Online Buying And Selling Of Passenger Cars Marketing Essay

With the rapid growth in population, traveling has also increased in Pakistan. Thus there would be a greater need to commute from one place to another. Furthermore, people are also diverting their purchasing method through online mediums as they tend to be more convenient, accessible, and time saving, cost saving, with a better after sales service, than the conventional physical market places. This paper is about the relevant factors which customers consider important if they were to buy / sell their cars through online mediums.

This paper aims to study the viability of online used and new car trading as a business model in Pakistan. It also assesses the necessary elements that are needed to be present on such a website, which would ensure substantial traffic, visitors and members who will ensure revenue generation for such websites.

Introduction:

Pakistan is a very big market for passenger cars. And the methods of buying and selling of passenger cars is not restricted to dealers, brokers and newspaper ads only. Meanwhile, the method of buying and selling cars has also evolved, like the pattern of buying other daily basis commodities. The introduction of the internet has revolutionized the buying and selling pattern of common man, to a great extent. Since the internet is on a rapid growing speed and is affecting almost every market and geographical area. However, the most interesting fact about internet revolution is that it has also transformed traditional industries like Automobile.

It is predicted that with the passage of time, Internet users will grow exponentially and stimulating chances for growth of their online purchases. Therefore, we think that the automobile sector should also be equipped to be present in online market place to cater for this chunk of online growing market.

This research paper will study and review the existing literature on the trends of buying and selling of automobiles globally, specifically of passenger cars in countries similar to Pakistan as well as places where Pakistani emigrants reside. It also assesses the findings of our primary research in which a sample of 50 respondents was surveyed. These respondents are somewhat related to the automobile sector, including auto parts manufacturers, suppliers, traditional car dealers and most essentially final consumers. This would be helpful to predict whether the buying behavior of the target market will support and endorse this online business model. The findings also help to determine the factors that may worry the final customers when they take decisions regarding buying new cars. The findings would conclude to determine whether online buying / selling passenger car is viable, sustainable, worthwhile and a profitable venture in Pakistan.

Objectives / Goals:

The objective of this paper is to understand whether an online based business model for buying and selling of cars will be successful or not. Furthermore, it will also assess the factors which may influence the buying decision for used and new passenger Cars. Moreover, it also tries to find out the factors which may be important for such a website, to ensure a substantial traffic over the website.

Problem Statement:

The conventional market places have turned out to be more populated, offer lesser variety, and demands more time from the shoppers. For buying and selling of passenger cars, people find difficult to go to such market places. Even then they are not sure about the quality / durability of the vehicles. Furthermore they are not sure what prices to ask / pay as far as used cars are concerned.

So if they are provided an online platform, where these facilities are offered, people may prefer and seek such alternate channel.

Hypothesis:

The study would be based on the following hypotheses; these hypotheses have been developed after reviewing the relevant literature.

H1: Pakistani’s would prefer online platform for buying and selling of their cars next 2-3 years.

H2: Pakistani’s would prefer to buy imported cars from online market Place.

Literature Review:

Pakistan has managed to achieve macroeconomic stability over the past two years. This is a good sign towards recovery of our economy from the most serious economic crises it has ever faced since inception. During last year the economy grew by a provisional 4.1% from a modest growth of 1.2% in 2009. This also signals sustained Pakistani standard of living. (Economic Survey of Pakistan 2009-2010). This shows that the economic conditions of Pakistan are towards betterment, as compared to past years.

Now the mode of transportation is becoming a necessity for every individual as he needs to commute from one place to another. The need may arise for inter-city traveling, pick and drop from schools, traveling to office / workplace, for long drive picnics, etc.

As per current scenario, in Pakistan’s context there are only 10 cars in every 1,000 persons (Auto Industry Development Program: Perspective of Auto Industry, Ministry of Industries, Government of Pakistan).

This is one of the lowest figures in the emerging economies around the globe, showing a very high potential of growth in the auto sector in Pakistan. Furthermore, the rising of the per capita income with the changing distribution of the demographic, supported by expected inflow of 30 to 40 million young people in the economically active workforce within the next few years would stimulate the industry to grow and expand.

So the idea of a business venture in the automobile sector is seriously supported by the rising demand of automobile in the country in near future. Nevertheless, unfortunately, the internet is found to be the most neglected channel to reach the customers, by almost every automobile company operating in Pakistan.

