Virtual dealers seek to make buying used cars painless
Author: Randy Cole | @DealerSuccess | Published: Jan 4, 2016, 8:00 pm PST
It has been reported that Shift, a company that is the brainchild of former Google employees, is moving into the San Diego area just as soon as it can find and outfit a local warehouse. Shift was infused with more than $73 million of startup capital, in the hopes of convincing people that the time for car buying with the push of a button is upon us.
But not all are convinced it will be that easy. Many wizened and aged leaders in the automotive community, have seen other companies such as Beepi, Carvana which hails out of Phoenix, and Vroom, come online with the same idea(s). But despite the massive influx of cash from investors who see, or purport to see, a paradigm shift unlike any that the automotive industry has seen since perhaps the introduction of fuel injection technology, there is still no single perfect payment system on the market. Or is there? Read on, for a possible clear and resounding “yes” to that question.
But first… We know that Big Data is making great inroads into the marketing world, able to deliver customized, real-time ads and messaging to unsuspecting consumers across the web. Then there is retargeting, which helps companies to follow you around the interwebz, once you have visited one of their online entities where they tag you with a ‘cookie’, allowing them to continue to show you their ad no matter whose web site you are on.
In like manner, Shift, which operates within a two-sided marketplace, meaning the both purchase as well as sell used vehicles, state clearly that their advantage is in using finely tuned and honed algorithms which help them to determine market values for cars being sold and purchased within any region or locale.
Their claim to fame is the highly regimented and streamlined purchasing and selling processes that they offer the customer, saving them both time and inconvenience. They also claim to be able to offer the very best pricing no matter which side of the fence you find yourself on, whether buying or selling.
In the spirit of something Joe Orr talked about in one of his videos on this web site under the “Next Level” tab, where he mentions that dealerships need to move towards an “Apple Genius” model, with a dealership champion who helps to facilitate the online purchases, Shift also sends out an employee called a “Car Enthusiast” who in like manner, facilitates the purchase of the used vehicle via a 15 minute evaluation. They are also outfitted with the ability to make a firm offer on the spot, based on their findings.
This is where the their highly touted algorithm comes into play, allowing the car enthusiast to create clear pricing models that determine what the offer to the used car seller will be. If the seller accepts the deal presented to them Shift then takes the car into possession and begins processing the vehicle based on their model; (1) very involved inspection, (2) detailing, (3) photo shoot, (4) and finally posting it on a variety of web sites that they identify as offering high visibility for the vehicle. And being former Google employees, it is not hard to imagine that they could possibly excel at that part of the package.
In all, says Minnie Ingersoll, co-founder and chief operations officer at Shift, the process usually takes around 30 days. If no buyer is found for the vehicle, they are paid after a 60 day period.
There are indeed more startups in Silicon Valley that are all vying for that same great spot in the sun, such as the company Instamotor, a startup that has created an app connecting sellers and buyers, while performing digital checkups on both to prevent fraud or other problems that can arise in the still wild west of unregulated online transactions between two free parties.
One of the major issues these companies face:
The used car business — estimated at $640 to $700 billion in 2015 — “has changed little over the past 50 years,” according to IBISWorld’s 2015 industry report.
But change IS coming – there is no doubt about that. And these startups, by migrating their business model to an online platform, rather than being tied to conventional brick and mortar which carries with it immense overhead, are able to sprint forward to a market position and functionality, that of offering online deals, that dealers and dealerships are only now beginning to accept and adopt.
While dealers have, in the past, been able to use third party vendor software to both measure and track sales of certain makes and models of vehicles in their area or region, they were still greatly dependent upon the code provided by that third party vendor to give them a clear and true picture of the marketplace and vehicle demand. That data was then used to determine pricing.
These new startups have proven themselves to be much more nimble and able to modify, tweak and even reprogram their algorithms as needed to keep up with the fickle and ever-changing demands of the automotive trends throughout the entire country. Because they can, to some degree sell cars in a much larger geo-space, they can also work with much larger data sets, allowing them more flexibility in pricing on both the purchase and the sale.
For example, with so many floods across the US, where we can clearly see on the news channels thousands of vehicles under water, it does not take a genius to identify an upcoming market surge for more used cars. Most people who just got wiped out by a flood are most likely not going to be in the position to afford a brand new 2016 model vehicle.
That means that current inventory, and having a good handle on what is out there now, as well as what could possibly sell well within a given territory, based on legacy data sales, could be a boon for these startups who can quickly turn their scopes and sights on markets across the nation, not just in one locality, as a dealership is forced to do.
Now, I mentioned early on that there IS, in my humble opinion, a software available for dealers that DOES deliver the promised perfect Online Deal Creation platform. I can say that with confidence, because it was tested and grew in stature and capability over a period of eight years, in the hands of a very capable and award winning GM in one of the most successful Honda stores in the Pacific Northwest.
If you are curious to know what that software is, simply use the contact form on this web site, and write in the subject line: Curious about Online Deal Creation, and we’ll send you more info and testimonials from dealers who are already seeing it in use on their site and can hardly believe the conversion numbers.
In the meantime, keep alert and the eyes open regarding this new paradigm shift that indeed IS one of the greatest shifts we have seen in the automotive industry in a long, long time.
Following are some interesting facts that might help bring a little more focus to the subject:
ONLINE CAR-BUYING OPTIONS/COMPARISONS
Beepi: 14 U.S. metro markets; car delivered to your door; 240-point inspection; 10-day return; financing assistance.
Shift: Sacramento, San Francisco, San Diego and Los Angeles; brings car to you for a test drive; 200-point inspection; seven-day return; financing assistance.
Carvana: Nine major metro markets; car delivered to your door; in some locations, is ready for you at a Carvana “vending machine;” sells in 42 states; 150-point inspection; 7-day return; financing assistance.
Vroom: ships the car you buy online to you anywhere in the U.S., picks up your old car; 126-point inspection; 7-day return policy; financing assistance.
Instamotor: California; an Apple app (IS 8 or later) that connects buyers with sellers; financing assistance.
A BIG MARKET*
• Total U.S. car market in 2015: $1.2 trillion
• Size of 2015 used car market: $640 billion
• Number of used cars sold in 2015: 41 million
• Dealer’s average gross profit on used car in 2014: $2,361
• Dealer’s average profit on new car in 2014: $1,200
*Sources: National Automobile Dealers Association; Manheim; Edmunds.com; IBISWorld; TrueCar