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

Discussion in 'Other Cool Technologies & Services' started by joe.pistell, Mar 7, 2018.

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  1. Cullen C

    Cullen C
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    "That said, their base was relatively small and their gross margins are still just shy of the average dealer. They will plateau because we are talking about used cars here and not books, videos, shoes, or groceries. There aren't any suppliers to muscle (like Amazon did to theirs). There aren't any sales tax advantages over the existing marketplace (like Amazon exploited for years). And, there aren't any used car factories that can ramp up production for Carvana."

    So while I will agree with you that the margins will never reach book or shoe levels, Carvana's business model doesn't require 50% margins to get to profitability. If you look at this last quarters performance, reaching 2k gpu, and understanding they have made statements about getting to 3k by year end, the margins will eventually be on par, if not slightly ahead of other dealers.

    "The used car market in America is one of the most efficient markets around. Between tens of millions of annual transactions, traditional auctions, transparent online retail pricing, and dealer pricing tools, there really are relatively few "inefficiencies" to be exploited."

    When you factor in the operating costs (particularly real estate and personnel) of Carvana in a given market vs the traditional dealer or even CarMax is where you should start to see fairly significant inefficiencies in the market.

    "Moreover, I predict Carvana will always have to spend heavily on the most expensive marketing - that is, the name recognition ads they currently run. Unlike the Chevy dealer I drive by everyday, Carvana simply won't be top-of-mind for most in-market consumers without it. Unlike Amazon, no one is shopping at Carvana.com every week (as 85% of Amazon's Prime customers do SOURCE)."

    If you think the Chevy dealer, simply because you drive by it everyday, is somehow front of mind as you begin your car shopping process today is laughable. Will they need to advertise, yes, I would imagine they will. But as they scale they may actually have to spend less as they leverage national ad spends versus what they have done most recently, locally and regionally.

    I know there has been a fixation on comparing Amazon with Carvana. It's oversimplified and perhaps lazy. But just because they are not Amazon doesn't mean they will not be successful. But hey, continue your day trading with the stock, it should be a fun ride for you.
     
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  3. Stauning

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    You know, it's possible to have online discussions without being an a**hat, right?

    I never said Carvana wasn't successful, just not worth more than $2 billion (which, BTW, is pretty successful in my mind). Given their current valuation is $7.7 billion, Wall Street disagrees with me (and, of course, disagrees that Carvana is a dealer). If you have some math that will show me how Carvana (when the sales plateau, as we all know they will at some point) legitimately earns a $7.7 billion valuation, I would love to see it.

    Here's my math (which didn't change after their recent earnings report) on why they're worth every bit of $2 billion: https://askthemanager.com/2018/07/carvana-is-worth-every-bit-of-2-billion/

    If I'm wrong on any of my assumptions, please let me know. The post has been out there for nearly a month, has had thousands of views, and no one has yet challenged the conclusions. (You may not know this about me, but I am always open to being told I'm wrong. In fact, I love to be right so much that I encourage others to correct me when I am wrong.)
     
  4. Cullen C

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    Steve, when did you get so sensitive....

    Forgive me, I was almost certain you were the author of a few articles about how Carvana would fail....must have been another Steve....

    I am not up for disputing your math or how you derived a 2 Billion valuation but I would offer a couple of thoughts.

    First, the value of anything is based on the belief of a buyer, at the time of purchase, that the thing has more value(perceived or otherwise) than the things assigned cost. Carvana's current value is simply that. Wall Street knows they are a car dealer. They simply think they are a better version of one. Enabled by very good technology and supported by very good customer experience. Again, the advantages vs the rest of the market in how lean they operate their markets is significant.

    Secondarily, the assumption that Carvana's sales are near plateauing or will plateau is worth questioning. This is still a relatively untapped market, most customers are still getting comfortable with the thought of buying a car online. My guess is they are very far from slowing down.
     
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  5. Alexander Lau

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    https://persollo.com

    Instant Checkout. Anywhere!
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    Persollo provides tools for brands, agencies and influencers to sell online in just 1 click bypassing e‑commerce sites or shopping carts.
     
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  6. Cullen C

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  7. Alexander Lau

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  8. craigh

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    I remember the days when companies only raised money once, then proved they knew what to do with that money by, stay with me here, making more money on their own.
     
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  9. Cullen C

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    Did Ruggles, hack into your account.....
     
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  10. joe.pistell

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  11. Cullen C

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