23 September 2018

For this week we‘re going across the pond to look at an event which happened the other day in New York and which just may one day land on our shores.

A digital dealership, Carvana, which says it does for used cars what Amazon does for most other retail goods, set up its service in NY which is now the 78th city or town it operates in. Buyers research a car on line, choose it, can sort the finance with Carvana if they want and have it delivered to their home without needing to visit a showroom. They get a seven day return option – what you or I would consider an extended test drive – and the usual warranty.

Laugh if you want but its trajectory is impressive. In Q2 it has been selling approx. 250 cars a day and making around £1,500 per unit. Its platform shows some 11,000 makes and models and it says 1 in 5 customers do the whole transaction, from start to finish, on their smartphone.

Carvana says it is a `capital-lite’ business which does not need fancy showrooms or highly paid sales/workshop staff. It PDIs cars from a couple of warehouses but does use retailers for servicing work.

The interesting thing is who is behind all this. In the case of Carvana, it’s a privately owned group of traditional dealerships, the DriveTime Automotive Group, and similar operations fronting mainstream retailers are now appearing around the country.

So far their slice of the £750 billion US car market is pretty small beer but maybe that’s because until now buyers haven’t had much of a credible, reliable alternative to the usual showroom format.

Why are dealers funding this? Aren’t they cutting their own throats – or is it a realistic assessment of the way the millennial generation buy their goods these days?

Which brings me to Mazda. As you may know, this week Mazda announced an extension of its MazdaMyWay service beyond the London hub. You know the thing, you book an appointment and a nice, non-pushy `ambassador’ brings the car to your door, invites you to take a test drive and with a bit of luck later gets your signature on an order.

So I rang the press office and asked: `Why are you rolling out your home delivery service beyond London? The cost per sale must be pretty high.”

“Because we hope to make incremental sales from people who may not bother traveling into a busy city centre or big retail park and so wouldn’t look at and choose our cars but who might do if we took it to them,” was the reply.

Taking cars to customers instead of getting them to come to you. Every journey starts with a first step, as they say…I wonder where this one will go.

John Swift

Editor

Auto Retail Agenda