Yes, we heard that from Ernie Garcia Jr. yesterday. What's the point? Its not about sales without gross profit. We didn't get answers to average days in inventory or actual operating profit/loss.
Beepi and Vroom and Carvana - will they make a DENT?
- Thread starter Jeff Kershner
- Start date
RE: "Your logic is all over the map. You deduce that If a biz is not making a profit, you're a fool to believe in it.
Then you say that you can't live without AMZN, but because it's never made any profits, it's gonna die soon."
First, you put words in my mouth. Second you miss the point.
http://www.fool.com/investing/general/2015/02/04/amazon-just-admitted-that-its-losing-billions.aspx
http://www.fool.com/investing/general/2015/02/04/amazon-just-admitted-that-its-losing-billions.aspx
If you think a business can exist in perpetuity without profit, you're just delusional. Amazon may hold the record. Certainly, they have pockets of their business that are profitable and in a pinch, they could close or sell of bits and pieces if they had to to retain a profitable core.
I find it interesting that companies like Carvana and Beepi cite sales stats without disclosing profit. What difference does it make that Carvan sells X number of cars. The list of companies who sold vehicles at volume and failed doing it is endless.
Let's take Beepi's business model. They claim they will buy YOUR car for $1500 more than a dealer will give. I say this based on recent dialogue with a Beepi employee. When this employee was asked, "Does this mean your company will pay more for a car than you would pay for the exact same car on the wholesale market?" The person didn't really understand the question but was certainly brainwashed to think that all cars bought and sold at auction are rejects from retail because they were faulty.
When asked about the fact that when a consumer trades in a vehicle in most states, they receive a credit for their trade in on the sales tax calculation, this person had no idea what I was talking about. In the interest of transparency, I asked, shouldn't you explain to a consumer that the extra $1500 they might realize in trade price will be reduced by the amount of additional sales tax paid? Of course, this doesn't apply in CA, and perhaps another 3 -5 states where this form of double taxation is in place. And that is where Beepi will survive longest.
So where did their investment money come from? Answer: California, where investors must think the entire country works like their home state.
Yes, I know Stanford MBAs are taught that its cool to rake in piles of investment dollars by appealing to emotion and leaving out salient details. After you raise the money you pursue sales in terms of raw numbers with the idea you can increase your margins down the road.
Again, I think the exercise of listing two columns side by side of companies in our business that hit the scene to all sorts of ballyhoo, then dropped by the wayside would be fruitful. If I get the time, I'll work on it. There's nothing like a little perspective. But for those who want to invest in startups like Beepi, TRED, Carvana, etc., I'm happy for you. You have a lot more credibility than those who never put their money where their mouth is. And every now and then you might hit a lick.
Then you say that you can't live without AMZN, but because it's never made any profits, it's gonna die soon."
First, you put words in my mouth. Second you miss the point.
http://www.fool.com/investing/general/2015/02/04/amazon-just-admitted-that-its-losing-billions.aspx
http://www.fool.com/investing/general/2015/02/04/amazon-just-admitted-that-its-losing-billions.aspx
If you think a business can exist in perpetuity without profit, you're just delusional. Amazon may hold the record. Certainly, they have pockets of their business that are profitable and in a pinch, they could close or sell of bits and pieces if they had to to retain a profitable core.
I find it interesting that companies like Carvana and Beepi cite sales stats without disclosing profit. What difference does it make that Carvan sells X number of cars. The list of companies who sold vehicles at volume and failed doing it is endless.
Let's take Beepi's business model. They claim they will buy YOUR car for $1500 more than a dealer will give. I say this based on recent dialogue with a Beepi employee. When this employee was asked, "Does this mean your company will pay more for a car than you would pay for the exact same car on the wholesale market?" The person didn't really understand the question but was certainly brainwashed to think that all cars bought and sold at auction are rejects from retail because they were faulty.
When asked about the fact that when a consumer trades in a vehicle in most states, they receive a credit for their trade in on the sales tax calculation, this person had no idea what I was talking about. In the interest of transparency, I asked, shouldn't you explain to a consumer that the extra $1500 they might realize in trade price will be reduced by the amount of additional sales tax paid? Of course, this doesn't apply in CA, and perhaps another 3 -5 states where this form of double taxation is in place. And that is where Beepi will survive longest.