Globally, the use of the internet, along with its other utilities, has expanded at a rapid speed, especially over the last two decades. If we take the example of Canada, according to study made by DESROSIERS Automotive Consultants, around 50% of Canadian households will be online by the end of the year. Moreover, only one in every ten households made purchases via computers at home. This depicts consumers’ possible concerns regarding their security of credit card transactions, or else they might want to physically inspect the goods and get its feeling when wants to make any purchase. (Dennis DesRosiers 2008)

Therefore, the issue of gaining customers confidence has to be specially highlighted with respect to payments, collection, auction bids, deliveries, documentation, etc. This would also allow our website to gain a reputation in the Pakistani automotive market as a reliable business entity.

However, shopping online is the most under-developed activity in the countries like Middle East, Africa and Pakistan region. Only half (around 47%) of online consumers indicates they have never purchased anything online. This is the highest percent of any other region in the world. Out of those who have easy access to the internet, about 33% do say they do not plan to make any online purchase in the next six months or so. (AC Nielsen Global Consumer Report, June 2010). This shows that the trend is now towards a change, and the shift would take to an online market place within a few years of time.

However, the Web-savvy Pakistanis will look online to buy computer hardware (25%) and clothing (18%), although they also lead the region saying they do not plan on making an online purchase in the next six months (38%). (AC Nielsen Global Consumer Report, June 2010)

The figures do not highlight the automobile purchases. This may be because lack of online presence and awareness among the target audience.

Thus, there is a dire need to create awareness among the prospects that could make use of online websites, which facilitate buying and selling of cars, rather than the conventional methods.

Out of the many people who use the internet in Pakistan, about 50% use the internet for information search and multiple purposes, this segment represents the target market for such an online market for buying and selling cars, will would exist (Shahzad Ali & Rooh-e-Aslam, 2008).

Moreover, their study also shows a growing trend in Internet usage for online banking, ticketing and payment of bills involving all the financial transactions. This indicates Pakistani internet users are towards maturity, and would find online transactions more comfortable while progressing.

Another research surprisingly proves that the Internet actually lowers prices for new cars, as the offline consumers on average pays 1.2% more than the online consumers do. Whereas the transactions do not have to occur online necessarily. It is true that the Internet makes price and product information more easily available. Meanwhile, new Internet institutions change the way that prices negotiation is conducted.

Moreover, In USA 48% of new car buyers visited at least one independent vehicle site such as Carpoint.com, Edmunds.com, Autobytel.com ConsumerReports.com and KelleyBlueBook.com just before buying a new car for themselves. (Zettelmeyer, Morton, Risso, 2000)

So with the rapid growth of IT sector in Pakistan, the same trend may also follow, and an online presence for dealers, brokers or any entity related to buying and selling vehicles, will be a good business opportunity, we see over the next couple of years.

EBay Motors was launched in April 2000. Many people in the e-commerce industry believed that consumers may hesitate to purchase a car online. However, the facts show that people did purchase numerous cars and although eBay expected more local purchases. However, more than 75% of all cars they sold were sent out of state. The site proved to be a very successful venture and initial estimates highlights eBay Motors to be on the track to sell $1 billion in cars per annum to become the largest car seller online. (Jim Britton, 2003)

This example of EBay shows, in a time span of even less than seven years of existence, its growth has taken place from mainly selling low-priced goods to more expensive items such as automobile cars. There is a specific case study which only examines the process of selling a high-priced automobile by using the electronic auction realm of eBay Motors.

Thus we also believe, if people are offered proper services for online automobile auctions such as trust in such electronic market places, consultancy for buyers and sellers, authenticity for documentation, like the EBay motors itself, they would certainly consider an option to make such purchases online.

It is often observed that the current Informational sites in Pakistan don’t have a direct relationship with car dealers. They may include pakwheels.com, carpakistan.com, pkmotors.com. A foreign example of such an information site is edmunds.com. It provides rich editorial content similar to a car magazine (that includes user’s review, spectator’s comments, mechanic’s opinion, etc.) supplemented with information on exact options and tentative pricing for new and used vehicles.

So sources of revenues for an online venture will include advertisements, detailed inspection reports on individual vehicles, as well as commissions to other online automobiles related sites such as the auto-loan from banks and auto insurance company websites, car trackers, audio system, car accessories, etc.

Our referral site will offer consumers detailed inspection report about individual cars, which will include current market conditions and invoice pricing along with the editorial content.

