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The auto industry is one of the largest industries in the world and this creates a lot of problems for various stakeholders in the industry. This essay will explore avenues that could be used in the process of setting up a car dealership within the car auction business. The essay is also going to look into ways and means of shipping cars within the car auction industry.
The auto industry has evolved over the years and this has made car sales to increase through use of different channels. One of the growing channels for sale of cars is the internet due to the growth of online car auctions sales.
The online car auction has been on the rise and as a result, car dealers in the world currently make use of e-commerce sites to advertise and conduct trade. Therefore, several pre-requisite have to be met in the process of establishing an online car auction.
There are several factors that one needs to consider before starting a business especially in the auto industry. The best tool to use in analysing a business start-up is a SWOT analysis on all factors affecting the online car auction industry. Moreover, we will also analyse the export of cars and the general trend within the auto industry.
Type of Business: Before any person or organisation intends to start a business, a consideration on the kind of business has to be analysed. For instance, in the auto industry an organization can consider if they are going to sell at the retail or wholesale level. An organisation might come up with its own online portal like EBay or if it is the case of an individual, he/she might make use of a site like EBay.
Moreover, in most cases retail auto dealers sell to individuals while wholesale business in most cases deal with selling to other dealers in different regions.
Consequently, an organisation or an individual might decide to focus on selling all types of vehicles or to sell a certain kind of automobiles (Krane, 2003). For instance, an organisation might have a niche and decide to sell trucks only, sedans only or other segments of vehicles in the auto industry.
Cost: This is a major factor that needs to be factored in the process of establishing an online auction business. Various costs have to be incurred in the process of establishing an online auction site. These costs include registration costs, licensing, advertising, and operational costs among others.
As a result, careful budgeting and planning has to be done. However, the major costs that an online business owner should watch out are security and shipping. Online transactions are faceless and thus it susceptible to fraud and therefore adequate security measures should be undertaken (Rubenstein, 2010).
Another major worry for online businesses is shipping especially in the case of international trade since several countries have different shipping rates and rules. While shipping to some regions could be considered non-commercially viable with problems like piracy and the sort.
Thus, in an online auction you could either set for the customer to pay for shipping or for you to pay the shipping (Morris, 2011). These are some of the major cost factors that need to be addressed in the process of setting up an online auto auction business.
Licensing: Before you set up an online auto auction in the United States of America, an organisation has to secure different business licenses. One of the mandatory licenses is a driver’s license that has to be issued with the US motor vehicle department. It is important to note that an individual can sell a limited number of vehicles without a license.
This rule however does not apply for businesses or people selling large consignments of cars (Sinclair, 2007). Businesses exporting used or new cars the Unites States have to register with the office of foreign trade and this makes business more challenging. Apart from business and foreign trade licenses, businesses have to also consider that some countries require a certificate of vehicle inspection form the country of origin.
This document is used to ascertain that certain regulations such as the age of the car do not exceed a certain number of years. For instance, Saudi Arabia only allows 4 year old cars to be imported into the country. Thus, all these licenses have to be acquired by the business during set up process.
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Price: This is a major factor considered by consumers and sellers in the process of trade. A consumer will buy a car or product based on the price of the car at the time of the sale. As a result, the seller has to price his car competitively for his/her car to be bought and at the same time make a profit.
During the setting up of an online auction site, thorough research has to be conducted before a reasonable reserve price is set. Factors that need to be factored in this process include the age of the car, mileage, features of the car (Jerenz, 2008).
It is advisable to include and document all the features and condition of the vehicle for it to attract genuine and competitive bids. Since the online auction business relies on trust based on information shared in the process of conducting trade. Availing all the information is necessary in attracting customers and at the same time building a good reputation for the business (Rubenstein, 2010).
Insurance: The auto industry relies heavily on insurance for the protection of interests of all stakeholders. Thus, an online auto auction business owner should have insurance all the cars his/her organisation is selling. This helps in cushioning the business against losses such as theft, shipping of damage to the vehicles.
Insurance covers such as general liability, comprehensive plans or a surety bond helps in protecting your business (Morris, 2011). For instance a surety bond might be expensive but it aids in covering of losses incurred as a result of failed contract with a supplier or vendor. The trade in used cars is lucrative but also risky hence an online auction business owner must get an insurance cover.
Documentation: In the process of doing business, it is important for documents of trade to be used. However, the online auction trade is mainly conducted without formal documents. In consequence, a business owner must make the effort to ensure all the needed and necessary documents are in order.
This is necessary for the purposes of trade since an online auction owner makes use of various channels within the trade process (Daft, 2006). For instance he/she has to work with custom officials during shipping, banks and other trade intermediaries. Moreover, the consumer has to be availed inspection documents, warranties, mileage and other documents necessary after purchase of the vehicle (Barringer, 2008).
The online auto auction of used cars has grown over the years due to various factors shaping the business world. The advancement of technology has accelerated online trade and the auto industry has also taken cue. Therefore, more auto online trade is conducted today and most of the trade is on used vehicles.
Sites like EBay sell cars based on user ratings for different third party car buyers and sellers (Jarvenpaa, 2008). The successful implementation of the online trade has been based on trust and security measures under taken by online auctions site owners.
The major driving force is price and the factors listed above with a bid to maintain and grow this industry. Based on research conducted, the auto online auction for used cars is set to grow due to consumer demand and ease of doing business. Therefore, it is recommended for a business owner to consider selling used cars using online auctions sites bearing in mind the above business factors.
Conducting an online auction site is quite challenging and business owners have to conduct good business research before commencing business. This is made more difficult since trade is conducted online where transactional and security risks are great. As a result, a business owner has to conduct good research and take the necessary precautions in opening an auto online auction business.
Some of the factors he should look into are insurance, licensing, price and costs and if these factors are catered for and mitigated then a good business can be developed. The auto online auction trade is set to grow and this will have a good ripple effect on business owners venturing in this trade.
Barringer, B. (2008). The Truth About Starting a Business. London: Allen & Unwin.
Daft, R. & Marcic, D. (2006). Understanding Management. Detroit, MI: John Wiley and Sons.
Jarvenpaa, S. L., Tractinsky, N., & Vitale, M. (2008). Consumer trust in an internet store. Information Technology and Management, 45–71.
Jerenz, A. (2008). Revenue Management and Survival Analysis in the Automobile Industry. Chicago, IL: Cengage Learning.
Krane, B. & Markowitz, J. (2003). Analysis of eBay. New York, NY: Lippincott Williams & Wilkins.
Morris, M. (2011). Starting a Successful Business: Choose a Business, Plan Your Success. New York, NY: Jones & Bartlett Learning.
Rubenstein, J. (2010). The Changing Global Auto Industry: A Geographical Analysis. Boston, MA: Jones & Bartlett Learning.
Sinclair, J. & Spillane, T. (2007). eBay motors the smart way: Selling and buying cars, trucks. Denver, CO: Springer Publishing Company.