January 22, 2024, VROOM announced the closure of its business, signaling the end of the platform promising to revolutionize the way people buy and sell cars. The company cited financial challenges as the primary reason for shutting down its operations. Like Carvana, VROOM launched a digital buy or sell your vehicle platform in 2013 and after a grueling decade, closed its doors in the face of financial woes.
Initially, Vroom faced fierce competition in the rapidly evolving online automotive marketplace but was able to sustain operations for quite some time as the used vehicle market had been robust up until 2023. “Last year was probably the worst year we have seen since we launched CarBuyerUSA.com” stated CEO and Co-founder, Bill Coleman. “COVID19 brought an incredible market surge in 2021 but the used car market has been in steady decline for over a year now and dealers have taken record losses on used vehicle inventory. With our Buy Cars only model, we liquidate vehicles very fast and operate through a variable expense provider model. Since we don’t really have a lot of inventory at any point in time, we don’t suffer the same depreciation in a falling market like we have experienced in 2023”
Like Carvana, Vroom bought and sold vehicles retail in a digital, convenience-based operating model. Both of their models are laden with personnel and operating expenses which is necessary to provide the high-touch service that consumers desire in a digital environment. But the luster of buying a car without visiting a dealership comes at a high price because both of their models essentially must replicate all the ground-based services that auto dealerships provide at the local-level. This means employees, equipment and added expenses to transport vehicles for test drives, deliveries, inspection/recovery of trade-in’s, etc. Selling new and used vehicles consumer-direct digitally is not a profitable model, it is idealistic at best. While many proclaim to be the “elixir” for the car dealership experience, time has proven that these models “sound good” but are not sustainable. Carvana is the proverbial “last man standing” in this arena and they are very “nimble” when it comes to financial reporting and managing the investment community. But, if you look at Carvana’s debt and operating margins, you will quickly see that their reported profits are not sustainable. Borrowing the title from the book by Louie Giglio, “Goliath Must Fall” really seems appropriate when referring to Carvana. It’s not if, but when they follow in Vroom's footsteps.
CarBuyerUSA.com launched in July of 2013 and is a privately held company operating in the US Contiguous States. CarBuyerUSA has a laser-like focus on buying cars from consumers and nothing else. By marrying traditional dealership fundamentals with consumer direct digital offering, our simplicity is our strength. Attempts to be all things to all people have proven to be too complex and costly for one after another wall street backed startup."
