This report discusses the principles of e-commerce industry by focusing on disintermediation caused by e-commerce. The report discusses intermediation impact analysis in the e-commerce industry specifically of used cars e-commerce industry. Used-car e-commerce industry experiences its challenges in the uptake of the business as a fully e-commerce business. This can be attributed to many factors and challenges which are brought out on the analysis of disintermediation impact analysis.
To illustrate how disintermediation would happen in used-cars e-commerce industry I propose My Dream Rider E-commerce website which will implemented as a full used-car selling e-commerce to both businesses and individual customers. The main reason for naming the website my Dream Rider is because the name tells a lot about which type of e-commerce website it is thus the customer can know the type of products he or she is expecting to find when they visit the website. Secondly, the name is very catchy and thus will create an urge to a new user to want to open the website and see what the website is about.
For any business, the primary goal is making money thus My Dream Rider has to make money for it to fully eliminate in intermediaries in the business. This report shows the business model that will be adapted by My Dream Rider for it to stay in business and to make profits. Other factors crucial to the success of any business like marketing are done by discussing the concept of clickstream behavior where consumers create a transaction log as they browse the internet for online shopping.
Disintermediation is the process of removing middlemen between producers and consumers existing in the market. Examples of middlemen for different types of businesses are wholesalers, distributors, brokers among other intermediaries. The automotive industry has had intermediaries for the longest time. The intermediaries have been able to succeed in the industry because of the nature of the industry. Most people are still visiting physical dealerships to purchase either new or used cars. However, this is more rampant for used cars as there are many factors that make buying of used cars through an e-commerce website not very viable (Ingham, 2015). Used cars cannot be compared to other products like household items or electronics which are easy to repair and sell. Cars have to go thorough inspection to make sure that what the customer is getting has value to his or her money. This is mainly because of the cost of cars. By embracing technology, intermediaries are becoming more dominant in the industry by establishing their own e-commerce websites that provide customers with a platform from where they can search for cars to purchase (Chapman, 2018). Some are even doing video reviews to add more convincing power to the customers.
However, the e-commerce industry is rapidly growing for all types of products thus customers would still want to make a full purchase for a car in an e-commerce without having to go through the struggle of dealing with different intermediaries like salesmen before purchasing a car as most customers have been known to visit several dealerships before making a decision on which car to buy (Katragadda, 2015). A study done in the UK shows that 9% of willing car buyers would prefer to buy a car in an e-commerce website if all the conditions were right for them. With this data, various companies are causing a disruption in the used car automotive industry. These companies include; Vroom, Beepi, Carsring, Carvana and Shift. These companies are taking advantages of the challenges involved in purchasing used-cars to cause intermediation in the used-cars industry.
Shift was started in 2013 by Ingersoll and George Arison. Shift adapted a business model aiming at giving both sellers and buyers more money by eliminating intermediaries like dealers and brokers while giving both the seller and the buyer a better selling and buying experience respectively. But where does Shift come in if it’s not an intermediary? Shift performs appraisal of the car and sets the price. This is done to eliminate negotiation by the buyer meaning that the price that the buyer sees is the final price. The fixed price is done to make it easy for customers who are doing comparisons with other businesses and to fasten the process of purchasing the car. Shift then facilitates other factors like delivery to the customer and facilitation of test drives. This concept of e-commerce websites is causing a disruption in the industry but some companies are experiencing huge losses even after using millions of dollars to invest in the industry. This can be attributed to the technicality of the used cars industry (Lardner, 2015).
My Dream Riders e-commerce website aims to eliminate intermediaries in the business by connecting both sellers and buyers. The website will provide an easy way for sellers to sell their used cars and for buyers to find and buy used cars. How will this be possible? To succeed in this industry, the website has to build some level of trust between the seller and the buyer and that is why all cars sold through the platform will be thoroughly inspected. Inspection will be done in such a way that there is a standard score that a car has to reach in order to be listed in the website. The price of the car will be set according to the make and the score of the car after the inspection. Setting the price will help create a level of trust between the buyers and the sellers as both will be getting value for their products. To help with logistical issues, the e-commerce business will only operate in a limited area and then operations will increase as the business grows. Limiting operations to one area will help the business assess all the metrics that will help how the business will be run as it grows. Similar businesses have experienced huge losses for expanding too quickly (Kong, 2015) thus this will help the business to grow gradually in a manageable way.
