Carvana and Vroom have reimagined the car buying experience. These two brands are rapidly gaining traction by taking advantage of modern consumers' online shopping habits. More and more buyers prefer a no-haggle, online shopping experience which has allowed Carvana and Vroom to eat into the market share of traditional car dealerships.
The big question is, can car dealerships compete with Carvana and Vroom? They may not be able replicate the Carvana/Vroom business model, but they can adapt to it and thrive.
Understanding the Difference Between a Car Dealership and Online Model
Historically, car dealers pegged their success on salespeople and haggling. Consumers became accustomed to this model and simultaneously believed they got the best deals through negotiations. However, the automotive industry has changed as a new generation of buyers entered the consumer space. These new shoppers are less interested in dialogue and more interested in simplicity.
Carvana and Vroom saw the niche in the market and filled it by moving their business online. Consumers can now shop for their favorite car, get the price, arrange for financing, and get the car delivered to their chosen location, all from the comfort of their homes. The good thing about the Carvana and Vroom model is that there are no middlemen or tiring negotiations. Customers spot their car and seal the deal on a website.
According to CNBC news, the model assumed by Carvana has gained popularity, as shown by its financial performance. Carvana's stock moved from a low of $30 to a high of $200 within a year. Given the success of this model, it is tempting to copy it. However, if you already run a franchise, you should be looking to complement Carvana rather than directly copying it.
Why Franchises Shouldn't Copy the Carvana Brand
There are three reasons why you should not copy the Carvana model:
- Limited Inventory - Online models like Carvana and Vroom can maintain nearly unlimited stock which gives customers the freedom to exercise choice. Normal car dealerships also have inventory choices, but the selection isn't as expansive which impacts marketing and sales strategies.
- Types of Inventory - Carvana offers only used cars but dealerships can include new vehicles in their portfolio, attracting both new and used car buyers.
- Deals & Offers - While some consumers like to shop entirely online, many consumers want to visit the lot to negotiate their deal. Carvana and Vroom don't offer that option.
How to Compete with Carvana and Vroom
You can compete with Carvana and Vroom by tapping into their weaknesses. Convert the shortcomings of a fully online business into a competitive edge for your business. The following weaknesses in the exclusively online model will give you a competitive advantage:
- Human Connection - Not every consumer is looking to work through a computer for their next car purchase. Traditional dealers can differentiate themselves from Carvana and Vroom by offering a real, personal car buying experience.
- Test Drives - There are no test drives in the exclusively online model but many shoppers want a test drive before purchasing. By offering this service, dealers are more likely to help consumers find the vehicle that's best for their needs.
- Market Online with Precision - Carvana and Vroom cast a wide net, but as a smaller dealership you can avoid wasted ad spend by understanding your target market and customizing your ads to bridge the gap between you and the consumer.
Working with an ad platform like MarketAI, which only markets to active shoppers, will help you identify people who have shown interest in buying the cars you have in stock.
We Can Help You
At ZeroSum, we understand the challenge of identifying active shoppers and the need to keep marketing expenses low. To help, we’ve developed MarketAI an ad platform that advertises solely to active shoppers and eliminates wasted ad spend. Our ad platform will help you optimize your ads and compete effectively with car sellers like Carvana and Vroom. Contact us today for a free demo.