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

[Ben_Adler12]

@Alexander Lau mentioned this in passing in another thread - Alibaba is also coming out with vending machines this year in China

https://www.cnet.com/roadshow/news/alibaba-launches-cat-shaped-car-vending-machines-in-china/

 

[Michael Pokora]

Carvana has the potential to be great, but they have a long road ahead. They are significate to the industry in that they are innovating the buying experience on several fronts the way only a start-up with hundreds of millions of dollars in cash to burn on the experiment can. Not many people can make that claim or come to the market with that many zeros.

Their advantage is that they can blow money on ideas without the need for immediate returns, that’s why they can pose a threat. Another thread on this board asked about who was innovating in the dealer space? The answer is the start-ups are, and they are developing proprietary solutions because they don’t want to compete with the existing competition. They want to get out in front with a better weapon no one can match. This is why their CEO commonly refers to the company as a tech company and not as a car company.

They won’t take out any singular dealer group in a specific market but there exists so much opportunity in the marketplace all they need to do is be a slightly better option for a small % of the customer base out there. It’s a numbers game and they know it. The gamble is to become sustainable before the cash runs out. The saying goes that the market can stay irrational longer then you can stay solvent.

They are far from perfect and they are facing heads winds through expansion, but regardless of their long-term feasibility as a business, they are driving innovation within the industry.

 

[Alexander Lau]

Carvana has the potential to be great, but they have a long road ahead. They are significate to the industry in that they are innovating the buying experience on several fronts the way only a start-up with hundreds of millions of dollars in cash to burn on the experiment can. Not many people can make that claim or come to the market with that many zeros.

Their advantage is that they can blow money on ideas without the need for immediate returns, that’s why they can pose a threat. Another thread on this board asked about who was innovating in the dealer space? The answer is the start-ups are, and they are developing proprietary solutions because they don’t want to compete with the existing competition. They want to get out in front with a better weapon no one can match. This is why their CEO commonly refers to the company as a tech company and not as a car company.

They won’t take out any singular dealer group in a specific market but there exists so much opportunity in the marketplace all they need to do is be a slightly better option for a small % of the customer base out there. It’s a numbers game and they know it. The gamble is to become sustainable before the cash runs out. The saying goes that the market can stay irrational longer then you can stay solvent.

They are far from perfect and they are facing heads winds through expansion, but regardless of their long-term feasibility as a business, they are driving innovation within the industry.

Burning through hundreds of millions isn't going to make their venture capital support very happy. I know that much. That number is way too high for them to have bootstrapped.

As for innovators, proprietary solutions can be provided by start-ups that do compete with existing competition (many examples of this). It's not always about the next big idea, it can just as easily be about making what works (models) better and much more efficient, stealing market share, that disruption. Let's face it, most start-ups fail miserably.

 

[Jeff Kershner]

Their advantage is that they can blow money on ideas without the need for immediate returns, that’s why they can pose a threat.

 

[Tallcool1]

I really don't know if Carvana will "make it" or not. @Cullen C , I have a great deal of respect for you and your willingness to face the storm of opposition you have received in this thread. I believe that you know far more about this than any of the rest of us simply due to how close you were to the business for all those years. That said, my comments are not meant to disrespect any of your past efforts as they related to Carvana and the role you played in getting that company as far along as it is.

Disclaimer complete. I don't care if they make it or not. We all have dealers come and go in our markets, especially if your store in an Independent such as mine. There is always another used car lot popping up. Sure we all say "they will never make it" or "there is no way they can be making any money". The problem is, who cares if they make any money. I don't care about their P&L. I care about the customers that they take out of the market WHILE they are losing or making money. Profitable or not, Carvana is taking market share. These competitors are taking gross profit from us.

Carvana has already made a dent. The dent is in their competitors' bottom line.

 

[ed.brooks]

Not pro-Carvana, nor anti-Carvana - not Carvana is going belly-up nor Carvana is going to disrupt the entire industry.
This is simply one consumer's experience.
There may be some lessons in there for all the (other) dealers out there.

NEW TECH: BUYING A PIZZA–I MEAN A CAR–ONLINE
Blog Post

 

[joe.pistell]

@kevinfrye 's entrepreneurial work on http://www.wylerfastlane.com/ (a car subscription service) connects to this awesome thread. If you don't know about Kevin's work with FastLane, you must listen to this week's Refresh Friday video [link].

