Adapting Business Models for Used Cars Industry

This assignment requires a detailed examination of the used cars industry, focusing on adapting business models to establish trust with sellers and buyers. The use of social media for advertising is also emphasized, as well as refining the business model and adopting a functional organizational structure to manage growth effectively.

2018
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Executive Summary
This report discusses the disintermediation impact analysis of an E-commerce website specializing in
selling of used cars. The report presents a discussion of how other companies have brought
disintermediation in the industry and shows what the proposed My Dream Ride E-commerce website
has in the market. This is shown by discussing its business model and other factors that will either lead
to its failure or success.

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Dear Mr. _______________,
I hereby present my research findings on the proposed My Dream Ride E-commerce website and declare
that this is my original work and has not been copied from any other sources apart from the supporting
resources cited under the reference section
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Table of contents
Contents
1 Introduction..............................................................................................................................................3
2 Disintermediation.....................................................................................................................................3
3 E-commerce business model....................................................................................................................4
3.1 Value proposition..............................................................................................................................5
3.2 Revenue model..................................................................................................................................5
3.3 Competitive advantage......................................................................................................................6
3.4 Market strategy.................................................................................................................................6
3.5 Organizational development.............................................................................................................6
4 Clickstream behavior................................................................................................................................7
5 Conclusion................................................................................................................................................7
6 Recommendations....................................................................................................................................8
7 References................................................................................................................................................9

1 Introduction
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.
2 Disintermediation
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.
3 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
3.1 Value proposition
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.
3.2 Revenue model
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.
3.3 Competitive advantage
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.
3.4 Market strategy
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.
3.5 Organizational development
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
 Departmentalization
 Allocation of responsibilities
 Coordination
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.
4 Clickstream behavior
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
5 Conclusion
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.
6 Recommendations
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.

7 References
Chapman, M., 2018. Online upstarts seek to disrupt used-car Buying. New York Times. Viewed 28 Mar.
2018, <https://www.nytimes.com/2017/04/13/automobiles/wheels/online-used-car-sales.html/>.
Henry, J., 2015. Carvana Used-Car Vending Machine Is Tip Of The Disruption Iceberg. Forbes Auto.
Viewed 28 Mar. 2018, <https://www.forbes.com/sites/jimhenry/2015/11/29/carvana-used-car-vending-
machine-is-the-tip-of-the-disruption-iceberg/#71d864e2678f>.
Ingham, E., 2015. Can Tech Startup Carspring Disrupt The £45B Used-Car Market In The UK? Forbes.
Viewed 28 Mar. 2018, <https://www.forbes.com/sites/edmundingham/2015/09/10/can-tech-start-up-
carspring-disrupt-the-42bn-used-car-market-in-the-uk/2/#41ec47fe4c72/>.
Katragadda, N., 2015. Beepi: Would you buy your car from an iPhone? HBS. Viewed 28 Mar. 2018,
<http://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-
transformation-of-business/beepi-would-you-buy-your-car-from-an-iphone/comments-section.html/>.
Kong, G., 2018. Is technology really disrupting the car-buying experience? CIO. Viewed 28 Mar. 2018,
<https://www.cio.com/article/3183468/data-center/pumping-the-brakes-is-technology-really-
disrupting-the-car-buying-experience.html/>.
Lardner, F., 2017. E-Commerce Having a Growing Impact on the Automotive Industry. Foley & Lardner
LLP. Viewed 28 Mar. 2018, <https://www.autoindustrylawblog.com/2017/02/20/e-commerce-having-a-
growing-impact-on-the-automotive-industry/>.
Ovans, A., 2015. What Is a Business Model? Harvard Business Review. Viewed 28 Mar. 2018,
<https://hbr.org/2015/01/what-is-a-business-model>.
Pahwa, A., 2015. eCommerce 101: eCommerce Business & Revenue Models. FEEDDOUGH. Viewed 28
Mar. 2018, <https://www.feedough.com/ecommerce-101-ecommerce-business-revenue-models/>.
Periasamy, P., 2002. ORGANIZATIONAL STRUCTURE FOR ELECTRONIC COMMERCE: A QUALITATIVE
INVESTIGATION. Semanic scholar. Viewed 28 Mar. 2018,
<https://pdfs.semanticscholar.org/f83f/91ff71cb38fc6b0a6adf73be9a173e31c3e8.pdf>.
Shewan, D., 2018. 7 of the Best Value Proposition Examples We’ve Ever Seen. The Word Stream Blog.
Viewed 28 Mar. 2018, <https://www.wordstream.com/blog/ws/2016/04/27/value-proposition-
examples>.