If brick-and-mortar stores fear Amazon and e-commerce as a threat to their existence, used car dealers may be terrified by the newest development in their industry: a car vending machine.<\/p>\n
<\/p>\n
Yes, it\u2019s real. And no, you can\u2019t shake it to get a free one.<\/p>\n
Online used car retailer Carvana opened its newest \u201cvending machine\u201d last week in Houston, where the gleaming, glass-encased structure sits right off a busy freeway.<\/p>\n
The eight-storey automated garage \u2014 three levels higher than the first version which debuted in Nashville a year ago \u2014 holds 30 cars.<\/p>\n
It dispenses used vehicles in four delivery bays, but only to customers who have the special coin to make it work \u2014 which they receive after completing an online purchase.<\/p>\n
This is a marketing gimmick, of course.<\/p>\n
But the company believes it could prove a valuable part of the strategy to win customers over by completely overhauling the dreaded process of buying a used car, something notoriously difficult and plagued by the fear of sales people taking advantage of prospective buyers.<\/p>\n
\u201cOur view of what we are trying to do is make the experience a high quality one that customers love,\u201d Carvana co-founder and CEO Ernie Garcia told AFP. The goal, he said, is \u201cto make car buying fun.\u201d<\/p>\n
He said the founders did not start out planning to be an online site, but aimed to rethink the car buying transaction from start to finish and find ways to \u201cdifferentiate economically, through the entire pipeline.\u201d<\/p>\n
The first step was to take a page out of Amazon\u2019s book and get rid of dealerships, which Garcia says adds $400 to the price of a car. Another $1,400 goes to pay sales personnel.<\/p>\n
Carvana, which launched in 2013 and is now in 21 markets after adding 12 this year, stores its cars far outside cities in areas where rent is cheap.<\/p>\n
The company says this year it saved customers more than $1,400 on average on purchase prices compared to the Kelley Blue Book suggested price, the industry standard.<\/p>\n
The typical concern for customers buying a used car is whether they can trust that the vehicle is safe and reliable, and whether they are paying too much.<\/p>\n
And even in the best of cases, the process can take several hours of paperwork to complete a purchase through a traditional dealer.<\/p>\n
Carvana offers online comparison shopping, refurbished vehicles, financing options and trade-ins all on its web portal, and Garcia says the fastest purchase was completed in seven minutes.<\/p>\n
The company also provides free delivery as soon as the next day, or pickup at one of the vending machines. Delivery costs $150, so Garcia says the vending machine is another way for Carvana to trim costs.<\/p>\n
However, as part of the new service they are offering $200 to buyers who prefer to fly to Houston to pick up from the vending machine, and transportation from the airport.<\/p>\n
The company also offers a seven-day test drive period, which allows customers the possibility of a full refund.<\/p>\n
\u201cThere is a lot of evidence that an easy-to-use return policy is a way to improve the car-buying experience,\u201d said Garcia, who compared the policy to online shoe retailer Zappos, which overcame skepticism about buying shoes without trying them on with its painless return policy.<\/p>\n
He said about half of the customers who return cars switch to another vehicle.<\/p>\n
\u201cIt\u2019s very clear from the customer response that what we\u2019re doing works,\u201d Garcia said.<\/p>\n
Carvana\u2019s revenues more than doubled this year to $350 million from $150 million in 2015, and just $40 million in 2014. The first year of operation saw just $4 million in business.<\/p>\n
And the firm this summer raised another $160 million in funding, bringing the total to $460 million.<\/p>\n
Carvana is not the first company to try to rethink the used car buying experience. There are many other online options, and CarMax became a big disrupter with its no-haggle pricing, easy trade-ins and reputation for straight-dealing.<\/p>\n
But CarMax also uses traditional dealerships, frequently in areas where other car dealers are located.<\/p>\n
Could the vending machine upend the sales model and make CarMax go the way of Blockbuster? The once-ubiquitous video rental stores collapsed quickly after the arrival of DVD delivery service Netflix and online streaming.<\/p>\n
Garcia declined to say. Nor would he provide details on sales at the Nashville vending machine, except to comment that \u201cthe response we have seen has been overwhelming.\u201d As a result, the company is looking to add more.<\/p>\n
\u201cWe\u2019re trying to expand as quickly as we responsibly can,\u201d he said. \u201cWe\u2019re looking to build out more.\u201d<\/p>\n
News reports say the company was trying to acquire land near Richmond for another machine, but withdrew the application after locals raised concern about the amount of light from the building.\u2014AFP<\/p>\n
Image: YouTube<\/p>\n","protected":false},"excerpt":{"rendered":"
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