A giant glass tower has quickly turned an online used-car site into a recognizable brand in Charlotte.
With its status as a mid-sized, fast-growing city, Charlotte is used to being a target market for hot online consumer-facing startups. That’s exactly what’s happening now with the used car seller Carvana.
Carvana launched in the Charlotte market in 2014, delivering used cars ordered online straight to people’s driveways.
But since opening its high-profile “car vending machine” tower on South Boulevard earlier this summer, sales have more than doubled.
Carvana is now selling an average of 20 cars per day to the greater Charlotte region, company representatives told the Agenda.
What is Carvana? The company is another example of massively funded startups targeting millennial buyers.
The premise is that people don’t like working with car dealerships and suffering through high-pressure sales tactics. Carvana’s main selling point is that you can buy a car and retrieve it without having to deal with any people.
Dollar Shave Club sells you razors, Casper sells you mattresses, Quip sells you toothbrushes. The Sill sells you plants. OfferPad, Opendoor and Knock.com are vying to sell your house.
Similarly, Carvana is trying to disrupt the way you buy a car.
The company launched with Atlanta in 2013, and moved into Charlotte and Nashville in 2014.
Since then, expansion has been dramatic:
- 6 new markets in 2015
- 12 in 2016
- 23 in 2017
- Another 12 in the first half of 2018.
The number of actual vending machines has grown more slowly, reaching 11 this year. Each vending machine costs about $5 million to construct, according to securities filings.
The business model seems to be working. The company went public in spring 2017, providing a wealth of financial data about the company.
Overall market penetration is small: About 0.72% of the Charlotte used car market, which, to be fair, is extremely fragmented.
Meanwhile, revenue growth is accelerating. Carvana counts a roughly $1,850 gross profit per car sold, though the company overall is still losing money as it expands.
Investors are happy about that. After a slow start, Carvana shares are up nearly 300 percent in the past year.
From Carvana’s investor presentation.
Google Finance
Here’s how Carvana works.
Carvana sells used cars that are 10 years old or newer, stocking all makes and models. You use the website to shop the roughly 10,700 cars they have in inventory.
This week, the cheapest car was a 2015 Smart Fortwo Passion Hatchback Coupe with 37,000 miles on it for $7,800.
The most expensive car was a 2017 Land Rover HSE with 21,000 miles on it for $79,400. Yes, they also sell Porsches starting around $45,000.
You don’t get to customize the vehicles, but you do get a pretty robust 360 video of the car you’d be buying.
Once you’ve settled on a car, you can choose to have it delivered to you (within 100 miles of the car vending machine) or you can pick it up there. They ship the car to your location within a few days.
If you choose to use the vending machine, the staff there will give you an oversized coin to stick in a slot and vend your car.
Carvana does trade-ins, as well. You put in your VIN or license plate number and a few more pieces of information, and they’ll send you an offer to accept.
Naturally, they’ll finance your vehicle as well.
Once you pick up your car or have it delivered, there’s a 7-day return policy. You have a week to drive it around, and if you don’t like it, you can take it back.
Will Carvana keep building momentum?
Since Charlotte was one of the company’s first markets, Carvana is still building the playbook for expansion within a city.
In Atlanta, which launched a year earlier, their market penetration has reached 1.5 percent. That compares favorably with the overall industry, whose biggest dealer brand counts 1.8 percent penetration.
Could Charlotte follow suit? We’ll see.
If nothing else, the Carvana tower is at least a cool addition to the South End “skyline” at night.
