Few industries experienced COVID-19 volatility, either sharp sales drops and expansion acceleration, as did used car markets online. Over the past two months, the purchase and promotion of cars online has temporarily moved from long term to a current imperative. Why has the industry been so resilient and the tendency to buy and sell cars online is a passing fad or an indicator of the Amazonification of auto retail? I sat down (virtually) with Toby Russell, co-founder and co-CEO of SHIFT’s online used car market, to find out more.
At first glance, the online used car market area is not an apparent selection for the unprecedented expansion of COVID-19. Demand for transportation has declined with others fleeing homes and seeking shelters on site in many of America’s high-population cities. In addition, customer spending on expensive parts such as cars is expected to decline in times of economic stress and emerging unemployment.
In fact, during the March and April 2020, sales of used cars online declined particularly as consumers adapted to a new economic reality. SHIFT’s April sales fell 40% from February sales, and the company’s main competitors, Carvana and Vroom, two publicly traded companies, also faced primary sales challenges. Carvana’s sales in April fell 40% from 2019 grades and Vroom was forced to sell a significant portion of its shares at a large discount. However, as consumers became accustomed to this new standard, they began to look for a safe and effective way to meet their transportation needs, from the grocery store to hospitals in case of emergency. The online used car markets temporarily fulfilled this role.
Part of the emergence of those markets is similar to the nature of their trading style and the benefits they offer over other shipping modes. When COVID-19 began to spread, many classic car dealerships and stores closed, as did public transportation in major cities such as San Francisco. Even in cases where public transport continues to operate, the prospect of being in an overcrowded environment has proved too difficult for many others to bear. Alternatively, car and car-sharing platforms and peer-to-peer car rentals also provide demanding situations due to the maximum speed of passengers crossing vehicles. Finally, with restrictions on air travel, tourists have switched from planes to private vehicles. For many, own shipping is the only viable option, and if you don’t already have a car, an online used car market is probably your most productive option to get one (and a cost-effective option compared to buying a new car. ).
The confluence of these market location points has given online automotive market locations an exclusive and great opportunity to serve countless new customers. As Edmunds analyst Ivan Drury points out: “Together, Carvana, Vroom and SHIFT sold fewer than 300,000 cars in 2019, or less than 1% of the used car market in the United States.” On the other hand, this opportunity has tested the resources and capacity of those places of the market that have not yet been successful and has forced to reinvent the pleasure of buying and promoting used cars online to satisfy the wishes of new audiences looking for online retail benefits without sacrificing the purchase of classic cars. and the sales process.
Major online used car markets have responded to this sinking or swimming scenario with impressive performance, prioritizing protection and driving the industry forward. As a result, Carvana and Vroom behaved strongly at the time of the 2020 quarter, and SHIFT sales in May 2020 returned to Record February levels.
While the industry as a whole has demonstrated an impressive ability to operate on a much larger scale than expected, which sets San Francisco-based SHIFT and its COVID-19, and why I’m interested in talking to SHIFT co-CEO Toby Russell. , is the adaptability and innovation that the corporate demonstrated at the beginning of the crisis. The delight of the SHIFT user differs from Carvana and Vroom in the key domain of driving verification. Carvana and Vroom each will offer a 7-day grace age or a “return policy” after the acquisition to facilitate the compromise of the transaction. However, SHIFT conveniently approaches their cars to potential consumers and allows them to check the vehicle before purchasing it.
This additional feature introduces a set of logistical and security considerations that SHIFT had to consider in the context of COVID-19. In response, SHIFT temporarily implemented (in the days after the California lockout order) several updates aimed, in Russell’s words, at “making cars safer, the verification and purchasing procedure safer, and the procedure more accessible.” First, SHIFT has perfected the car’s delivery and driving control procedure so that it has no contact, which is not a minor logistical matter. Second, the company has begun applying loose antimicrobial remedies to all its cars to prevent the spread of germs. In addition, SHIFT has created an essential program for employees that offers discounts to essential employees. Given SHIFT’s terrible initial monetary scenario due to COVID-19 and its focus on its control momentum as a fundamental differentiator, corporate movements have proven to be essential to the company’s fitness and long term, which has since announced plans. to the public this year.
