In my last article I outlined how I thought that traditional auction houses are failing customers and believe that the online platforms are delivering something closer to a thought out value proposition.
The article included the quote “in my opinion the long term success of the online platforms will be secured around trust and brand, areas that I plan on exploring in further depth in a future article“.
My thoughts around the brand element of the platform were based upon the work Harvard Business School’s Michael Porter and his work Porter’s Five Forces. In allows marketplace analysis based upon five areas;
1. Supplier power
2. Buyer power
3. Competitive rivalry
4. Threat of substitution
5. Threat of new entry
Numbers one and two weren’t the intended focus (these could be related to car buyers and those consigning cars) and point four really relates to classifieds and traditional auction houses.
My interest around brand relate to points three and five.
My main theory is this; online auction platforms will become commodotised and brand will win out.
Twenty years ago if one wanted to create an online auction platform it would have required a large amount of investment to get it up and running. Today, with WordPress site and plugins would get you something workable for a four figure amount. That’s not to say it would be up to the standard of the current market offerings, but it would allow the testing of a viable product.
There’s no licence required to become an online auction platform, it’s unregulated and therefore bar capital the barriers to entry are low and there is nothing stopping more entrants joining the market.
There is only so much product differentiation that can take place; store the car v. don’t store the car, buyer pays fees v. seller pays fees and the percentage take from the deal. That’s it.
Imagine, for simplicity that all online auctions charged the same amount to the same party and none stored the cars. The only element left to differentiate is brand.
If all it takes is a strong brand plugged into a generic online platform with an operational back end to create a market entrant then the Porsche Club GB were a competitor waiting to happen for Collecting Cars.
The same is true for the Ferrari Owners’ Club, Pistonheads, BMW Car Club GB etc., if anyone one of those were to launch an auction platform it would likely have a modicum of success based purely on the strength of the brand which in turn would increase the level of competition in the marketplace.
By partnering with Porsche Club GB two things are achieved;
- Nullifies the threat of competition from PCGB setting up a competing platform. Not only could this reduce the level of listings, but specifically reduce the number of Porsche listings on the site.
- The brand of Collecting Cars is now influenced as it sits alongside PCGB. If the deal had instead been done with the MG Owners’ Club the impact of the brand in the mind of consumers would have different. Not better or worse, just different – most obviously via price point. CC is positioning the brand towards to upper end of the market.
If Pistonheads were to enter the auction market it would be a case of leveraging the brand. Car and Classic have done this, however Collecting Cars and The Market are both building something from the ground up.
The original content way in which CC are doing it I think could be a case study for new business launches in the current marketplace with the use of podcasts and now YouTube. The standard is set by carwow with 5m YouTube subs – create original content that people want to consume and the brand of the operating company receives recognition without advertising.
As 2021 unfolds it will be interesting to see how the competing platforms continue to build defendable market positions.
Sources: https://hbr.org/1979/03/how-competitive-forces-shape-strategy
Mark Tofts 