Carvana, the major used car retailer, is one of the highest short stocked companies on the stock exchange.
You would be forgiven for thinking that the used-car market is pretty impervious to disruption -- after all, haggling over the price of used vehicles is a centuries-old practice. Nonetheless, used car dealer Carvana thinks it has found the magic ingredient to turn this industry upside down. Does it have what it takes?
The business model
Carvana’s core value proposition is to eliminate the back-and-forth that takes place between buyers and sellers of used cars. In contrast to the existing used-car dealership model, where would-be purchasers haggle with dealers in person, when buying a car from Carvana much of the transaction is carried out online. Moreover, the cars are sold for fixed prices, which goes some way to eliminating the trepidation many people have about being fleeced by a dealer. The buyer can then choose to have the car delivered to their house, or can pick it up at one of Carvana’s transparent "vending machine" towers, where the car will be lowered down to them
Gimmicky marketing strategy aside, the business case here is quite straightforward: cut overheads by having the majority of the transaction take place online and reassure purchasers with a slick website and non-negotiable prices (the casual buyer generally prefers not to haggle).
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