Car-based commerce

According to Visa and PYMNTS.com, Canada’s neighbours to the south spend more than $250 billion on products and services during their commutes to and from work. In 2017, for the first time ever, more cars were registered with mobile networks than actual new phones in the United States, according to Chetan Sharma, a mobile data consultancy. Both of these statistics show the massive market potential for car-based commerce. Merchants that engage consumers can grab share by reaching new consumers while selling additional products and services to existing ones, resulting in organic growth of the retail market beyond its current size.

HOW CAR-BASED COMMERCE WORKS: TOUCH VS. VOICE
Car-based commerce can occur in any vehicle with an Internet connection; drivers interact with the in-vehicle infotainment system via touch or voice to purchase products and services. Only two automakers currently offer platforms that enable consumers to make purchases from behind the wheel: SAIC in China and General Motors with its Marketplace platform in the United States. Through these built-in platforms, drivers can purchase fuel and coffee or reserve a parking space by navigating the centre infotainment screen with their fingers.

While major automakers are focusing on built-in platforms, technology companies are also betting on car commerce. Amazon is gaining early insights in voice-based commerce through Alexa in non-automotive settings. Alexa is already offered as a convenience feature in vehicles from eight of the 10 largest automakers by global sales. Alexa-based commerce features can be enabled in these vehicles through a remote software update. Other third-party software developers—namely Apple and Google—offer voice-based assistants in vehicles, though none focus on commerce.

Voice-based commerce circumvents two major issues plaguing touch-based systems: liability stemming from distracted driving and limited screen space. Because systems such as GM Marketplace require drivers to take their eyes off the road, its functionality is limited to when the vehicle is not in motion. More touch-based features are being introduced into vehicles that leverage the centre screen, while voice-based assistants circumvent the competition for screen space by reaching drivers through another medium.

WHY CANADIAN RETAILERS ARE PRIME BENEFICIARIES
According to Euromonitor International’s 2017 Global Consumer Trends Survey, groceries and household essentials are the most frequently purchased items in Canada weekly, followed by food for takeaway and delivery. The high purchase frequency in these categories means grocers operate in a category with ample opportunity to increase discretionary purchases through car-based commerce.

A growing share of transactions that occur near the car will be incorporated into vehicles in the near future as a means of saving time for busy consumers. The added convenience will also incentivize these consumers to buy more often and consider purchasing products and services they otherwise may not.

Car-based commerce currently operates through a click-and-collect model, which is cheaper for merchants than delivery. Canada’s car-based culture and diversity mean that the big grocers already operate stores along major thoroughfares and have strategies for targeting the multitude of ethnicities and foreign-born residents that make up the Canadian consumer base. Canada’s smaller population allows merchants and software players to be nimbler in testing new strategies to target consumers than in larger markets like the United States or China.

WHAT CANADIAN RETAILERS CAN DO NOW
There are two strategies that Canadian grocers can pursue now: partner with existing car commerce players such as General Motors, or partner with software firms that have a presence in the car such as Amazon, Apple or Google. While GM Marketplace is not currently available in Canada, the delay may be a blessing in disguise for Canadian retailers. Merchants partnering with General Motors in the United States face a scalability issue because the software powering each automaker’s infotainment system is unique.

Third-party platforms such as Alexa avoid this scalability issue and are a one-stop solution for those merchants looking to enter car commerce. Canadian retailers should use this time to identify stakeholders at third-party software firms and work with them to strategize car-based commerce opportunities. At the very least, merchants need to be aware of the trend and the multibillion-dollar market that car-based commerce will quickly become.

Eric Totaro is a Senior Automotive Analyst at Euromonitor International, an independent provider of strategic market research.