There are plenty of bumps in the road for auto sales.
Inventory is improving but is still constrained, and inflation continues to keep car prices lofty.
For the end-to-end platforms that promise to transform car buying, sales are down, and markedly so.
But look under the hood of some of the recent earnings report this week from CarGurus and Vroom, and a few trends stand out: The omnichannel approach to car buying is gathering some momentum, as consumers want to spend less time in the showroom and complete more of their transactions online. Dealers want to connect more easily with those buyers as they post their listings.
And so here we find what amounts to another definition of the “connected” car: One where omnichannel, platform and dealer approach gets as much done online as possible before taking delivery of the auto itself. The connection, then, starts at the platform where the sale is made.
Commentary from CarGurus earnings call and supplemental materials from the company detailed that 70% of consumers shopping for an auto would like to do more from home, across digital channels, while 80% of dealers are open to selling online. The company noted that it ended the year with 24,567 paying dealers on its platform in the U.S., up 707 compared to the prior year, and gaining 2% overall. Management also noted that in the U.S., quarterly average revenue per subscribing dealer was up $209 to $5,842.
CEO Jason Trevisan noted on the call that dealers are taking on more company offerings to bring consumers to their inventory online, and where a growing number of dealers are embracing the Digital Deal offering that includes vehicle-specific financing and insurance before arriving on site to pick up their vehicles.
Total fourth quarter revenue was $286.7 million, down 16% year-over-year, but as the CEO said, a bit better than the midpoint of guidance. Fourth quarter Marketplace revenue was up approximately 3% from the year-ago period, at $166 million. The digital wholesale business saw revenue slip 32% year on year.
But as for the consumer-facing opportunity: The company has noted in its filings that the total addressable market for retail digital sales is about $1 trillion, and so CarGurus (and its platform peers), have barely scratched the surface in terms of market penetration — at least not yet.
For the dealers, said Trevisan, there’s the advantage of helping them connect with consumers even as they are resource constrained. As he said on the call, “They don’t have the same size sales forces that they used to have. And so, they need to try to handle or manage or service a certain volume of leads with fewer people … the higher the quality of the lead, the higher the conversion rate, the more they can handle with a smaller sales force.” Investors bid up CarGuru’s shares 6% on Wednesday.
In Vroom’s call and results, eCommerce units sold were down 80% to a bit more than 4,100, and revenues in that segment were off a similar amount to $141 million.
Vroom, as has been relayed in previous earnings calls, has been focused on building out its logistics network to streamline delivery times to two days. Management noted on the conference call that macro pressures continue to impact unit sales, and there’s a significant amount of older vehicles to sell through.
The company has stated in recent calls that it is targeting profitability over growth, and taking a regional approach to its operating model. Investors sent the shares down 3% through Wednesday’s trading action.
The platforms are evolving, despite the headwinds, but there’s still the desire — at least evidenced from CarGuru’s results — that consumers want to save some time, online, before they kick the proverbial tires.
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