Foreign cars for sale via home shopping

Based on article from KoreaTimes February 2013

CJ O Shopping hosts introduce the Nissan Altima.

New marketing tool may hurt brand reputation

A growing number of foreign automakers operating here are turning to home shopping channels in a bid to win a bigger slice of the pie in the rapidly-growing imported car market.

Nissan Korea introduced its flagship Altima sedan on CJ O Shopping for an hour at 10 p.m. on Jan. 27. It was officially launched at dealerships in October.

“It was part of our efforts to adopt various marketing schemes to attract customers,” an official from Nissan Korea said. “We didn’t offer any discount. We only took requests for test drives from customers.”

CJ O Shopping aired programs for imported cars about 20 times last year.

“Basically, home shopping programs for imported cars are good for customers and foreign brands,” an official from CJ O Shopping said. “They’re like an hour-long TV advertisement.”

According to the official, home shopping operators do not receive any sales commission from cars as they do with other products.

Honda Korea sold its new Accord sedan on the home shopping channel in December, just weeks after its official launch. The automaker didn’t offer any discounts, but it’s believed the marketing tactic helped Honda Korea sell 337 Accords in December alone.

Previously, some imported makes such as Ford, Chrysler and Peugeot lowered prices one year after introducing a vehicle to the local market.

However, market insiders also point out that using home shopping channels for marketing and promotion can be risky. They argue that such programs offering huge discounts can damage the reputation of the car companies.

“It can be seen as a clearance sale,” an official from a foreign car firm said. “Of course, it could raise the sales volume on unpopular models in the short term but customers would not want to buy a car from that brand at an officially announced price any longer, expecting a huge discount offer. This consequently damages the brand image.”

Ford and Honda were severely criticized by customers last year after they sold their cars at discounted prices through a home shopping channel.

In April, Ford Korea sold the 2011 Fusion through CJ O Shopping at 27.5 million won, down from its original price of 35.05 million won, along with extended warranty offers.

These deals frustrated consumers who had paid a higher price for the same car. New customers visiting showrooms demanded huge discounts, even on other models. For Ford, using the home shopping channel led to a drop in prices in its used-car market.

Sales through home shopping channels can do more harm to premium brands, as they tend to be associated with words like “cheap,” “discount” and “free gifts,” which luxury automakers want to stay away from.

While home shopping channels can negatively impact a brand’s reputation, online stores can have a similar effect. A few years ago, a local dealer of Mercedes-Benz sold the S500L 4Matic at 184.8 million won through NS Mall. Last year the C-Class C200 was on sale through an online store auction at 30 million won. The German brand dealt with more complaints from existing customers and dealers than they did new orders.

Now, Mercedes says it has banned dealers from conducting sales through online stores and home shopping channels without its approval, in fear of damaging its premium image.

“Along with premium cars, we think it is also important to provide premium customer services in a place where we can interact with them,” an official from Mercedes-Benz Korea said. “We now think it is inappropriate to sell our cars through online malls and home shopping channels.”

However, other companies believe home shopping and online sales are the way of the future and will continue to seek new customers through alternative media platforms.