BREAKING news! Carvana & Vroom is bleeding cash. Is Ecommerce in auto DOA?

[joe.pistell]

Based on Vroom's & Carvana's news, Ecommerce in auto retail maybe DOA.

Yesterday, @Alexander Lau finds:
Used car site Vroom lays off staff, 25%-50% says source, as it halts Dallas and Indiana operations

https://techcrunch.com/2018/03/05/u...ce-as-it-halts-dallas-and-indiana-operations/

The layoffs come in the wake of tumultuous times for some of Vroom’s other competitors.

In the UK, both Carspring and Hellocar shut down last year. Shift, meanwhile, laid off staff and paused operations in at least one market, but also eventually raised more funding led by BMW.

Perhaps biggest of all was Beepi, which blew through $150 million in funding before two potential sales fell through and it was sold for parts.
​

Today, Carvana reports:
Carvana stock tanks after company reports wider quarterly loss

https://www.marketwatch.com/story/c...mpany-reports-wider-quarterly-loss-2018-03-06
Shares of Carvana Co. CVNA, -14.35% fell more than 7% late Tuesday after the company reported a wider-than-expected fourth-quarter loss and revenue that also missed expectations. Carvana, a platform for buying used cars online, said it lost $47 million in the quarter, or 45 cents a share, compared with a loss of $36 million, or 26 cents a share, a year ago. Sales rose to $265 million, from $107 million a year ago. Analysts polled by FactSet had expected the company to report a loss of 39 cents a share on sales of $270 million.​

 

[john.quinn]

Can anyone who has actually made a solid living in automotive retail be surprised?

I remember the first time the internet was going to replace the dealer... LOL.

Still... lots of work to be done to make things easier for customers and dealers.

 

[Steve Stauning]

There is likely no more efficient market than Used Car Sales in America. Tens of millions annual retail, auction and peer-to-peer transactions completed by tens of millions of independent buyers and sellers with 100% transparency to pricing; yet technology "disruptors" think they can make money by adding costs (like delivery, pick-up and vending machines) to this equation?

Someone failed to take Economics 101 when they were in school.

 

[Michael Pokora]

If anything it represents a huge opportunity for the existing dealer community to create the future for the customer base.

 

[craigh]

I think it's a great add-on business model for existing dealers.
If you are already in business and successfully selling cars, start offering the option to start/end transactions online.

Don't stop using your dealership the way it has worked for decades.

 

[Jason@nabthat]

It comes down to Cost of Acquisition.

These companies forgot they are a two headed COA monster eating up money like an Excursion consumes gas. Dealers have a number of advantages; (1) Brand/Certified Used (can't buy a new Honda at a Lexus dealership; consumers are seeing higher incentives on new vehicles so why would they buy a used one?), (2) Service (customers keep coming back making it easier to communicate Value Propositions) and (3) Trade-Ins (new vehicle sales brings in used inventory) and there are more...

Beepi,Carvana, Vroom have to deal with COA across (1) Acquiring Inventory and (2) Acquiring a Buyer. Both are extremely expensive. Add to it a multiplier because they are relatively unknown to the general public which means their marketing has to be increased.

NabThat started 4 years ago as a TrueCar like platform (in many different ways) and one of the issues we faced before pivoting the company to help dealers with technology platforms and consumer products was the Cost of Acquisition - It is damn expensive

Without looking at their financials, I assume they are paying well over $500 per acquisition (totaling more than $1,000 in marketing costs per buy/sell of a single vehicle). We are not evening addressing how they are purchasing vehicles (continually decreasing assets). This is a volume game and getting to the volume and making it potentially sustainable would take Billions of $$$$.

Sounds like "Dead man walking"....

 

[joe.pistell]

Someone failed to take Economics 101 when they were in school.

and... someone failed to ask used car shoppers if they wanted to buy a car without seeing it.

DOH!

 

[Stefan]

It looks like they got blinded by DISC and forgot about DIMM.

and... someone failed to ask used car shoppers if they wanted to buy a car without seeing it.

DOH!

I think this is a DIMM problem more than DISC. In order to make it long term you need to master both.

 

[Alex Snyder]

Without looking at their financials, I assume they are paying well over $500 per acquisition (totaling more than $1,000 in marketing costs per buy/sell of a single vehicle). We are not evening addressing how they are purchasing vehicles (continually decreasing assets). This is a volume game and getting to the volume and making it potentially sustainable would take Billions of $$$$.

Whoa!

 

[AdamMurray]

Based on Vroom's & Carvana's news, Ecommerce in auto retail maybe DOA.

These company's might be choosing the font on their headstones but I believe e-commerce in auto retail is far from dead. As several above have mentioned, they just went about it in a way that never made any financial sense. While franchised dealers are slow to move, some still endeavor to take full advantage of online retailing and this will only push the tech, processes and competition to make it happen...and still make money.