Doritos or a Dodge Challenger?
On Wednesday, Carvana, an e-commerce platform for used cars, is opening a vehicle vending machine in San Antonio, which is exactly what it sounds like. The four-year-old startup already has similar contraptions in Austin, Houston, & Nashville. Standing eight stories tall, the site is essentially a small garage with room for 30 cars. When a customer puts in a special “coin,” her car of choice is plucked from the rack like a bag of chips, albeit more delicately (here’s a video of how it works).
p>Instagram: Instagram post by Carvana
Customers buy their car in advance from the company’s online inventory of approximately 8,000 autos, then it’s loaded into the machine for the huge reveal—as Carvana puts it: “A personalized & memorable pick-up experience.” Is it a gimmick? Of course. However, it’s rare for a car dealer–particularly a used-car dealer–to embrace the surprise-and-delight mantra that most retailers subscribe to these days. Coffee that’s occasionally decent is approximately as far as dealers go.
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Carvana is taking another page from the 21st century retail playbook: the omni-channel strategy—letting customers shop wherever & however they want. For vending machine fans who don’t live in San Antonio, Carvana will carry the gimmick to tremendous lengths, kicking in $200 in travel expenses & a ride from the airport. Not into the car-as-a-candy-bar thing? No problem. Carvana moreover delivers. Feel free to buy a worn-in Ford F-150 on your iPhone & have it sitting at the curb the next day, if not sooner.
Carvana @Carvana In #Jacksonville, we delivered 2 vehicles at the same time for 2 customers celebrating their anniversary! Congrats,… https://t.co/V8ipyE8pKM Twitter: Carvana on Twitter
Carvana offers warranties & financing & its prices are generally pretty good, in part because it doesn’t have to worry approximately maintaining & staffing dealerships. What the company doesn’t offer is a test drive, though there’s a seven-day window to return a vehicle—no questions asked.
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If a website is too quick for such a big-ticket transaction, buyers can still go to an old-fashioned lot & smell the coffee. Carvana’s is financed by DriveTime Automotive Group, a Phoenix-based network of dealerships. But the real question for Carvana is whether a critical mass of consumers are comfortable dropping tens of thousands of dollars on a product, sight unseen. If real estate is any indicator, the answer is yes.
In August the company raised $160 million in its third round of funding, & it reportedly has an IPO in the works. Carvana Chief Executive Officer Ernie Garcia says buyers who know what they want spend as little as 10 minutes on the transaction.
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In truth, Carvana, & the crowd of e-commerce startups like it, doesn’t need to corner a vast share of buyers. The used-car market in the U.S. is massive—slightly larger than that for new vehicles. In a satisfactory year, 45 million machines & some $640 billion will trade hands.
If a company such as Carvana captures one-quarter of that, it will be approximately as huge as General Motors—though probably more profitable.
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