If you’ve been in the car industry, you’ve probably heard of the new dealership on the block, Carvana. They are known for their car vending machines. That’s right, vending machines.
Carvana’s mission is “to change the way people buy cars by providing a completely painless and transparent car buying experience online, eliminating the need to take the intimidating trip to the dealership.”
Their aim is to provide exceptional service and cut the dealership costs, saving customers $1,500 or more on their vehicle purchase.
Carvana’s business model is quite intriguing, but the real reasons why traditional dealerships can’t compete with Carvana are different than what you may think.
A Glorified Dealership?
Carvana touts that they are not a dealership and are often described as a technology startup, an eCommerce platform.
But are they really not a dealership?
After all, they do buy and sell vehicles at the retail level. They are essentially a dealership without the physical showroom, making them an “online-only” dealership.
And as they may seem more simplified compared to traditional dealerships, there are other costs and logistics. Vending machine overhead, delivery, and pickup are now important pieces of their business model. They also don’t have access to closed auctions and they don’t offer service for backend profits.
Not For The Traditional Shopper
Carvana markets themselves as cutting out the middleman, allowing shoppers to skip the negative dealership experience and buy cars online, saving money in the process.
While it’s true a lot of shoppers don’t like the dealership experience, when it comes to cars, the majority of shoppers do like to shop in-person. And even more, most shoppers don’t buy on price alone.
Shoppers like to kick the tires and get a real sense of a vehicle before they make a large purchase.
Carvana offers delivery and a 7-day money back guarantee, but deliveries in some locations can take up to 12 business days. For the shopper who likes to compare vehicles side by side and test drive them quickly, this is a deal breaker.
This is why Steve Stauning, who recently aired on Refresh Friday to discuss his article Why Carvana Will Fail and How They Might Succeed, says Carvana is “solving for the wrong issue” and that “there’s nothing Carvana is doing that a traditional dealer can’t do”.
And it’s true – traditional dealerships can allow shoppers to buy entirely online and offer pickup and delivery, but should they?
Serving a niche market
Even though it’s a fraction of the market, there are still shoppers who prefer to purchase their next vehicle entirely online.
These shoppers are in a niche market of their own.
In a recent Refresh Friday webinar, Rick Buffkin commented, “Carvana is literally 3 miles from our main store. Currently, Carvana is a zero threat to our used car sales!!! They’ve been here in the Nashville area for roughly 3 years.”
While Carvana may not be a threat to the traditional dealership, there are opportunities for online-only dealerships to grow.
Perhaps the real competition for Carvana, are other online-only dealerships such as Vroom, who in December 2015, acquired the largest online dealership, Texas Direct Auto.
Texas Direct Auto does have a huge physical showroom, which asks the question, can Carvana survive in its current form?
What Can be Learned From Carvana?
Carvana is serving a niche market, a market where traditional dealership might not want to compete.
There are still, however, valuable lessons that can be learned for traditional dealerships.
Online-only dealerships are forced to convert shoppers to customers if they wish to survive. This means having optimized website elements such as CTAs and clear images.
Analyzing sites like Carvana can offer strategies for traditional dealerships:
- Advanced filtering options
- High quality 360° photos
- Highlighting vehicle imperfections
- Transparent pricing
Carvana does offer a new and exciting business model, and it doesn’t look like traditional dealerships have anything to fear and that there’s a lot to be learned.
Your Turn – Join the Conversation
Is a complete online shopping experience right for your dealership?
What strategies can you take from Carvana and apply to your store?