Margin under pressure due to transparency?
Lots of traders are complaining about pressure on their margin because due to transparency on the internet. Warehouses became smaller and it’s not clear where the future will take us. Additionally there are some economic changes and market fluctuations – the market is flooded by inventory. Others are telling about growing businesses, more and more international consumers and a need, which can not get satisfied.
How does this match and what happens to the margin?
We can learn a lot from the second-hand car market. In times before online trading the lack of transparency caused a lot of research on buyer’s side and margins were not stable. Third and forth sales were defined by bulk imports to Africa instead by local traders who have the contact to the inventory.
Over the years the internet market became more transparent. If traders presented their products as catalogue on their website, advertisement portals grow. For example: mobile.de. If there are too many of those portals, search engines like Google will fail and therefore industry specific search engines raise.
Stable margin – International demand – Increased change of ownership
Today the passenger car’s value is predictable. The prices for purchasing and reselling are listed on websites like Kelly blue book. The difference is the seller’s margin, which is stable by now.
At the same time the offers get available for the buyer – thanks transparency! The client is always only one click away. The market becomes more liquid and the demand is growing. That means: More offers for the buyers and demand from all over the world.
A higher frequency of trading is the third effect caused by the liquid market. As soon as the user knows that he is able to sell his item for a known value, he plans in shorter terms. Buying a car is not for driving it until scrap anymore, it will be changed regularly. And so the trading volume grows.
Today’s trading volume of a used passenger car equals the new sales volume. If the same trend will come to machinery industry, we can expect the threefold for the used machinery market.
Who will win? Who will lose?
Did this change maintain the disappearance of car dealers? No! Every company which adopted to this change grew rapidly. Today there are more used-car dealers than 10 years before.
Factors of success
- Nice online presence for creating trust and giving information …
- … and which is available all over the world (at least in English language)
- Self-expression and knowledge about the own added value – missing transparency does not work anymore
For used-car dealers there are stable trading margins and other drifts: Namely funding and business for replacement parts and services.
The service is the decisive factor!
For the used machinery market the factors of success will be similar.
- Time of reaction
- Estimation of values
- Smooth transaction
- Extensive information about the machine
- Transparency for overall costs
- Clarity about steps from deal to startup
A lot of potential services are hidden here – so the chance for margin as well. Finally the velocity of goods increases and that reduces the capital commitment. The market becomes more and more functional.
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Why the hell do we share our knowledge?
We are experienced e-commerce professionals, passioned in mechanical engineering. Digitalization means change for every industry. This fact creates winners and losers. We’d love to see our clients and partners as winners – that’s all!