Ford will test Internet sales models in China
From left, Ford China Chairman Jason Luo, Ford CEO Jim Hackett, Ford Chairman Bill Ford and Ford Asia Pacific President Peter Fleet outline the next phase of China expansion.
Ford Motor Co. is using the world’s largest vehicle market as a test bed for alternatives to traditional dealer showrooms.
The automaker last week announced a partnership with Alibaba Group Holding to explore cooperation on, among other things, the sale of Ford vehicles in China on Alibaba’s online retail platform Tmall. Although Ford has not divulged specific plans, the partnership could involve using the concept of a “car vending machine,” where customers use smartphones to browse vehicles housed in a collection several stories high, then wait as they’re delivered to the ground floor.
Separately, Lincoln recently launched a number of pilots in China’s Hunan province as it experiments with selling models. Amy Marentic, president of Lincoln in China, told Automotive News that the brand last month began testing three ideas: online-only stores using virtual reality and mobile phone technology, popup-like mobile sales centers, and mini delivery centers with room for a couple of show cars and service bays.
In each instance, Marentic says that if the pilots are successful, the methods could eventually make their way to the U.S.
Ford’s foray into alternative selling models makes sense in China, analysts say, because the market is highly competitive and primed for growth. And, much like the U.S., consumers are increasingly interested in online sales.
“Ford’s partnership with Alibaba will benefit its competitiveness in the Chinese market, as the e-commerce market in China will continue to grow as more consumers opt for online shopping rather than traditional brick-and-mortar stores,” BMI Research said in a report last week. “However, Ford dealers will come under pressure if its strategy is successful.”
Jim Hackett makes a presentation to the owner of the 100,000th Lincoln vehicle delivered in China.
The automaker has vowed that its dealer body will continue to play a key role in China.
Lincoln, for example, has been adding showrooms nearly every week since it launched in 2014, and says the most important factor influencing a consumer’s purchase in that country is dealership experience.
The brand has about 90 showrooms to date, with plans to reach 100 by year’s end.
But its high growth rate may slow in the coming years. While Lincoln’s luxury competitors each have 500 to 600 dealerships in China, Marentic said Lincoln may take a different approach.
“When you come into a market last, you have to come in in a thoughtful way,” she said. “We have a network strategy. We’re not tied down to 600 stores. If the market moves more online, we’re in a really good position.”
That involves trying the three pilot programs. Marentic said the goal is to attempt to serve a province that’s the size of Kansas and home to nearly 70 million people, without adding more traditional dealerships. If successful in Hunan, they’ll expand to other parts of China.
“We could stop our network expansion at any point and move all online, but all through our dealer investors,” Marentic said.
Mike Burgiss, vice president of digital retailing for Cox Automotive, said the small size of Lincoln’s network in China creates an opportunity to try something more suited to the desires of today’s consumers.
“If we could clear the slate in the U.S., I’d bet we’d end up with a different number of dealerships,” Burgiss said. “There’s a lot of flexibility when you can design in a new market.”
Ford’s three-year tie-up with Alibaba allows them to dabble in four business units: operation systems, cloud computing, digital marketing and online retail. It could involve areas such as mobility services, connectivity and artificial intelligence.
CEO Jim Hackett said it aligns with Ford’s mission of delivering “smart vehicles in a smart world.”
Initially, the two sides will explore “digital solutions for new retail opportunities at various stages of the automotive ownership cycle, from presales and test drives to leasing options,” Ford said in a statement.
Beyond the high-tech pilots, the partnership could help Ford by combining sales components under one umbrella.
“China is a very different market than the U.S.,” Burgiss said. “When you can integrate like that — the financing, retail sales component, distribution channel and have perfect control over the inventory — it simplifies a lot of things.”