So where did their investment money come from? Answer: California, where investors must think the entire country works like their home state.
Yes, I know Stanford MBAs are taught that its cool to rake in piles of investment dollars by appealing to emotion and leaving out salient details. After you raise the money you pursue sales in terms of raw numbers with the idea you can increase your margins down the road.
Again, I think the exercise of listing two columns side by side of companies in our business that hit the scene to all sorts of ballyhoo, then dropped by the wayside would be fruitful. If I get the time, I'll work on it. There's nothing like a little perspective. But for those who want to invest in startups like Beepi, TRED, Carvana, etc., I'm happy for you. You have a lot more credibility than those who never put their money where their mouth is. And every now and then you might hit a lick.
RE: "Beepi is expanding quickly and some of these items will be proven one way or another fairly soon as they launch into very diverse markets."
Expanding? Sustainable expansion or expansion juiced by investor's money? Expansion financed by profit? These are important details you leave out.
RE: "I am sure that folks on this forum can look at the Carvana model and chip away at perceived deficiencies. I welcome the comments."
The market and your P&L will expose any holes in your game. Things like margin and average days in inventory are important to know. The road to success is littered with the corpses of those who thought they could make up lack of margin with volume.
Expanding? Sustainable expansion or expansion juiced by investor's money? Expansion financed by profit? These are important details you leave out.
RE: "I am sure that folks on this forum can look at the Carvana model and chip away at perceived deficiencies. I welcome the comments."
The market and your P&L will expose any holes in your game. Things like margin and average days in inventory are important to know. The road to success is littered with the corpses of those who thought they could make up lack of margin with volume.
Unlike @ruggles I won't pretend to intimately know how well Beepi is currently performing financially. As I said in my post, I do think they are going to be faced with some significant operational challenges. I think we agree that the market will sort this out soon enough.
Not sure what you are implying by the last comment about Carvana. I assure you we are a very metric driven company. Please don't confuse the lack of an answer to a specific question regarding average days in inventory with a lack of knowledge. We understand there is a balance between volume and margin. We understand all the profit drivers associated with the used car industry and have moved those to a place that customers are already spending the majority of their time. If having bright people creating customer centric products is somehow a detriment to our long term success I will be surprised.
Again I think we agree that the market will define our long term viability.
Lastly, while I wouldn't willing to go line by line on a P&L with you I think the results we have experienced in Atlanta are no small feat.
From reading previous threads I know you will have a response and I look forward to it.
RE: "Unlike @ruggles I won't pretend to intimately know how well Beepi is currently performing financially."
I have no idea how Beepi is performing financially. My comments only address its business model as I understand it. I quick back of the envelope calc tells me they probably aren't doing well, and won't do well in the future unless they change their business model. The current model seems based on a few invalid assumptions. Certainly the market will sort things out in time. As Ed Brooks points out, there can be temporary disruption while a start up based on false assumptions, funded by masses of speculative capital, fails.
I don't doubt that Carvana is a very metric driven company. I found Ernie Garcia Jr. to be mostly brilliant, although his pace of communication doesn't allow for one to weight his comments before he's so far down the road you forgot what he previously said. At the end of the presentation, most people were wowed, but didn't exactly know what he said.
I'm not sure what "results you have experienced in Atlanta" you refer to. It is no feat to sell volume at little or no margin. People do that every day without claiming to be "disruptive." Like I said in a previous post, "The idea that you can make up low margin with volume has been unsuccessfully attempted many times in the auto business." I've operated dealerships where all we had to do was change the word "fleet" to "unit sales" and suddenly the volumes look really large. During that time period, the largest Chevy dealer in the world went bust selling 38K new units a year. That's one dealer, one location, 38,000 new units. Most of the vehicles never landed at the dealership and were drop shipped. Sound familiar? They were going to make up the low margins in volume.
We live in an era where the cost of capital is really low. What happens when interest rates return to a more historical norm? You'll need some margin to absorb that, OR you'll have to pass it on to your customers.
