The words “used car salesman” may summon an instinctive cringe in many consumers, and the sight of one might send most scrambling to get off the lot while they still have their wallets. As for such companies hoping to drive forward in a new age of used car enterprises, kicking the specter of industry stereotypes could also mean ditching the process of haggling — and even that pesky used car salesperson — entirely.
But, how can used car sellers afford to step out of the price-bargaining game? For Carvana — of car vending machine fame — it’s through the lower overhead cost granted by the company’s largely self-serve auto purchasing and financing model.
Carvana has perfected its business to the point that it no longer sees the need to create a four-hour process to upsell its customer on certain items, Ryan Keeton, Carvana co-founder and chief brand officer, explained in a recent PYMNTS interview.
“We [provide] a self-service platform that people can go through and pick their financing [and car] and do a trade-in [or other service],” Keeton said.
For Carvana’s customers, getting to see their cars unloaded from a multi-story gleaming glass vending machine is an added perk, of course. They just can’t shake the vending machine if the car gets stuck.
Getting one’s wheels online
Carvana operates differently than most other car dealerships, used or new. Under the model used by Keeton’s company, employees inspect, touch up and photograph the cars to be listed for sale, then upload 360-degree external images and interior photos to the Carvana website — all with zoom-in options.
Customers can then remotely view any number of cars while sipping coffee from the comfort of home, or even on-the-go through their mobile phones, thereby eliminating the need to drive from dealer to dealer examining options that may or may not fit their wants or needs.
The customer can save additional time by viewing personalized financing options, assessing interest rates or other details and adjusting potential payment plans for each vehicle she considers through the Carvana platform. She can also tack on ancillary products like warranties and gap insurance, all in the name of shaving precious minutes from the car buying experience.
If satisfied, a buyer can even purchase her new car online and have a Carvana employee drop the vehicle off at a scheduled time, or can schedule a time to pick it up from one of the company’s distinctive automobile vending machines. According to Keeton, the model shrinks the whole process from an entire afternoon down to about 11 minutes.
Saving time, saving money
But Carvana’s unusual business model doesn’t just prevent the knee-jerk runaway reaction that sales folk can instinctively generate in buyers. According to Keeton, the model also saves the company money.
Because it provides detailed online photos, Carvana doesn’t need a large and well-staffed lot filled with employees showing off each car all day long. Instead, only specific cars are loaded onto a hauler and trucked from a distribution center to vending machines or customer drop-offs after a purchase is made.
Keeton claimed customers also save some coin through this business model. After purchasing a car, a customer has about a week to test it out and see how it fits her lifestyle, then she decides whether to keep it or arrange a return and refund on the seventh day.
“We do not have the traditional brick and mortar overhead that a dealership does — which is about $2,000 per sale that gets passed to the customer,” Keeton said. “[As such], you are able to save about $1,430 versus [the] Kelley Blue Book [value], on average.”
While Carvana’s business model sets it apart, its distribution model has also helped to differentiate the company.
Its giant vehicle vending machines, for example, which have been helping the company make headlines, are, in part, a bit of an advertising ploy, Keeton said. Installing one of the highly-visible structures in a new city is a quick way to get the word out and establish the brand.
“It’s a great marketing presence,” he said. “It’s a very oversized, glowing building made of glass, that’s a car vending machine. That can generate interest through local media as well as just for people who are driving by on the road and [see it].”
The machine also shapes the customer’s experience, giving her the convenience of a pickup option and making the car acquisition process memorable.
A customer who has made a purchase online arrives at the lot, receives a three-inch branded coin from a staff member, pops it into the machine and sees her car slowly lowered and released to her. While a QR-code might do the trick just as well as a coin, Keeton says he sticks by the metal disc for its tactility and the visceral evocativeness of traditional vending machines. Plus, it becomes a keepsake for customers because they can take it home along with the car.
“[We wanted to give customers] a memorable and impactful experience so people would want to go out and tell their friends and family about buying a used car,” Keeton said. “Let’s make car buying fun again.”
Carvana’s vending machine and skip-the-lot model also makes it easier for the company to add presences in new cities — something that has been coming into focus as it expands.
It is easier to establish an operation with this smaller footprint, Keeton noted, and the company can use a hauler to deliver cars to each location as needed. The result is customers in a city such as Tucson, Arizona, where the firm recently set up shop, receive access to approximately 9,000 available cars, though the company only has to stock a few on its premises.
Still, when it comes to entering a new city, there’s no quick and easy recipe for trust, Keeton attested. Instead, that must be built as each area’s customers learn of the service, see how it works for others and media and word-of-mouth spread the news.
“Our footprint expands with every new market we enter, and each time [we] need to build awareness of [the] service,” Keeton said. “[We] need to fulfill the promises [we] make to customers. Every time we [expand], we have to climb that hill of legitimacy and building trust.”
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