When asked what SHIFT’s equipment and operations had allowed the company to recover as it did, Russell emphasized the constant adaptation to changing customer desires. It also identified the price of building an interdisciplinary team with diverse backgrounds and perspectives to foster creativity and collaborative decision-making. In this case, the progression and execution of a COVID-19 strategy required input and cooperation between automotive delivery personnel, automotive mechanics, designers, software engineers, product managers, etc. From the point of view, much of its strategy, such as delivering a check vehicle or expanding to the “price” segment of cars at least 8 years of age with more than 80,000 miles (an area in which Carvana and Vroom are not active), has been reinforced through the circumstances of COVID-19.
Looking ahead, what remains is: to what extent is the recent expansion of the online used car market a sign of the times rather than a basic substitution in purchasing behavior? According to Russell, for the most part, the dynamics and expansion of the industry driven through COVID-19 will continue.
The trajectory to online car retail has been particularly advanced. Just a few months ago, many industry players thought that online car markets would take another five years to literally take root. The explanation for why adoption of online automotive markets will continue to increase is simple: it is a much greater pleasure for visitors. According to a 2019 report published through CarGurus, 96% of other people begin their pleasure in buying cars online, looking for pricing experts for the cars they are interested in. But in most cases, those consumers can’t buy the car they’re interested in. Check online. Instead, they are referred to a racer who would possibly or not have the car. This asymmetry between the purchase of auto groceries and the delight of transactions will not continue to be appropriate for consumers increasingly accustomed to optimized online order processing and the delight of sales.
The transition to greater adoption of online automotive markets will undoubtedly lead to increased scrutiny and festival by classic car dealers looking to adapt their own legacy models. Russell is not involved in this top festival due to the main barriers of entry, the first of which is the difficulty of finding a functional e-commerce skill. This infrastructure is particularly complex to build in the automotive sector, as any online marketplace must take into account financing and warranty requirements, as well as the ability to move giant quantities and vehicle titles. There is some other impediment to realization. Processing transactions with a car is different from other types of processing: a car cannot be packaged and shipped like many other products purchased and executed online.
Another notable trend, Russell acknowledges that it would possibly not last, is the migration from transactions from new cars to used cars and used cars to widely used ones. RECENT knowledge from SHIFT shows that older and less expensive cars are the most in demand: these types of cars traditionally accounted for 15-20% of SHIFT road tests, but have recently passed 30-40% of road tests). The exchange price segment discussed in the past of older cars certified for change aims at this developing demand.
Finally, historically, the high season requires road overhauls on weekends. More recently, the so-called peak has changed from Wednesday to Friday, as other people fleeing the house are looking for a check at the end of the workday. The jury is unclear whether the shape of the retail week and the seasonality of the retail year will replace and flatten in the long run.
The past few months have tested and validated the price of online automotive markets and demonstrated that the automotive industry cannot and will not be free from the disruptive forces that are transforming retail. Time will tell whether SHIFT can apply the same exposed COVID-19 innovation to separate from the place package of the online marketplace, or whether fast-growing Carvana and Vroom will take the lead. In any case, given the margin of growth, the online automotive market sector is in fact a sector in which several players can retain a significant percentage and sustainable business. The long term is really brilliant for used car market spots online.
I am the founder of Startup Universal, a content platform that covers start-ups and opportunities in emerging and emerging countries. In 2017, I left New York and
I am the founder of Startup Universal, a content platform that covers startups and opportunities aimed at emerging and emerging countries. In 2017, I left New York and left my homework at the e-commerce start-up Jet.com to travel around the world for a year with my wife as a member of the Remote Year program, exploring the progression of startup ecosystems in Asia, Africa and Europe. and South America. I write about my reporting with local marketers and start-ups around the world and how they use generation for life in their home countries and beyond. You can touch me on Twitter @jonmoed.