Where there is traffic, there is business. The traveling market has given rise to “in-car vending,” a new business many regard as the “next game-changing opportunity” in sales. The model has attracted the attention of many entrepreneurs and investors, and in the last month Mobile Go and Cargo, companies from home and abroad, have accomplished fund-raising.
Three Models for ‘In-Car Vending’
As early as 2016, the American start-up Cargo set its eyes on in-car vending. Its Chinese equivalents like GOGO+ and Mobile GO appeared soon after. However, the three companies have very different models for the same business.
Cargo was the first to test such a business model – to put a convenience box in a car, which would function “as a mobile 7-11”, providing passengers with products such as snacks and USB cables. It partnered with ride-sharing companies like Uber, Lyft and Via, with Uber being the main partner with a majority of cars.
Cargo offers primarily convenience boxes, which are located between the two seats at the front, and are transparent for easy visibility. Cargo also has a dedicated website which passengers can access with their Uber account. They can input a product code and pay with PayPal, Apple Pay or Android Pay.
In China, in-car vending dates back to 2016, when GOGO+ from Shenzhen launched its platform in taxis to meet the instant need of passengers. Its tagline is “One car, one shop.”
GOGO+’s boxes have been through several iterations. The current 3rd generation has a convenience box in the middle of front row, a shelf on the back of the seats, a cargo box and a refrigerator in the trunk. A fully equipped car can hold more than 100 goods, and the setups costs about 2,000 yuan. Passengers only need to scan a code to make the purchase.
Mobile Go, which launched in November, has a lighter model than GOGO+. It targets ride-sharing drivers on the Didi network. After paying 99 yuan as a guaranteed deposit and passing a training session, Didi drivers can become qualified operators. Recently, GOGO+ has also entered a collaboration with Hangzhou Taxi Group to put its products in taxis.
Mobile Go offers a snack box and seatback shelf that can stock 20 items such as beverages, water, videos and other daily supplies for urgent use. Passengers only need to scan a code to make the purchase. Drivers are not directly involved in the purchase, but they receive a 20 percent commission on the purchased amount. With order rewards, referral bonus and asset maintenance, a driver can make an extra 500 yuan per month, according to Mobile Go’s promotion materials.
Is it a Good Business?
With a low investment threshold, quick recovery of investment and easy scaling, in-car vending solves the problem of cargo damage and replenishment. However, as this is a new business model, there are only two domestic companies – one which just completed its angel funding round and the other its A funding – with trial operations. There is still uncertainty in China’s unclear policy framework.
First and foremost is the market prospects. The self-service vending in office building and the convenience store are an extension of context. However, in-car vending serves during the trip from one destination to the next, and the supply during the ride may not be essential. Demand will most likely be limited to chewing gum, mineral water and energy bars, which are not sufficient to sustain a big company.
The next thing is user experience. Customers choose sharing cars, instead of public transportation such as a subway or bus, to have an undisturbed and fast ride to their destination. In-car vending may influence the passenger’s riding experience. Sales behavior may be as annoying as a stylist persuading you to buy membership card. From another perspective, many car owners also do not like people drinking or eating in their cars.
The third challenge is the choice of goods. In-car vending units are usually small, with only 20-40 items for both drivers and passengers. The driver’s demand is easier to manage, while the high mobility of cars and randomness of passengers make precision targeting quite difficult.
The fourth concern is competition from new entrants. In-car vending has low entry barrier, and it’s easy for self-service operators to duplicate the business and enter the market. In-car vending operators are still in the expansion stage to establish themselves. Once they have to compete head on, drivers will be the resources they have to compete over with a heavy allowance. This may lead to fraud orders placed by drivers to get allowances.
In-car vending needs to achieve a balance between hygiene, safety and user experience. The essence of new retail is personalized services for individuals. How to achieve profits without compromising user experience is a key problem to address.