What Startups Like Vroom, Carvana and Beepi Mean for Remarketing

Los Angeles Times - August 3, 2015

Star­tups like Vroom, Car­vana, Beepi, and Shift are start­ing to see more sales traf­fic this year. Con­sumers can use their mobile device or lap­top to see pho­tos of pre-owned vehi­cle, find com­pet­i­tive prices, walk through the legal paper­work, and com­plete the trans­ac­tion quick­ly.

Con­sumers val­ue con­ve­nience, and com­pet­i­tive pric­ing, very much these days. An Accen­ture study found that 75% of U.S. respon­dents to its sur­vey would con­sid­er mak­ing car selec­tion, financ­ing, price nego­ti­a­tion, back office paper­work and home deliv­ery com­plete­ly online.

This vir­tu­al deal­er busi­ness mod­el is tak­ing off for Car­vana. That com­pa­ny went from $5 mil­lion in rev­enue in 2013 to $40 mil­lion in rev­enue last year, and is on pace to hit $120 mil­lion this year.

How does this grow­ing sales trend affect deal­ers? For now, it appears that pri­vate par­ty sales (which make up about 60% of used vehi­cles sales in the US) are where these trans­ac­tions are hap­pen­ing. For exam­ple, most of the cars for sale on Beepi are owned by indi­vid­u­als who might oth­er­wise have trad­ed them for a new car or sold them through a clas­si­fied ad, Craigslist, or a third-par­ty site like Auto­trad­er. Used car shop­pers are like­ly drawn from sim­i­lar chan­nels.

Here’s how a sales trans­ac­tion takes place with Beepi:

• Poten­tial sell­ers sched­ule an appoint­ment for a Beepi Inspec­tor to con­duct a two-hour, 185-point vehi­cle inspec­tion and pho­to ses­sion.
• If the car pass­es, the own­er gets a price, the car is list­ed and a sale is guar­an­teed in 30 days.
• Beepi marks up the car 3% to 9% more – depend­ing on the vehi­cle – and keeps that for its prof­it.
• The com­pa­ny says it will pay $1,000 more than a dealer’s best offer, but to enforce that a cus­tomer must have a writ­ten or elec­tron­ic offer to present Beepi.
• Buy­ers go to the site, click on a car and see a no-hag­gle price.
• They look through exten­sive pho­tos of the car’s exte­ri­or and inte­ri­or and read a vehi­cle his­to­ry and con­di­tion report. Shop­pers who hit the “Buy Me” but­ton can pay with a per­son­al or cashier’s check, a bank wire trans­fer, a loan through Beepi or finance the car using up to five cred­it cards. They can even pay with Bit­coin, the vir­tu­al cur­ren­cy.

Car­vana has a more tra­di­tion­al busi­ness mod­el. The com­pa­ny buys cars, ships them to depots in Atlanta and Dal­las where it recon­di­tions the vehi­cles. Car­vana buys up vehi­cles from indi­vid­u­als, auc­tions, and automak­er finance com­pa­nies dis­pos­ing of pre­vi­ous­ly leased vehi­cles.

Con­sumers have a lot more options for car shop­ping with new and used cars these days. Vir­tu­al show­rooms have a tough, com­pet­i­tive cli­mate to move through and will see com­pe­ti­tion from strong third-par­ty used car list­ing sites that deal­ers are work­ing with.

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