Pub. 9 2019 Issue 4

20 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com What Carvana Doesn’t Know By Joel Kansanback, Executive Vice President of Automotive Development Group a Brown & Brown Company W hen the pundits of Silicon Valley and Wall street look at the retail car busi- ness they see an in- dustry ripe for disruption. They first see a market that is hyper fragmented. While publicly traded CarMax sells over 750,000 cars per year that represents less than 2% of total US used car sales. They see an inefficient sales market that consumers still generally hate. While we’ve made strides as an industry, ours is still among the least trusted professions. As an industry we’ve really cleaned up our act over the last 25 years. The worst sales tactics of the past are generally gone. The bad guy car dealers while still in existence are now few and far between replaced by more and more dealers with a true commitment to providing customers an excellent customer experience. But that’s not what the upstart competition sees. They look at Uber and how they came out of nowhere to totally disrupt an industry that was ripe for dis- ruption. Most of us probably still remember how awful the tradi- tional taxi business was. Unreli- able, dirty, inconsistent, hard to pay, hard to predict the total costs. Each market dominated by a few players who didn’t screen their hires properly, didn’t treat custom- ers great andwere as inconsistent in their delivery as possible. Youmight remember surprise airport fees they added. Or you might remember CONSULTANT’SCORNER there was a flat rate available to your hotel but you had to ask for it in advance - and even then, you had to insist on it. So many times, their meter wasn’t working and the driver would just make up a charge and you were left wondering if you just got cheated. If you called a cab, you’d have to get outside and guard the corner to protect against someone stealing your cab. If you were lucky enough to have them arrive it was usually dirty, there were communication barriers and you had to listen to their music of choice. A truly awful experience that didn’t survive the disruption brought about by Uber and then Lyft. Carvana sold over 100,000 cars last year and is already talking about a path to two million. Their brake neck expansion is taking the country by storm. They are throwing up those car vending machines so fast it’s hard to keep track of which markets just opened and which are next. In the upside-down world of this era of new publicly traded companies there is significantly more emphasis placed on sales growth, market share and the number of locations than there is on profitability. By all these measures Carvana is crushing it and there’s plenty of reason to believe the pace of growth is sustainable for quite a while. What Wallstreet and the new generation of car sellers is completely underestimating is the franchise dealer’s ability to adapt. Today’s dealers sur vived the Great Recession. They then went on to adapt to