Shifting Gears: Entering the Automotive Vertical

Abstract

Tradera, Sweden's leading online marketplace for circular consumption, is
considering entering the online automotive advertising market in Sweden as a new
vertical to diversify its business.

This thesis aims to determine if Tradera should enter the online automotive
advertising market and to propose a strategic roadmap for entry if it is determined
to be beneficial. The scope of this project was threefold: 1) to assess Tradera’s
capabilities for undertaking the expansion, 2) to determine the most suitable
approach to market entry, and 3) to investigate the effectiveness of a
performance-based pricing model as a means to penetrate the market.

Through a combination of literature review, an online survey, and interviews with
industry experts, the research identified and evaluated the barriers to entry and
potential enablers for Tradera's entry into the market. It was found that the market
is highly competitive with medium to high barriers to entry. Among several
specific barriers, the research highlights three main ones: 1) the two-sided network
effects of current market leader Blocket, 2) predicting the timing of the market's
development as it’s pushed towards transactional business models, and 3) proving
tangible value with performance-based pricing without operational complexity.

To overcome these barriers, the research identified several enablers which Tradera
must fulfill, including: 1) leveraging its brand recognition, association with trust,
and high platform traffic, 2) offering customers the option to buy used cars either
online or offline, and 3) leveraging its in-house expertise and existing
infrastructure to develop an operational lead-based model from the start.

Lastly, a roadmap to launch has been defined in three phases: penetration,
monetization, and reinvention. This roadmap highlights the requirements, actions,
and concrete suggestions that should be executed.

Abstract (Swedish)

Tradera, Sveriges ledande marknadsplats för cirkulär konsumtion på nätet,
överväger att gå in på marknaden för bilannonsering på nätet i Sverige som en ny
vertikal marknad för att diversifiera sin verksamhet.

Detta examensarbete syftar till att avgöra om Tradera bör gå in på marknaden för
bilannonsering online och att föreslå en strategisk plan för inträdet om det bedöms
vara fördelaktigt. Projektet hade tre syften: 1) att bedöma Traderas möjligheter att
genomföra expansionen, 2) att bestämma det lämpligaste tillvägagångssättet för
marknadsinträde och 3) att undersöka effektiviteten av en prestationsbaserad
prismodell som ett sätt att penetrera marknaden.

Genom en kombination av en litteraturstudie, en online-enkät och intervjuer med
branschexperter identifierades och utvärderades hindren för inträde på marknaden
och potentiella möjligheter för Tradera att komma in på marknaden. Det
konstaterades att marknaden är mycket konkurrensutsatt med medelhöga till höga
hinder för inträde. Bland flera specifika hinder lyfter forskningen fram tre
huvudsakliga hinder: 1) de tvåsidiga nätverkseffekterna hos den nuvarande
marknadsledaren Blocket, 2) att förutse tidpunkten för marknadens utveckling när
den pressas mot transaktionella affärsmodeller, och 3) att bevisa konkret värde
med prestationsbaserad prissättning utan operativ komplexitet.

För att övervinna dessa hinder identifierade forskningen flera möjliggörare som
Tradera måste uppfylla, bland annat: 1) utnyttja sitt varumärkeskännedom,
association med förtroende och hög plattformstrafik, 2) erbjuda kunderna
möjlighet att köpa begagnade bilar antingen online eller offline, och 3) utnyttja sin
interna expertis och befintliga infrastruktur för att utveckla en operativ
lead-baserad modell från start.

Slutligen har en strategisk plan för lanseringen definierats i tre faser: penetration,
monetarisering och förnyelse. Denna plan belyser de krav, åtgärder och konkreta
förslag som bör genomföras.

Popular Abstract

The monopolistic nature of the Swedish online advertising market for used cars poses challenges to marketplaces interested in capitalizing on the lucrative automotive vertical. At the same time, the market is undergoing a transformative shift driven by digital technologies. We have researched the potential entry of Swedish marketplace Tradera into this highly competitive digital market. Our findings touch upon emerging business models and investigate the potential of a new pricing structure, offering intriguing perspectives on a potential market entry case.

When purchasing a used car, many people start by browsing online advertising sites, such as classifieds (platforms for advertising goods online). These platforms have become increasingly important to the car buying process and are trying to take over more and more of the transaction. This trend is related to a larger trend of verticalization and service integration among online advertising sites. Previously horizontal platforms are now focusing on specific areas, such as auto, real estate, and jobs, while also incorporating additional services for consumers.

Although classifieds are driving the move towards digitalization, more service and increased responsibility over transactions, the supplier side of the equation may not be convinced about this direction. Powerful dealerships make up a large portion of used-car sales on these platforms and they want to maintain the traditional physical transaction to keep customers tied to their ecosystem of integrated services. Furthermore, research has shown that consumers still prefer to physically inspect a vehicle before making a purchase, indicating that the buyer side hasn't fully embraced digitalization either.

Players in the used car advertising space can emerge through two possible avenues. First, by accepting their position within the ecosystem of car sales and prioritizing the generation of qualified leads for potential buyers, which is what lucrative dealerships seek. Alternatively, they can emerge from successfully becoming a full-fledged marketplace, taking ownership of the transaction and building their own ecosystem.

This report focuses on lead generation for dealerships and explores a relatively new pricing model for advertising called lead-based pricing. In this model, advertisers pay only for actual leads generated by the ad, such as phone calls and emails. While a few players in Europe have successfully implemented this model, it has yet to make its mark in the Nordics. If the associated complexity can be overcome, performance or lead-based pricing has the potential to drive dealership performance and enhance the overall value proposition for buyers and sellers. Utilizing this new pricing model could provide the necessary competitive advantage to break into a space dominated by a monopolistic player.

The report also offers guidance for organizations venturing into the competitive Swedish online car-advertising market. It sheds light on the barriers and enablers for entering this space and uncovers the potential of performance-based pricing as a strategic advantage. These findings can empower businesses with actionable insights, equipping them to make informed decisions.

• author: Anderberg, Tobias and Svensson, Axel
• supervisor: Lars Bengtsson
• organization: Innovation Engineering
• course: INTM01 20231
• year: 2023
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering
• keywords: Online automotive advertising, performance-based pricing, classifieds, marketplaces, transactional models, monopolistic markets.
• language: English
• id: 9123636
• date added to LUP: 2023-06-14 12:14:21
• date last changed: 2023-06-14 12:14:21