Startups just keep coming in the used-car market
In case you missed it, this week brought more reminders that the used-car market is in flux.
First, there was an article on Monday in Crain’s Chicago Business, an affiliate of Automotive News, about yet another online startup seeking to help dealers find specific used vehicles. “A new model for used cars” proclaimed the headline.
Next was a Bloomberg article, which appeared on autonews.com on Tuesday, headlined “Trouble selling grandma’s cars sowed seed for $1 billion startup.” The startup aims -- you guessed it -- to help connect buyers and sellers of used cars.
The used-car segment has long been the leader in auto-retailing innovation. Without heavy involvement by automakers, and without being locked into sales of a single brand of used cars, both franchised new- and independent used-vehicle dealers operate in a freewheeling environment when selling used cars and trucks.
That has opened the door to an enormous amount of digital innovation over the last decade or so.
That segment is where outfits such as vAuto led the revolution in inventory management, using data rather than intuition to determine what was selling in a given market at what price.
It’s also where online vehicle listings took off, both wholesale and retail. After all, buyers could be reasonably sure that a new white Toyota Camry was pretty much the same from dealership to dealership. But a 3-year-old white Toyota Camry? Show me the photos.
Moreover, the lack of any factory-set sticker prices meant that every used-vehicle transaction was different. What at first was a challenge became an opportunity, as programmers learned how to write software that mined the enormous amount of data available on pricing, vehicles’ ages and conditions, and so on.
The innovation ferment isn’t slowing.
As those two stories this week show, startups just keep coming.
Many are local, such as the two highlighted this week. Other startups focused on wholesale or retail used-vehicle sales include AutoAxess, in California, Dealer Simplified’s Auction Simplified, in upstate New York, and Carphoria, growing out of Texas. Arlena Sawyers, who covers the remarketing world for Automotive News, wrote about those outfits and others in an April 13 article.
What does all of this activity tell us?
First, that there’s a lot of funding available for startups of this sort. The German company raised $100 million to launch, and wants to raise another $500 million for international expansion, including a push into the U.S. The Chicago company raised $10 million in venture capital.
If you’re an auction, a dealer or a company involved in online sales and marketing of used vehicles, know this: Rivals aren’t put off by the cost of launching a business in your space. They can get the money, easy.
Second, just as there’s a growing volume of used vehicles in the market, there are a growing number of startups who see opportunity in this space. That’s both an affirmation of the opportunities for the existing players and a challenge to their current positions.
It’s survival of the fittest, folks. Someone who’s just a regional player today may turn into your biggest challenger.
Are you ready to compete?
News Editor James B. Treece oversees Automotive News’ coverage of auto retailing, including used vehicles and remarketing.
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