To Buy a Car in China, Hit the Vending Machine

Internet giant Alibaba aims to disrupt China’s auto retail landscape with an experiment that sidesteps car salesmen

GUANGZHOU, China— Eric Zhou is interested in buying a Ford Kuga sport-utility vehicle. So last week, he picked up the car for a three-day test drive from a vending machine.

Mr. Zhou never visited a dealership or spoke to a salesperson. He booked the test drive online, then showed up at a service center where employees can identify would-be buyers using facial-recognition technology. His SUV was then delivered from the eight-story “vending machine”—essentially an automated parking garage.

“This is so much more efficient and convenient than traditional dealerships,” said Mr. Zhou, 38 years old.

It’s the first of several such car-vending centers that Chinese e-commerce giant Alibaba Group Holding Ltd. plans to open across China this year—part of the company’s latest effort to translate its success in online retailing to the physical shopping world.

Alibaba is betting on the experiment to succeed in China, where consumers have enthusiastically embraced the e-commerce economy. Mr. Zhou buys clothes, home appliances and even the construction materials needed for his recent home renovation without going into a traditional store.

The car-vending concept has been tried in the U.S.—with limited success. Carvana, a used-car dealer in Phoenix, has been operating such structures since 2013. Customers can search for, purchase, finance and trade-in vehicles online, then have the option of picking it up from a giant vending machine filled with cars.

But the model hasn’t taken off more broadly in the U.S., where many consumers prefer to negotiate a deal in person, and have the salesperson help them with tasks such as pairing their smartphone with a car’s Bluetooth, said David Sullivan, a Michigan-based analyst with AutoPacific Inc.

China’s automotive retail climate is different—and ripe for disruption, analysts say.

China’s consumers, often first-time car buyers, are more open to trying out new concepts, said Dean Stoneley, Ford’s Asia Pacific vice president for marketing. Ford has seen sales in China decline sharply in recent months as domestic competitors become more popular. Ford is now searching for new ways to engage customers, as more and more go online to do their car-buying research, Mr. Stoneley said.

“A car vending machine is the ultimate word in friction less commerce—you don’t have to deal with salespeople trying to talk you into things you don’t want, and you don’t have to haggle over price,” said Jessica Wolfe, a principal in the Consumer and Retail practice of A.T. Kearney, a consulting firm. “You can think for yourself, do the research, and make the purchase when you’re ready on your phone. That’s exactly how millennials like to transact.”

At the vending center, attendants are available to explain a car’s basic features and to answer questions. Ford said each car has contact details of local dealerships where customers can go with questions or problems.

China’s internet giants are experimenting with bringing the principles of e-commerce into other corners of the physical retail world as well. Just as Inc. is experimenting with unmanned supermarkets, Chinese e-commerce companies are taking stakes in malls and supermarkets, digitizing such operations as they seek growth beyond their core online retail business. In some cases, they’re aiming to use the vast troves of data they have gleaned from e-commerce to change the way consumers shop in the real world.

Alibaba is experimenting with using augmented reality mirrors and vending machines in malls to allow consumers to “virtually” try on various lipstick colors and buy them on the spot through Alibaba’s online platforms. Inc., which made its name in online ordering and delivery, is also getting into brick and mortar with a chain of clerk less convenience stores where shoppers can pay using facial-recognition technology.

Under the auto vending-machine program rolled out by Alibaba last week, customers go to Alibaba’s Tmall website to book the test drive, which is free for those with high scores on the Sesame Credit rating system by Alibaba affiliate Ant Financial Services Group. Without a high credit score, consumers have to fork out 99 yuan ($16) to test-drive selected Ford sedans and 198 yuan for other models including a Ford Mustang sports car.

Alibaba is currently offering only Ford models, but it is in talks with other foreign and domestic brands to expand the inventory, said Lu Huan, the marketing director for Tmall’s automotive division.

The vending machine in Guangzhou saw brisk business on its first day of operation. In the first two days, Ford received 450 orders to test-drive the vehicle, Mr. Stoneley said. Ford declined to say if the new approach has resulted in any sales yet.

The vending machine helps to ease anxiety for potential car buyers, who are often tense when they enter a dealership expecting a hard sell, said James Chao, a Shanghai-based automotive consultant at IHS Markit.

Still, Mr. Chao said car brands face a challenge with this approach: Without a salesman, it may be tougher to convert a test drive to an actual sale, or to respond to customer feedback in the process.

“With extended test drives you don’t have someone seated next to you, listening to your feedback and trying to overcome your objections,” he said. “That’s one of the reasons that the auto retail process has stayed the same in the last 30 years.”


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Author;  Liza Lin
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