Online Car Sales Changing the Power in Car Buying Networks
This article discusses how used car purchasing websites are starting up and are beginning to take business away from in-person dealerships. It explains that while some car dealerships do not yet feel threatened by these online markets, surveys are showing that consumers would rather buy a car online than negotiate with a salesperson. Although they are buying these cars sight unseen, more and more people are comfortable doing these as they begin to buy everything online. These sites also some sort of money-back guarantee, making consumers more comfortable with these purchases and less likely to go to a car dealership than in the past.
These developing services demonstrate the change in the distribution of power in a car-buying network. As more consumers lean towards car purchasing online, the in-person dealerships lose power in the network. This is because consumers are gaining more outside options through the online dealerships. While the in-person dealerships have many outside options to each consumer through other consumers, these other consumers all gain the outside options of the online dealerships, therefore decreasing the power of each in-person dealership (and the prices and/or complexity or purchasing process) to create a balanced network. As the buyer’s outside option increases in value to them, the in-person dealership will have to offer them lower prices and/or an easier purchasing process to increase the value of the buyer’s purchase or risk losing them to the online dealer.
Source: http://www.concordmonitor.com/Used-car-startups-lure-buyers-online-away-from-dealer-lots-4825606