Recently, some similar car trading websites have initiated offering cars just at the posted prices to the consumers. The most popular ones are CarsDirect.com and Greenlight.com in USA. CarsDirect is an online broker that has signed contracts with around 1700 dealerships nationwide. The consumers buy cars at fixed prices on this website. However, they do get chance to have a discussion with the dealer to sign the papers and assess another necessary information.

Whereas Greenlight is a large owner of dealerships and sells consumers cars owned by its dealerships network only. (Morton, Rosso, October 2000)

Not only this, even now Toyota has come up with a new plan by the name of Toyota Global Vision. They have planned to dominate the new emerging markets. The vision has already been complemented by their new car – The Etios, a simple, fuel-efficient, small sedan that sells for around $10,000. This car has specifically been designed for the Indian market by Toyota and is a huge success there. Besides this, there is a month long waiting list for the buyers and Toyota has to increase its production within no time. (John Rosevaer, March 2011)

Pakistan is a very similar market to India. Thus it is for sure that this economic car will also have a good market share in Pakistan as well, as people are fond of small sedans. Therefore, aligning with Toyota’s Global vision concept, and with other automotive companies operating in Pakistan, an online dealership would be used to cater for the Pakistani automobile market.

As far as used cars are concerned, In US Market, E-Bay Motors serves as a good marketplace for their nationwide automotive industry. It charges a nominal fee for listing the car plus a certain percentage as a commission. Even so, the added advantage they give to their customers is a lot of help deciding what prices to ask and how to advertise the car to the best advantage. (Bob Rankin, 2010).

So when such a venture would be started in Pakistan, the buyers would want to be more confident of coming forward and make their purchases from online venture because of its reputation of being safe. So the sellers can list their car on such online websites and portals as an auction as well, if they cannot decide what price to charge.

Nevertheless, if we take the perspective of buyers, he gets many great benefits. It provides him with the ability to read product reviews of other fellow-shoppers or product experts. Such opinions count a lot at the time when people purchase consumer electronics. A research shows that 57 percent of online respondents consider reviews prior to buying. Reviews on cars (45%) and software (37%) rounded out the top three most important online influences when making a purchase.

(Global Trends in Online Shopping, AC Nielsen Global Consumer Report, June 2010).

So there has to be a provision of testimonials of existing users and members as well, in order to ease up their decision making process, if they opt for a specific model.

One of the biggest problems we might face to start our business is the lack of traffic on our website. Obviously, if our website isn’t getting any traffic, we cannot generate any revenues.

People now often use the internet to search for information. Thus we need to provide all the meaningful information for free to other sites, and we could possibly then see more traffic and better search engine rankings. The secret will be to always include a link to a one’s site with each tidbit of information.

Therefore, we will try to give away free expert content, create articles, videos or any other content that people will find useful. And distribute that content through online article directories or social media sites.

Finally, another useful article highlights best practices and tips for online car selling websites. Used cars that are online for sales should be listed against scores of similar vehicles available online or any other medium. The author of this article also emphasizes that at EBay, 40 is the magic minimum number of pictures, which facilitates a quick sale of the vehicle. This is because those seriously interested buyers want to see real pictures. Fewer photos or poor photos can mean no, or at best low, offers (Russ Heaps 2011).

Therefore, the listings of cars will have keywords in the headlines for the buyers, to minimize their search time. We will also give an advanced description of the vehicle in writing. This would be one of our good areas where we as private sellers can outperform a professional dealer.

Most importantly building a rapport with the sellers as well as buyers will keep them value highly of where the process is at. So we as the online market place for vehicle trade platform would make sure it’s a great experience for our customers.

Primary Research:

An interview with the car dealer was also conducted to collect valuable input for the Study. Furthermore we also managed to conduct a survey as follows:

Sample selection

For this a sample of 50 respondents was selected from the city of Karachi only.

They were as follows:

20- People who recently bought a new car (Businessmen, Doctors etc)

10- People who recently bought / sold used car

10- Car Brokers

10- Passenger Car Dealers

An interview with the car dealer was also conducted to collect valuable input for the Study.

Data Collection Method

Based on the literature survey a theoretical frame work and a closed-ended questionnaire were developed and was pre-tested before being launched. We personally administered the questionnaire by visiting the respondents.

Analysis Procedures:

Closed ended questionnaires were developed and on the collected data cross sectional analysis were performed. Analysis was done on Microsoft excel, the data was average out and graphs have been generated upon the averages.