@Cullen C CONSIDER THIS:
What if Carvana added a subscription to its biz plan. WOW. You’re 100% ready to roll it out. You can finance internally thru a stock secondary. I’m buying $CVNA for my 401k on this speculation alone! http://bit.ly/2CYc3VY


My $0.02
The car subscription eco-system is made possible on the management system built by http://www.driveclutch.com. This platform empowers a land rush into this paradigm-shifting opportunity. I believe the Subscription biz model should favor used cars (vs new) due to it's lower unit costs. I'll also assume that the subscriber assumes the car has miles on it, they'll be more concerned with the condition of the car and less concerned about its EXACT mileage.

This is could easily become a firestorm sweeping into markets with the greatest of ease.
This subscription opportunity fits budding eCommerce players in the used car space like Carvana, Vroom, Shift, Beepi (aka Fair.com) and well-capitalized players others (like Carmax).

Franchised dealers who are interested in this opportunity need to attend Digital Dealer and listen closely to @kevinfrye thoughts and experiences.

Thank you @kevinfrye !


p.s. Dealers, this is the best test drive experience ever! Subscribers eventually will want to get out of the premium service and buy the Car/SUV/Truck they most liked. Subscribers may want to buy the car they're in right now

 

[Chris Cachor]

I believe the Subscription biz model should favor used cars (vs new) due to it's lower unit costs. I'll also assume that the subscriber assumes the car has miles on it, they'll be more concerned with the condition of the car and less concerned about its EXACT mileage.

I think it all depends on the subscription plan. I can't speak for others but my intuition tells me customers interested in this program (at $800+/mo) are going to care about the condition AND the miles. That's not to say you can't have multi-tier subscription programs, either. I just think these programs serve the higher end of the market that can spend a little more in return for more flexibility. I mean, it's basically a perpetual lease program, right?

 

[craigh]

I mean, it's basically a perpetual lease program, right?

It is, with the added benefit of being able to swap out cars based on your immediate needs.
I could see that being a huge draw, especially if we could get it up here where seasonal vehicles are fairly common.

 

[Cullen C]

@kevinfrye 's entrepreneurial work on http://www.wylerfastlane.com/ (a car subscription service) connects to this awesome thread. If you don't know about Kevin's work with FastLane, you must listen to this week's Refresh Friday video.

@Cullen C CONSIDER THIS:
What if Carvana added a subscription to its biz plan. WOW. You’re 100% ready to roll it out. You can finance internally thru a stock secondary. I’m buying $CVNA for my 401k on this speculation alone! http://bit.ly/2CYc3VY


My $0.02
The car subscription eco-system is made possible on the management system built by http://www.driveclutch.com. This platform empowers a land rush into this paradigm-shifting opportunity. I believe the Subscription biz model should favor used cars (vs new) due to it's lower unit costs. I'll also assume that the subscriber assumes the car has miles on it, they'll be more concerned with the condition of the car and less concerned about its EXACT mileage.

This is could easily become a firestorm sweeping into markets with the greatest of ease.
This subscription opportunity fits budding eCommerce players in the used car space like Carvana, Vroom, Shift, Beepi (aka Fair.com) and well-capitalized players others (like Carmax).

Franchised dealers who are interested in this opportunity need to attend Digital Dealer and listen closely to @kevinfrye thoughts and experiences.

Thank you @kevinfrye !


p.s. Dealers, this is the best test drive experience ever! Subscribers eventually will want to get out of the premium service and buy the Car/SUV/Truck they most liked. Subscribers may want to buy the car they're in right now

I agree that subscription service is a sexy alternative that allows dealers to potentially capture two ends of the market. The higher end of the market where a consumer values flexibility enough to pay a premium(sometimes significantly more than a traditional lease.....or two). As well as the lower end of the market where a person is subscribing to a car(without the inconvenience of a credit check) that will allow them to get into a car and use that car as a means of income, essentially having it pay for itself. The later option is potentially a bigger market opportunity, potentially disrupting the buy here pay here market.

While it is a sexy option it is my opinion that the unit economics need a lot of work for it to be viable. There is an affordability concern that I think gets glossed over during these discussions. The reality is that people currently have had to resort to stretching loans out to 60-66 months on average to keep monthly payments in the $300-350 range. Flexibility is cool. But for most it simply will not be in reach until an apples to apples vehicle comparison can occur. Subscribing to a 2017 Nissan Altima for $850 a month is not scalable.

It doesn't mean I am against dealers adding it as a mobility option while continuing to push sales and lease options. I think it would be wise for dealers to offer as many options as possible without diluting their brand. The car market, particularly used, is an extremely fragmented one. Why not try to satisfy those varied needs.

As for ecommerce players(and others) jumping in. Those economics matter to them as well. Carvana, CarMax, DriveTime or Vroom may potentially be better positioned to take advantage but customers are not.