E-commerce business model
A business model can be seen as the description of how any business makes money. The biggest challenge faced by many startups is understanding the problem they intend to solve for their target customers by starting the business (Ovans, 2015). The process of understanding the problem being faced by the customers helps you identify whether or not there is a need for your product in the market. Understanding the problem you are solving will help to know whether your target customers will want your product. After identifying whether there is need for your product the second step is identifying how you are going to make money from the business. These two ingredients are what make up the mix that is used for analysis when coming up with a business start-up
This is not different for e-commerce business models as those two ingredients should be closely evaluated for any e-commerce business. To discuss the business model of My Dream Rider E-commerce five components are discussed;
- Value proposition
- Revenue model
- Competitive advantage
- Market strategy
- Organizational development
This is the most important component of the five because value proposition helps explain how the business intends to fulfill customer needs. It explains what aspect of the business makes it stand out from its competitors and why the customers should purchase its products or services instead of the products and services of other similar businesses in the industry (Shewan, 2018).
In this generation of millennials, most people are looking to their phones for almost everything. Smartphones have revolutionized business and thus people are using their phones to shop through e-commerce websites. For new cars, dealers are finding it easy to thrive in the e-commerce industry because there is already a level of trust between customers and the dealerships because the cars are new. However, used-cars e-commerce industry is not doing very well as compared to the new cars industry. My Dream Rider e-commerce website aims to change this by changing the way customers purchase used vehicles by doing away with middlemen who make the experience of selling and purchasing vehicles difficult for both the sellers and the prospective buyers. Despite most customers agree that they would purchase a car through an e-commerce website if they were assured everything is right and that they were getting value for their money.
My Dream Rider aims to make it easy for sellers to find buyers for their used cars and for buyers to buy their dream cars. This will achieved by making sure that the vehicles submitted for listing by sellers are inspected thoroughly by the company. This will involve hiring of qualified technicians who will inspect the vehicle to make sure everything is in order. The inspection will be done a checklist to make sure the car reaches the minimum score for it to be listed for sale in the e-commerce website. The business will also determine the price of the car for the seller to make it easier for the buyer to make a decision on a car because the price will be non-negotiable for all vehicles. This will make it easy for the customers because it’s a common thing among most car buyers especially used-cars buyers to visit more than one dealer comparing prices and the quality of the car that exist in those dealerships. With a constant non-negotiable price, customers will be assured that the car they intend to purchase has guaranteed value for their money. If the customer is interested in a car the business will facilitate other measures like test drives on behalf of the seller. This will apply for all types of customers; business to customer and business to business.
The revenue model of a business specifies how the business will earn revenue from the investment it has made to make sure there is returns on the investment (Pahwa, 2015). There are different types of revenue models that can be adapted by an e-commerce website but my Dream Ride e-commerce will adapt drop shipping revenue model. This model is the best suited for this business because the main aim of the business is to eliminate intermediaries that exist between the seller and the buyer.
To kick off, a heavy investment will have to be done on the business thus there is need for the business make money so as to ensure there is a return on the investment. The drop shipping revenue model does not specify how the business will be making money so far as the transaction happens between the seller and the buyer. For the business to make money, the business shall go an extra mile of arranging test drives for willing buyers but for a cost. Since the business will involve used cars only, most customers will need to do a test a drive. The business will arrange how the customer will get the vehicle for but for a certain fee. The business will also make money through logistics of the cars either from the sellers or to the buyers. If a seller is wants to sell a car, they are supposed to deliver it to the business premises for the inspection and other procedures that are done before the car is listed in the e-commerce website. If the seller is not willing to bring the car to the business premises, the business will arrange pickup of the car at the sellers cost. For the buyers, the business shall deliver the car to the buyer at their own cost if they are not willing to come and pick up the car at the business premises. The two ways of making money will only work if the business is able to serve a lot of sellers and buyers to make sure that the business is breaking even and making profits.
