(Yicai Global) July 12 -- Xianyu, the second-hand online marketplace of Alibaba Group Holding Ltd. [NYSE:BABA] has opened a brick-and-mortar store to let potential consumers experience its services.
Aiche Xianyu Used Car, an experiential offline store jointly set up by Xianyu Used Car, owned by Alibaba, and Aiche Baba, another second-hand car e-commerce platform, debuted in Hangzhou, capital of East China's Zhejiang province, yesterday. It is China's first brick-and-mortar service store of a used car e-commerce platform offering 4S -- sales, spare parts, service, survey, services.
The newly-opened experiential store is designed and decorated in accordance with the standards of an 4S store, with 80 percent of its area being experiential space, offering car display, purchase, sale and after-sales services.
More than 200 second-hand cars were on display at the store yesterday. Consumers can find out more about the details of the cars for sale online after scanning the QR codes of the used vehicles. They may also have a test drive of the car.
The experiential store boasts several e-commerce characteristics similar to Xianyu's. The store accepts Alipay, allows customers to trace their orders to ensure that their money is safe, and provides financial services in addition to used car transaction services.
"E-commerce giants could be the biggest winners," Mei Songlin, vice president and managing director of JD Power's China operation, told Yicai Global while analyzing competition among the used car platforms.
Second-hand car transactions offer a very low gross margin and a commission of only 1 percent, Mei said, adding that 3 percent commission is already very high. Therefore, used car platforms can only rely on providing financial services to add to transaction depth.
Used car e-commerce platforms have advantages that traditional financial institutions lack. Second-hand car e-commerce platforms backed by Baidu, Alibaba or Tencent, collectively referred to as BAT, such as Xianyu Used Car can improve their efficiency and ability of risk control with data support from BAT.
"Going forward, Xianyu Used Car will fully exploit data on Alibaba's hundreds of millions of consumers and those on car purchases, sales and use to help boost the development of secondhand car platforms," He Jia, director of Xianyu's second-hand car business, told Yicai Global. "Our goal is to cultivate 100 CarMax (the largest used car platform in the US) in the Chinese used car market."
The most important impact of used car finance on the market is reflected in customer experience, Mei underlined. Since online operation is more efficient, customers will have entirely different experience when borrowing money from online lenders than from traditional banks, leading to higher consumer expectations.
Mei projects that some domestic used car platforms will start experimenting with asset-heavy operations after securing funds. "They will even have more diversified models then. Of course, they may also fail," he said. "This will be a great market with many highlights. The market is still taking shape."