au­to­mo­bile Su­per­mar­ket in Nan­jing, cap­i­tal of East China’s Jiangsu province, a crowd of cu­ri­ous con­sumers got a taste of this re­al­ity last month as buy­ers drove off in new cars they just bought.

In two days af­ter the car su­per­mar­ket opened on July 15, more than 30 cars, mostly lux­ury brands worth mil­lions of dol­lars, were bought. In ad­di­tion, buy­ers picked up au­to­mo­bile parts, car dec­o­ra­tives and en­gine oil.

In do­ing so, they saved quite a bit be­cause the prices were lower than those in the tra­di­tional mar­ket.

The scene was a con­trast to the past, when car deal­ers in China dom­i­nated the seg­ment of auto sales.

The man­u­fac­turer-dealer nexus was too strong; they could armtwist the con­sumer into ac­cept­ing ar­bi­trar­ily set prices and other terms and con­di­tions for af­ter-sales ser­vice.

Now, new reg­u­la­tions have in­tro­duced al­ter­na­tives and em­pow­ered con­sumers. Cou­pled with in­no­va­tive fi­nance for buy­ers and re­struc­tur­ing of sales chan­nels, the Chi­nese auto in­dus­try is driv­ing into a new era.

First signs of the change ap­peared on April 14 when the Min­istry of Com­merce is­sued new guide­lines for car sales. Un­der the new regime, auto trad­ing com­pa­nies can sell ve­hi­cles with­out any au­tho­riza­tion from car­mak­ers. The mea­sures took ef­fect in July.

That means, both au­tho­rized and unau­tho­rized car sales are al­lowed. Auto su­per­mar­kets of the kind that Sun­ing opened in Nan­jing, exclusive multi-brand car stores and even e-com­merce plat­forms sell cars now in China.

The min­istry hopes the new mea­sures will im­prove sales and af­ter-sales ser­vice across dif­fer­ent auto brands, an ap­proach that is ex­pected to save re­sources and boost ef­fi­ciency.

As if on cue, Sun­ing said it ex­pects to open more than 100 auto su­per­mar­kets in first- and sec­ond-tier cities in China.

Liu Dong­hao, head of Sun­ing’s au­to­mo­tive busi­ness sec­tion, told re­porters at the Nan­jing store open­ing that the ven­ture marks the start­ing point of the com­pany’s wider car-re­lated busi­ness.

Sun­ing’s off­line and on­line plat­forms will cover au­to­mo­biles, elec­tric mo­tor­bikes, au­to­mo­bile elec­tron­ics, car dec­o­ra­tives, en­gine oils, rental and used cars.

The plat­forms will deal with buy­ers di­rectly with no mid­dle­men in be­tween.

“It’s not right to say we have the low­est price. But our pric­ing is trans­par­ent, prod­ucts of­fered are di­verse and we guar­an­tee qual­ity,” said

Liu, who is also the pres­i­dent of Sun­ing Dig­i­tal Com­pany. “The ball is now in the con­sumer’s court.”

Sun­ing is col­lab­o­rat­ing with Ping An Au­to­mo­bile But­ler to of­fer auto fi­nance and auto in­sur­ance ser­vices in a one-stop-shop model.

Gome, an­other ma­jor re­tail player in China, is plan­ning to add a car sec­tion at most of its 1,700 stores in the coun­try. The project is ex­pected to start within a year.

Gome’s ex­ist­ing stores, usu­ally lo­cated in down­town ur­ban ar­eas, record a large num­ber of foot­falls. So, the po­ten­tial for the up­com­ing car busi­ness is high, said Zhang Haifeng, head of Gome’s car busi­ness, in a meet­ing with po­ten­tial in­vestors in Kun­ming, Yun­nan province, last month.

He said e-com­merce alone won’t suf­fice as an al­ter­na­tive auto sales chan­nel, so brickand-mor­tar stores are im­por­tant too.

Al­ter­na­tive chan­nels need not be seen as com­pe­ti­tion to ex­ist­ing dealer net­works. In­stead, Gome’s planned auto foray will help both car­mak­ers and deal­ers to sell cars.

“So, if you think we’re go­ing to re­place car deal­ers, then you have mis­un­der­stood our busi­ness model.”

He said Gome is build­ing a sys­tem that is open to car deal­ers and car­mak­ers. It is up to them to de­cide what car mod­els they would of­fer to con­sumers through the new sys­tem. But, if the new

pres­i­dent of Sun­ing Dig­i­tal Com­pany and head of Sun­ing’s au­to­mo­tive busi­ness sec­tion

ap­proach gives cus­tomers a stronger voice, car deal­ers and car­mak­ers would nat­u­rally of­fer bet­ter-sell­ing prod­ucts and bet­ter prices, Zhang said.

“So, we’re not go­ing to fight deal­ers. In­stead, we’d like to in­vite them over to hud­dle to­gether for warmth.”

Mean­while, Tmall, the e-mar­ket­place owned by Alibaba, an­nounced plans on July 26 to un­veil an ul­tra­mod­ern real-world garage re­sem­bling a snack or bev­er­age vend­ing ma­chine by the year-end.

Tmall con­sumers can push a but­ton to select their car and drive away in it in a jiffy, ac­cord­ing to Yu Weix­uan, gen­eral man­ager of Tmall Au­to­mo­bile, the di­vi­sion of Tmall that is driv­ing the garage ven­ture.

Con­sumers with a good credit score can make 10 per­cent down pay­ment to buy the car of their choice in 20 min­utes.

Sesame Credit, a credit scor­ing sys­tem de­vel­oped by Ant Fi­nan­cial Ser­vices Group, the on­line fi­nance firm backed by Alibaba founder Jack Ma, will use big data to track on­line shop­pers’ be­hav­ior and pay­ment record to award points. Any­one with over 750 credit points be­comes el­i­gi­ble to buy a car off the garage.

For ex­am­ple, a car priced 150,000 yuan ($22,058) would re­quire a con­sumer to pay 15,000 yuan to­ward down pay­ment and a mort­gage of about 2,000 yuan.

In the era of off­line-an­don­line sales called New Re­tail, Tmall has be­come the pre­ferred e-mar­ket­place for au­to­mo­bile in­dus­try play­ers

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