My Dream Ride e-commerce website is unique from other similar e-commerce websites and intermediaries that deal with selling of used-cars. For traditional intermediaries like dealers and brokers that exist between the seller and the buyer the business has a competitive advantage because it makes it easy for a seller to find a customer for their car and for a buyer to find their dream car. This is achieved through the e-commerce website which provides a platform through which buyers can find sellers. The e-commerce industry is growing at a very steady rate and it is estimated to overtake the retail industry by the year 2020. Thus adopting the e-commerce model for the business will make it stand out among traditional intermediaries as it will make the experience of selling and buying cars for both sellers and the buyers easy. However, this comes at a cost where the business should establish a level of trust especially to the buyers to make it effective to buy and sell through the e-commerce website.
Used cars e-commerce industry has other players that might bring a lot of competition to my Dream Ride e-commerce website after disintermediation is achieved. To deal with other e-commerce websites, the business will ensure that the car that are listed are up to a specified standard by conducting thorough inspection on vehicles before they are listed in the website. This is done to assure prospective customers that all the cars listed on the website do not have any problem and the price going along with the car has been determined through a lot of analysis.
The success of My Dream Ride E-commerce website is dependent on the number of sellers and customers that will be accessing and using the website every day. Apart from visiting the website, the revenue will be generated by the number of complete sales that are done through the e-commerce website. For the business to attract a lot of customers an in depth research on the market will be done to come up with a strategy that will help the business attract more customers than its competition.
To achieve this, the business will have to do a lot of advertisements. Although traditional advertisements through televisions have been known to be effective, the business will use social media to advertise itself to prospective customers. Social media websites experience breathtaking number of visits every day and the business sees this and plans to take advantage. The business will advertise on the following social media websites; YouTube, Facebook, Twitter and Instagram.
For any E-commerce business to succeed organizational structures aimed at supporting must be put in place (Periasamy, 2015). My Dream Rider E-commerce business will have to implement new organizational structures that will work for the business considering the industry under which it is operating in which presents a lot of challenges. My Dream Ride will implement a functional structure with five basic components;
- Reporting relationships
- Span of control
- Allocation of responsibilities
Functional structure will ensure a hierarchical approach is adopted by grouping employees depending on their functional specialization. Each grouping or department will be required carry it duties to the best of its ability while ensuring communication and interoperability with other departments.
Clickstream behavior is the data that is collected as consumers browse the internet while doing online shopping. This data is very crucial for any e-commerce business especially My Dream Ride. For My Dream Ride this data will be necessary especially for marketing.
The data collected as different users use the e-commerce website will help the business to know consumer trends. This will be possible by implementation of an analytical program to analyse the data and give the trend followed by different customers. With this data, the business will be able to know which products are on high demand and how are customers accessing them when they visit the website.
The data collected and analyzed can also be used by the business to create a recommender system that will be useful especially for new visitors. The recommender system will help the e-commerce to recommend products immediately the customers visits the website depending on the trend that is more rampant among many customers. By doing recommendations, the website will be able to turn visitors into buyers.
The data will also be useful for customer segmentation. This will work especially for businesses purchasing cars for sale from the e-commerce website. Segmentation will involve identifying the most regular customers and those who are not regular. This will help create a different experience for every customer that visits the website. By giving personalized experience to every customer, more customers are likely to come back again or recommend the website to friends thus helping increase sales for the business
According to the research done and presented on the report above My Dream Ride e-commerce business can bring intermediation in selling of used cars industry. However, there are many challenges facing the used-cars industry that make it hard for it hard for any e-commerce business to disrupt the industry and completely remove intermediaries existing between sellers and buyers.
However, the industry presents a lot of opportunities for an e-commerce website as many customers are willing to buy used cars from e-commerce websites as long as they are assured of quality for their money. Thus My Dream Ride E-commerce website has potential to succeed if it implements a business model that will make it easy for both sellers and buyers to sell and buy respectively. This will be achieved by doing a lot of marketing and adapting a functional structure that will be easy to manage given the nature of the business.
For My Dream Ride E-commerce website to succeed there are certain things that are crucial in the used cars industry that should be followed. The business should make sure that it establishes the trust of its sellers and buyers from the beginning. This will help the business create a name thus many customers will prefer the business to other intermediaries. The business should use social media to advertise as different social media platforms present a large number of people. Apart from refining the business model the business needs to adapt a functional organizational structure to help manage the business as it grows. The functional structure will only work if the various departments work distinctively while also ensuring there is effective communication.
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