I hate to kick someone when they are down, but as a car dealership owner and digital marketing company CEO, I can’t help myself.
From the very beginning, when Carvana first hit the scene, I asked myself, “Are people really ready to buy cars online?” Without seeing them, touching them, smelling them? Not even driving them? The answer is, and always has been, yes SOME are. But not all. And the question Carvana has been waiting to answer? How many? What percentage of the market will be willing to buy online? Why is that important? Because that’s the key to it all.
While Carvana was burning through cash to look like the Amazon of car sales, at some point the cost of customer acquisition was going to be the magic number that defines all. That number is the combination of the size of the market and how difficult it is to reach. If one in every two used car buyers is willing to buy online, then no problem, giddy up! If it’s one in a hundred, which is likely closer to the truth, suddenly those metrics don’t look so good. Pretty tough to compete in a price focused industry when your cost of customer acquisition is two or three thousand dollars a car. It’s only a matter of time before you can’t compete, and when that happens it’s all over. After all, what depreciates faster than a used car?
The good news is that car dealers everywhere should be learning a valuable lesson. Your ability to create predictable scalable lead generation on your website and then being able to measure and track those leads from dollars spent to return on investment is your key to growth and success. The demise of print advertising has been a painful event for a ton of car dealerships, and made used car marketing more and more challenging. Limited options. Price focused listing services. Marketing agencies, AKA “money pits”. Third party leads that are well, garbage. The days of being able to spend a couple of grand on a newspaper ad and guarantee yourself a few deals are gone.
Carvana figured that out. Ten plus years ago. It’s all about the ability to generate leads online. That is the only way to succeed in the car business today. Particularly the used car business. The missing element, ironically, is the brick and mortar. The physical experience. That is the limiting factor for Carvana. But not for the local car dealer. The limiting factor for the local car dealer is the lead generation. Predictable, scalable, lead generation. Then it’s “Move over Carvana.”
Ask yourself, as a consumer, given the choice between responding to an ad for a vehicle you can actually look at, touch, and drive, from a dealer that is local and an online company that will ask you for payment up front before you get to touch or drive the vehicle, even with a return policy, which way are you going? That’s right. Newsflash Carvana, once the local car dealership figures out how to compete online with you, you’re in more trouble than you are right now. A little known startup named Zymbyo may be just what those local car dealers need.