Autohome’s Great Ambition: Becoming The Largest Online Automobile Purchase Platform
Qin Zhi, CEO of one of the leading online destinations for automobile consumers in China Autohome, shared in this article his insights on various topics: the online automobile purchase business, price transparency, the “insane” subsidy strategy, second-hand automobile market, competition, to name just a few.
On November 11th 2015, Autohome Inc, the leading online destination for automobile consumers in China, spent 50 million RMB in holding an Automobile Festival. During the festival, around 15,000 automobiles were sold, and the total transaction volume hit 2.2 billion RMB. Qin Zhi, the CEO of Autohome at that time, announced that he would begin to turn offline automobile business onto a huge online transaction platform.
Almost two years later, Qin Zhi, in an interview with TMTpost and several other media agencies, suggested that: “I would further turn Automobile.com.cn from a media outlet into a huge online automobile purchase platform that provides professionally produced and user-generated content, a comprehensive automobile library based on data collected from various dealers, extensive automobile listing information to automobile consumers and personalized recommendation based on users’ specific preferences and requirements.”
Autohome used to be merely an intermediary between automobile dealers and consumers: first, it would “recommend” consumers to member dealers that sell the car model consumers were inclined to purchase, but the transaction ultimately were made directly between dealers and consumers. Later on, Autohome realized that this was not real business, so it started to build “Autohome Mall,” a full-service, one-stop online transaction platform.
Shifting focus to selling automobiles and boosting price transparency
To “fight” in the coming Bachelor’s Day (or rather “Another Shopping Day”), Autohome Mall, Autohome collaborated with dealers and carried out “take-it-or-leave-it-price” discount activity, so that consumers no longer need to purchase cars in 4S stores and can purchase cars at fixed price for any car model across China directly online and then just go pick up the car from dealers.
Autohome Mall is an O2O platform, too. Consumers can buy groupon vouchers on the platform and enjoy huge discount when purchasing cars from dealers. For example, consumers and buy a voucher worthy of 2,000 RMB with merely 499 RMB.
To wrap up, Autohome Mall sells two kinds of things: automobiles and groupon vouchers. The platform started to sell vouchers long time ago, but only started to directly sell automobiles recently. Yet, it planned to shift its focus to selling automobiles and invested heavily in this sector.
“We shift our focus to meet the most urgent needs of consumers. A voucher of 2,000 RMB means no big deal for automobile buyers. Compared with the voucher, a better purchase experience is more urgent. Autohome’s mission is exactly to provider better purchase experience, saving consumers the effort to go to offline 4S shops, shop around, bargain and make harsh choices,” Mr. Qin explained.
Mr. Qin believed that price transparency was crucial in winning consumers’ trust. At present, Autohome is steadily teaming up with an increasing number of dealers and selling their automobiles, even exclusively, at fixed price. Still, to meet the needs of different consumers, Autohome Mall will continue to provide discount activities such as “multiple discounts”, “take-it-or-leave-it-price” and sell groupon vouchers.
He admitted that he didn’t expect that Tmall would enter this market and invited automobile manufacturers to open official stores on its platform. Yet, he suggested that Tmall was not experienced and devoted enough in this sector, while Autohome owned a specialized service team of over 300 members.
According to unaudited financial results for the second quarter of 2015, the total revenue reached 860 million RMB (around 135 million USD), while the revenue from advertising business hit 597 million RMB (94 million USD). More specifically, revenues from automaker advertisers increased to 453 million RMB (73 million USD), revenue from dealer advertisers increased to 145 million RMB (23 million USD), and revenues from the dealer yellow page business increased to 264 million RMB. Obviously, advertising business still accounted for large part of Autohome’s revenue.
Yet, Qin Zhi suggested that Autohome would attach equal importance to advertising and automobile selling business in the future.
Subsidy strategy can’t last long after all
In his opinion, price meant no big deal to second-hand automobile consumers, either. Instead, the reputation of a platform meant everything to them. Mr. Qin revealed that the transaction volume of second-hand automobiles was increasingly steadily on Autohome Mall, and that the most important thing for Autohome right now is to build up its reputation with a mature evaluation and credit-check system and win consumers’ trust.
Mr. Qin also shared with us his opinions on the “insane” subsidy strategy adopted by many second-hand automobile dealers. “The real value of a company is to create value, not money-burning. Such strategy can’t last long, unless one is confident to give subsidies for over five years and make profit at that time when every other competitors will have been driven out of the market,” he said with a laugh.
However, the inconvenient truth is that Autohome had got to adopt the subsidy strategy either. But it is gradually reducing the subsidy since it was well that such strategy was so unsustainable. Instead, it carried out several other marketing activities as substitutes.
For example, it teamed up with Happygogo.com, an affiliate online retailing platform of GBS (Golden Eagle Broadcasting System), and established a subsidiary Mango Automobile. According to the contract, automobile purchase guide programs will be broadcasted on two TV stations of Happygo.com and Hu’nan Economy Station on October 11th, so that consumers will be able to purchase automobiles through PCs, smartphones and TV programs. In addition, Autohome will recommend automobile models to consumers based on big-data and a sophisticated algorithm. According to the recent financial report, the number of daily active users on mobile gadgets increased by 88.5% year on year and reached 9.8 million in June, and was soon going to surpass that of PCs.
It was reported that 25,229 automobiles were sold on Autohome Mall during last Bachelor’s Day, and total transaction volume reached 3.931 billion RMB. When asked by journalists how many automobiles Autohome aimed to sell during this Bachelor’s Day, Mr. Qin declined to reveal specific figures but suggested the figure should be a little bit higher than that of last year.
At last, when asked if Autohome had any plan to merge with other platforms, he said that:“ We are open to any possibilities and before things come to a head, never say never.”
[The article is published and edited with authorization from the author @Wang Xuan, please note source and hyperlink when reproduce.]
Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.
Originally published at www.tmtpost.com.