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Comparison of online and offline Retail Environment of Car Industry

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Essay title: Comparison of online and offline Retail Environment of Car Industry

The offline retail environment of the automobile industry is that of manufacture to intermediary to consumer. The process from which the product (car) proceeds from manufacturer to consumer is that of through the automobile dealer. This intermediary batch purchases a number of models from the manufacturer and sells them from the �lot’ or storefront. This placement and presentation of the product has proved largely successful. The tangible product is viewed, test driven and purchased from the intermediary. An advantage of the offline retail environment is that of the face to face (F2F) transaction environment. The purchase of a car requires high involvement between the supplier and consumer and can be argued demands a customer relationship and it is contended that this enhanced interactivity empowers the consumer. (Pitta, Franzak& Fowler, 2006) Knowledgeable sales people could also enhance trust and along with an already established brand knowledge. A fervent argument in favour of a retail environment is; consumers of products of a higher expense i.e. cars, houses, furniture require time and attention from employees (Grewal, Baker, Levi & Voss, 2003) and it is argued that this value cannot be replicated or matched in an online environment.

One major weakness off the offline retail environment that E Business may have overcome is that of customisation. Previously, if a consumer wished to have a particular feature or option they would have to wait weeks or months for the particular specification to arrive, this is no longer the case as the consumer can purchase custom made products without having to wait for specified features. The online retail environment now offers many benefits both to the manufacturer and consumer. Web markets expand the choices available to buyers, give sellers access to new customers and reduce transaction costs. (Kaplan & Sawhney, 2000) The impact of B2C direct marketing is that manufacturing transaction costs are lowered and expensive intermediaries can be eliminated, this can be described as disintermediation. (Turban, 2006)

Nonetheless, purchasing a car and the whole process has proved to be time consuming and at times a battle of wills between the consumer and automobile dealer. It is suggested that consumers who express a high disutility of bargaining and a lack of time are more likely to purchase from the internet. (Zettlemeyer, Morton & Silva-Risso, 2001) The onset of online intermediary or infomediaries (Viswanathan, Kuruzovich, Gosain & Agarwal, 2007) has brought about a distinct advantage for these consumers. Therefore, it is more clearly seen that the online environment has reintermediated agents such as Microsoft Carpoint and www.autobytel.com rather than making them obsolete.

Today, the consumer can purchase directly from the manufacturer referred to as business to consumer (B2C). Even so, in researching various websites from car manufacturers such as Toyota and Fiat, (www.fiat.co.uk, www.toyoya.co.uk) the car dealership appears to remain the recommended means of purchase. The online advantages are that the consumer can compare all products available and in conjunction use the infomediaries to compare different brands and manufacturers. This can be described as �click and mortar’ purchasing (Turban, 2006). The consumer can use the online environment to research and select the product they wish to purchase and use the car dealership to view and assess the tangible product. There is also a superior sense of security in purchasing from the dealership as many consumers may still be wary of protection when purchasing products on line especially when the cost is extremely high. Their “clicks and mortar” retail operations have the confidence enhancing real store backing up the benefits of their internet operations. (Pitta, Franzak & Fowler 2006) Early in a relationship, elements such as company or brand name assume increasing importance. They serve as surrogate indicators of probable performance. Thus, international brands such as Toyota have brand equity that bolsters consumers’ perception of trust (Ward and Lee 2000) and heighten the consumers’ sense of fulfilment. Rather than solely online companies, who may only offer ghost storefronts with no inventory and little reputation to defend. (Pitta, Franzak & Fowler 2006)

Value creation has been described as the difference between the amount that the consumer is willing to pay for a product and the costs of providing the product. Value can also be added to the product through outside or support (Porter, 1985) activities such as brand awareness, speed of delivery, after sales service.

Resource Based View (RBV) theorists argue that information technology (IT) resources can be used today in an online environment to enable a firm to improve efficiency regardless of whether mimicked by competitors,

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