Beepi and Vroom and Carvana - will they make a DENT?

[Jeff Kershner]

Maybe they will and maybe they will not.

There have been a few new players in the industry. One of them just raised $54 million equity funding (Vroom). That’s a lot.

Beepi and Vroom are two of those players…

Many of us here in the dealer forums shrug a shoulder at these new ventures. Saying to ourselves “I’ve seen this before and it failed, over and over and over.”

They don’t know what it takes to REALLY sell and SERVICE a car.

But is there a tipping point?

Is there a point where you say, "Oh SHIT… they've figured something out. They’re no longer working on theory." They have figured how to really leverage the missing connection to the consumer within our dealer industry and operations.

What keeps these startups from being successful?


.

 

[Cullen C]

Maybe they will and maybe they will not.

There have been a few new players in the industry. One of them just raised $54 million equity funding (Vroom). That’s a lot.

Beepi and Vroom are two of those players…

Many of us here in the dealer forums shrug a shoulder at these new ventures. Saying to ourselves “I’ve seen this before and it failed, over and over and over.”

They don’t know what it takes to REALLY sell and SERVICE a car.

But is there a tipping point?

Is there a point where you say, "Oh SHIT… they've figured something out. They’re no longer working on theory." They have figured how to really leverage the missing connection to the consumer within our dealer industry and operations.

What keeps these startups from being successful?


.

If you think 54 million is a lot check out these numbers:

http://blogs.wsj.com/digits/2015/05/29/beepi-raising-monster-round-to-scale-used-car-marketplace/

http://techcrunch.com/2015/05/27/carvana-300m/

 

[Chris Leslie]

I think you are really on to something @Jeff Kershner

I have so much to say around this topic. To be honest though I don't think many folks want to talk about it. They don't want to talk about how unprepared they are for even todays market let alone tomorrows market. These dealerships are suffering from the Innovators Dilemma and it's going to be a bloodbath.

The question reminds me of a TED talk i recently watched. It sheds a little bit of light on why startups succeed. What it comes down to is timing. These companies noted above are a bit early to the party in my opinion. But, they are starting to do things, make moves and ask questions. They are operating outside of traditional dealership conventions.

Dealerships can't understand how they work or why they make money because it doesn't match to their current view of how things are supposed to work. Who would have thought that one day people would rent out the extra bedroom in their house to strangers via a mobile app?

 

[Jeff Kershner]

I think you are really on to something @Jeff Kershner

I have so much to say around this topic. To be honest though I don't think many folks want to talk about it. They don't want to talk about how unprepared they are for even todays market let alone tomorrows market. These dealerships are suffering from the Innovators Dilemma and it's going to be a bloodbath.

The question reminds me of a TED talk i recently watched. It sheds a little bit of light on why startups succeed. What it comes down to is timing. These companies noted above are a bit early to the party in my opinion. But, they are starting to do things, make moves and ask questions. They are operating outside of traditional dealership conventions.

Dealerships can't understand how they work or why they make money because it doesn't match to their current view of how things are supposed to work. Who would have thought that one day people would rent out the extra bedroom in their house to strangers via a mobile app?

Chris, love your comment. You're invited to write an article for the blog since you "have so much to say". That would be awesome!!

Bloodbath? Interesting choice of word(s).

Are dealers resting on the franchise laws too much; that tends to change more frequently then ever before.

I was on a call recently where this exact question was asked. The dealers on the call "shrug'd a shoulder" .. saying there have been so many start-ups over the years that have tried this AND FAILED.

I would agree..to this point, too many (EVERY) start ups (despite their cash, their funding and the people behind the operation) have failed.

Because... "they don't know what it really takes to sell and service a vehicle."

True?

 

[Chris Leslie]

Before getting into the Auto Biz I worked in the Newspaper Business. I sat in meetings where executives shrugged off Twitter, Facebook and the whole idea of online news. I've heard this argument before, watched it with my own eyes...

Their argument "We are the newspaper. We are authoritative. We are the news."

I don't have to remind anybody how all of that is working out for everyone.

 

[Jeff Kershner]

Before getting into the Auto Biz I worked in the Newspaper Business. I sat in meetings where executives shrugged off Twitter, Facebook and the whole idea of online news. I've heard this argument before, watched it with my own eyes...

Their argument "We are the newspaper. We are authoritative. We are the news."

I don't have to remind anybody how all of that is working out for everyone.

2009.

 

[Chris Leslie]

Thanks Jeff, My bad. I've updated the link to something more recent.

 

[JessicaRuth]

How about Carvana We've talked about them a few times on here before, too.

"Skip the Dealership" is their tagline.

 

[ed.brooks]

Maybe they will and maybe they will not.

There have been a few new players in the industry. One of them just raised $54 million equity funding (Vroom). That’s a lot.

Beepi and Vroom are two of those players…

Many of us here in the dealer forums shrug a shoulder at these new ventures. Saying to ourselves “I’ve seen this before and it failed, over and over and over.”

They don’t know what it takes to REALLY sell and SERVICE a car.

But is there a tipping point?

Is there a point where you say, "Oh SHIT… they've figured something out. They’re no longer working on theory." They have figured how to really leverage the missing connection to the consumer within our dealer industry and operations.

What keeps these startups from being successful?


.

One of Vroom's major investors is former Autonation and Blockbuster CEO Steve Berrard - he may know a little something about what it takes to sell and service a car. Carvana is a major player in this space too. They are backed by DriveTime, "a used car dealership network and automobile finance company focusing on buyers with credit issues. The company has 128 dealerships in 21 U.S. States, and more than 3,500 employees. DriveTime has sold more than 650,000 cars and lent in excess of $3 billion."

There is some major knowledge AND some major capital at play here -

 

[Cullen C]

Chris, love your comment. You're invited to write an article for the blog since you "have so much to say". That would be awesome!!

Bloodbath? Interesting choice of word(s).

Are dealers resting on the franchise laws too much; that tends to change more frequently then ever before.

I was on a call recently where this exact question was asked. The dealers on the call "shrug'd a shoulder" .. saying there have been so many start-ups over the years that have tried this AND FAILED.

I would agree..to this point, too many (EVERY) start ups (despite their cash, their funding and the people behind the operation) have failed.

Because... "they don't know what it really takes to sell and service a vehicle."

True?

@Jeff Kershner

Couple of quick points.

CarMax in 1993 would have been considered a "start-up" if that were a sexy term at the time. I think they have done okay for a group of Circuit City guys that most likely didn't know a ton about servicing and selling cars.

No doubt the used car business is a difficult one to navigate. There have been more than a few failed ventures, some by car companies and car guys with years and years of experience "servicing and selling cars"

Autonation's Used Car only operation (in the Wayne Huizenga days):
http://community.seattletimes.nwsource.com/archive/?date=19991219&slug=3002371

Asbury selling used cars on WalMart property:
http://www.bizjournals.com/buffalo/stories/2002/04/29/daily10.html

Lithia and the L2 concept:
http://www.autonews.com/article/20080930/ZZZ_SPECIAL/309309931/lithia-puts-brakes-on-used-car-stores

My point in all of this is that as difficult as the business of selling and servicing used cars can be customers have changed a bit over the last 20 years with the help of technology. Sometimes it takes a fresh approach to help a business catch up to those changes.

See Amazon's approach to selling books versus Barnes and Noble. See RedBox's approach to renting DVDs versus Blockbuster. See Netflix's approach to streaming movies versus Redbox.

Thoughts?