I had hoped that the billion-dollar startups of online car sales like Carvana and Vroom would utterly quash megamall car dealerships forever. In fact, the big brick-and-mortar dealers seem to be surviving just fine.
This popped up on my radar from a somewhat troubling Automotive News headline declaring that startups were displacing small car dealerships, taking out the little guys while the most bloated big lots weathered the storm. “Smallest dealers pressed as online startups reshape used market,” Automotive News declares, citing a JP Morgan analyst:
“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.
Certainly, this sounds like a potential problem for independent dealers in the future. The rest of the article lays out, however, that we have a long way to go if we have any hope of online sales genuinely displacing any dealerships anytime soon.
I knew that Carvana had already made its founding father-and-son duo billionaires. I didn’t realize that they were accounting for just a fraction of a percentage of America’s car market. Per AN:
J.P. Morgan analysts predict that 12 percent of all used-vehicle sales will happen online by 2030 vs. less than 1 percent today. They expect Carvana to own the lion’s share of them — 35 percent.
At the same time, the used-vehicle market — with annual sales of $841 billion, according to Vroom and CarLotz — is wide open. Market leader CarMax controls just less than 2 percent of sales. Combined sales of Carvana, Vroom, Shift and CarLotz make up less than 1 percent.
Less than one percent! That’s unreal. I mean, it’s unreal for two reasons. The first is that it’s hard to believe that all of the hype, drama, attention focusing on Carvana, Vroom, and any other online car dealer plays against a backdrop of over 99 percent of all car sales still happening through traditional networks. Part of this is down to big marketing and general buzz-worthiness of buying cars in the Amazon age. Vroom had a Super Bowl ad, but more than that it struck a chord here in America.
I just thought the pandemic would have had more of an effect on us. Hell, I helped somebody sell a car on Vroom just the other week! I didn’t want anyone I knew dealing with any tire-kickers coming to their doorstep. In 2020, we all just bought and sold normal-ass trucks at normal-ass dealerships! My mind is blown.
The second aspect is that clawing up a fraction of a percentage of America’s unbelievably huge car market — the second largest in the world — is enough to make you a billionaire. Our appetite for cars is insatiable.