Expected Results:

The questionnaire was formed on the conducted interview to get a better knowledge of the local market and how automobiles are purchased online. The interview showed clear hints of the real results; expected results are somewhat the same and are as follows.

People avoid purchasing automobiles or literary anything online due to the lack of self-efficacy as there’s limited internet knowledge.

Government taxes, duty, fee and time taken time taken for t he automobile to reach; all of these factors make the automobile purchase online difficult.

Local automobiles can be bought online and will be a new way of purchasing online in coming years in Pakistan.

Lack of specialize mechanics, equipment and spare parts make the purchase of imported automobiles very less.

Internet security is also another issue which stops from buying online.

Results and Discussion:

A questionnaire was distributed and from 50 respondents the answers were plotted into graphs of which the results are ahead.

On the purchasing of a vehicle online or not the answers clearly showed the better trust of purchasers in physically buying the product rather than purchasing online, mainly the trend and self-efficacy of the purchaser have a big part to play.

In another question which was asked in reference to the first question the purchaser had a clear lack of security while paying online due to which the purchaser hesitates to buy online.

The results also indicate that purchaser does not even consider that a product like an automobile can be bought online as the physical presence of the product is very important and cannot be bought online, unless he is given a guarantee of payments, expert opinion on specific vehicle, testimonial, physical inspection, chance to interact with dealers, correct documentation, etc.

The purchasers want to buy automobiles locally rather internationally. This was because of global scams, deliveries, non-availability of auto parts, lack of mechanical expertise in the market, etc.

For the customers who have plans to buy / sell their cars online for themselves or others, an authentic reference is very important. This clearly highlights security factor which may influence their purchase decision.

In the question of physical presence of the product the respondents have clearly given the answer and the importance of physical presence of the product due to the factors which are in the following questions.

The presence or intend of buying the product is highly effected by the reasons of not availability of spare parts, also unavailability of good mechanics and machines, which can measure the maintenance of the vehicle.

The bulk buying purchasers and showroom owners indicated that purchasers don’t intend to import through an online website, unless a relaxation in custom duties is given to them. They also want a safeguard against fraud and internet scams which they hear and read about in newspapers.

However, these dealers and bulk buyers have shown interest in buying an automobile from Japan as they are quality wise better and honest people due to the enormous industry.

Results Obtained:

Findings from the survey questionnaire show that only 60% of the respondents prefer to buy used / new passenger cars through an online platform if their highlighted interests are safeguarded. If the rest would be given options such as security, safe payment options, guarantee 100% physical inspections, this chunk will also love to go online for making such purchases. However, until now Individuals have not yet bought many products online but the trend would continue with time as businesses would start gaining consumer trust.

However, users are still hesitant to purchase cars internationally. This is due to lack of availability, lack of specialized mechanics and possibilities of scam during inline transactions. But the most popular option for imported cars was Japanese origin due to its good market and easier maintenance in the local arena.

Therefore, the first hypothesis that we considered comes true:

H1: Pakistani’s would prefer online platform for buying and selling of their cars next 2-3 years.

However, the second hypothesis is rejected:

H2: Pakistani’s would prefer to buy imported cars from online market Place.

Conclusion

Any used cars would be physically inspected by our team first, before getting listed on our website.

The customers would be provided an easy mode of payments for transactions.

Include relevant and meaningful pictures, expert opinions, testimonials, etc. for the relevant cars the users will search.

Extra Services like transfers, documentation etc. would be provided.

Auctions, where buyer and sellers could solicit bids.

Online dealership of new cars of existing companies in Pakistan.

The above elements would build a rapport with the sellers as well as buyers, and keep them value highly of where the process is at. So we as the online market place for vehicle trade platform would make sure that the above afore mentioned elements are present on or website. It would ensure substantial traffic and enhance the great experience for our customers, if they are to buy and sell used cars and locally assembles new cars.

However, people still may not go for the option to buy imported cars through such an online platform. It is because they first want to physically inspect the cars before going making such a decision. Nevertheless the Japanese cars will be one of the favorites due to easier and cheaper maintenance, relatively easier availability of spare parts and its specialized mechanics.

Suggestion for Future Work:

This paper can be extended to make studies for:

In which cities of Pakistan will this business model be successful?

Do the automotive companies realize importance of online selling in Pakistan?

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