I have no idea how Beepi is performing financially. My comments only address its business model as I understand it. I quick back of the envelope calc tells me they probably aren't doing well, and won't do well in the future unless they change their business model. The current model seems based on a few invalid assumptions. Certainly the market will sort things out in time. As Ed Brooks points out, there can be temporary disruption while a start up based on false assumptions, funded by masses of speculative capital, fails.
I don't doubt that Carvana is a very metric driven company. I found Ernie Garcia Jr. to be mostly brilliant, although his pace of communication doesn't allow for one to weight his comments before he's so far down the road you forgot what he previously said. At the end of the presentation, most people were wowed, but didn't exactly know what he said.
I'm not sure what "results you have experienced in Atlanta" you refer to. It is no feat to sell volume at little or no margin. People do that every day without claiming to be "disruptive." Like I said in a previous post, "The idea that you can make up low margin with volume has been unsuccessfully attempted many times in the auto business." I've operated dealerships where all we had to do was change the word "fleet" to "unit sales" and suddenly the volumes look really large. During that time period, the largest Chevy dealer in the world went bust selling 38K new units a year. That's one dealer, one location, 38,000 new units. Most of the vehicles never landed at the dealership and were drop shipped. Sound familiar? They were going to make up the low margins in volume.
We live in an era where the cost of capital is really low. What happens when interest rates return to a more historical norm? You'll need some margin to absorb that, OR you'll have to pass it on to your customers.
Another question: For some reason it seems to be modus operandi for operators of new concept auto start ups to want to spread the news of what they are doing? Are they trying to convince others to become their competitors? Are they trying to stir up hype to keep the flow of investment capital moving? Or is there something else I'm missing?
There are a lot of "smart people" who are brilliant at raising money for ideas based on deep seated emotions of investors. In my opinion, the king of raising money for failed start up automotive businesses would be Scott Painter. Most of these people have never successfully operated a real auto dealerships. They probably think it is so simple as to be beneath their talents OR finding out how easy to raise money in Silicon Valley, they figure they don't have to learn the business before the set out to change it.
There are a lot of "smart people" who are brilliant at raising money for ideas based on deep seated emotions of investors. In my opinion, the king of raising money for failed start up automotive businesses would be Scott Painter. Most of these people have never successfully operated a real auto dealerships. They probably think it is so simple as to be beneath their talents OR finding out how easy to raise money in Silicon Valley, they figure they don't have to learn the business before the set out to change it.
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Placing my pic on a graph makes as much sense as me placing yours on the chump side of the ledger. It doesn't prove anything. If you are trying to paint me as a laggard because I don't throw money at every new shiny object, I plead guilty. I still have the money I would have wasted on the vast majority of those. I've placed money and/or time into CRM as early as 1992 when the first Autobase system was a MSDOS program running on a 386SX. I was involved with advanced desking software as far back as 1996. I have been involved in personality assessments that resulted in mostly women being hired into a major Japanese dealer Group, beginning in 1998. I watched the failed Ford Collection fail in my home state, and in the others. A current business partner headed up the failed Priceline experiment and has shared what they learned about consumers from the expensive lesson. I have been involved in digital methods of scanning the market to determine which vehicles, new or pre-owned, finance best on a balloon or lease, beginning with the roll out of that product in 2008. I am a backer of a relatively new program that will have a major impact on the operation of pre-owned departments. Hell, I even showed Arnold Tijerina my LG G4 last week to dispel the rumor I still use a flip phone. I find it intellectually vacant, at best, to try to paint someone a certain way because they don't agree with you. Perhaps a discussion based on actual facts might be better. But you choose. You can claim a future success for each new startup just like I can claim my grandmother is in orbit around Mars. Neither of us can disprove the other. But if you want to call me a laggard, I'll just call you a chump. Unless you don't put any money where your mouth is. Then I'll have to come up with a better term.
It seems whenever a store is mentioned where negotiation is eliminated or dramatically reduced, @ruggles automatically assumes that they are giving cars away. From my experience, this is far from the truth. Witness CarMax -- they are very rarely the least expensive in the market and customers seem willing to pay for their preferred buying experience.