Carvana is getting attention with “vending machines.” But can it change the way people buy cars?
David Royse | LedeTree
Be honest. Would you rather sit there nervously while a car salesman goes back to “talk to his manager” to see if he can come down another grand on the used ride you’re trying to buy, or would you rather just click on the car you want and have somebody bring it by – or go get it out of a vending machine?
Carvana is betting on the latter.
The five-year-old, Tempe, Ariz.-based company will report quarterly earnings on Tuesday, a report that will be watched closely for clues as to whether the company is doing what it says it wants to do – “change the way people buy cars.”
The company is trying to take advantage of just about every other sector’s move to e-commerce, offering an online car-buying site that has led some to call it the Amazon of used cars. And it has been expanding its reach. It has delivered online-purchased used cars throughout the country, but buyers can get their car delivered to them as soon as the next day for free in 39 markets around the country, a number that has been expanding a lot recently.
But maybe just as intriguing – and certainly more visible – is its other delivery method – “vending machines” popping up in a few cities where buyers can show up and pick up their car. The company last month opened its seventh vending machine, this one in Jacksonville, Fla. It is the first in the state for the company, though another is expected to go up soon alongside I-4 in the Orlando area.
The vending machines seem to be more for show and publicity than anything else – a way to get people talking about Carvana. After all, if you live in a city with a vending machine, you could just have the car delivered to your house. But the cool-looking buildings are likely to get people talking about the company.
Carvana’s founder, Ernie Garcia, said as much in a statement announcing the new Jacksonville location. “We launched in the Jacksonville market in 2016, and the community has welcomed our company and our employees over the past year,” Garcia said. “We hope we can reciprocate that hospitality with Florida’s first Car Vending Machine, by bringing some fun back into the car buying process, to a city that has embraced the new way to buy a car.”
Carvana is even trying to get customers to use the “vending machines” by offering them $200 to fly to a city with one of the glass towers instead of taking delivery at home.
Carvana has competitors in the online car-buying market, among them CarMax, which has been around for a couple of decades. (Read more on the broader use of the Internet in car purchasing in this Florida Times-Union story)
Garcia also said the vending machines are aimed at generating buzz in a recent talk to the Economic Club of Phoenix at Arizona State University.
“The vending machine builds advertising into the model,” Garcia said. “It sits by the freeway. It gets people talking. It’s interesting. It represents what we do.”
He also notes it’s cheaper for customers to come pick the cars up, rather than delivering them to their door – savings that helps the company keep car prices low, which is one of its main selling points.
Shares of Carvana jumped after it reported earnings back in June, when it beat Street estimates in announcing its first numbers since going public. While the company was operating at a loss then, Garcia told analysts at the time that the path to profitability was in sight. The company has been a bit of a curiosity to analysts – having lost $93 million last year, after losing just $36 million the year before. It also has been subject to questions about whether car buying is even a growth industry, considering the much-reported lack of interest in cars among young people more interested in living where they can walk and ride public transit. In August, Carvana bought an upstart would-be rival, Carlypso, for undisclosed terms.
Header photo: Carvana