“A lot of smaller independent used retailers, or independent franchise dealers, they are the ones that are likely to suffer the most because they don’t have the capital or the relationships or the bandwidth to invest in the move towards digital,” said Rajat Gupta, auto retail analyst with J.P. Morgan.
Carvana, Vroom, Shift Technologies and, most recently, CarLotz have raised nearly $4 billion. And while they have yet to report profits as public companies, investors see nothing but daylight for the online used space.
Carvana, the bellwether player that went public in 2017, in particular has dazzled the stock market of late. After trading at about $93 at the start of 2020 and dropping to less than $30 in the early weeks of the coronavirus pandemic, Carvana’s shares have since boomed, selling for as high as around $300 in recent weeks. It closed last week with a share price of $296.08 and a market capitalization of $50.86 billion — far outstripping the combined values of the six public dealership groups.
Sensing opportunity, and with the pandemic juicing interest in online vehicle sales, Vroom, Shift and CarLotz all went public within the past nine months.
Carvana Chief Product Officer Dan Gill welcomes the competition.
“Changing consumer behavior is hard to do, and we’ve been pushing that boulder up the hill for eight years, trying to get consumers comfortable with the idea of buying a car online,” Gill told Automotive News. “And the more people that are telling that story and helping consumers get comfortable with that experience, we see it as a great thing.”
The pandemic’s role in convincing investors and retailers that the future of used-vehicle sales is digital is not to be overlooked.
“What I think COVID did was accelerate that entire process by, like, five years,” Shift co-CEO Toby Russell said. “It went from, ‘Hey, at some point in five years, I need to be able to sell online’ to, ‘Wow, CarMax is shut down in the state of California.’ ”
Used-vehicle sales are moving more quickly in the direction of other retail sectors, said Russell, who estimated the rate of online used-car sales could rival those of shoes and apparel in the next five years.
Michael Bor, CEO of used-vehicle consignment company CarLotz, concurred.
“As more and more consumers start to get accustomed to kind of the Zappos treatment versus the traditional used-car treatment, they’re going to be less and less willing to go visit Joe’s Used Cars on a dirt lot with an electrified fence around it and no Web presence and no online capabilities,” Bor said.
