For our latest episode of the Vehicle 2.0 Podcast, we were fortunate to explore the growing shift in traditional car ownership models with John Hanger, Senior Director of Special Projects at Carvana. His career path to this point has offered a fascinating perspective of the evolving automotive industry, with his current position at Carvana putting him on the front-lines for one of the biggest disruptions in the used vehicle marketplace.
We’re excited to offer a selection of highlights from our interview with John below. If you’re interested to hear more, give the episode a listen and subscribe to stay tuned for future episodes!
John on Carvana’s “vending machines”
Scot: We have one of those [vending machines] in Raleigh and it's kind of a genius thing because it's on this highly trafficked area and it's very eye catching. Most times you're not driving around and seeing a giant car vending machine. I think it's a genius marketing trick and technique. Tell us how that works. My understanding is you put like a giant coin in there. It's all, some of it's kind of showmanship. Isn't it essentially like a European parking structure of some kind that you guys have converted to do this?
John: Yeah, it's a really cool idea and on the face of it, it looks a little gimmicky, but I've been blown away by how much our customers actually enjoy it. The way it works in a nutshell is the vending machine, first of all, is not where you go to shop for cars. It's not like a dealership where you go and look around and test drive various cars. It's where you're taking delivery of the car you've already purchased through the website. There's a team there that's basically responsible for delivering a tremendous experience for them. We go to great lengths to make it fun.
When they show up there, they're given a token that's like four inches around. They actually go drop it into the venue machine. Some of them are as high as nine stories, some four or five stories. But somewhere in that glass tower is this customer's car. There's a robotic platform that goes up, pulls the car from whatever floor it's on, brings it down, scoots it out in front of them, spins it around so they get a chance to see it under the bright lights and then drops it into a glass garage area where the customer can then go inspect it for themselves, take it for a drive and ultimately taking home.
The whole thing's recorded with video and pictures so that the customer has a chance to post things to social media. And most customers will bring family members and so on just to make it that much more fun and it just turns out to be a great experience for everybody involved.
John on selling cars with Carvana
Scot: We've talked about how you guys have innovated buying cars. A lot of people I talk to love the selling car experience. Could you talk a little bit about that?
John: So, it's kind of a relatively new focus for Carvana. Obviously from the beginning we took trades and, and a fair number of people buying a car, we'll have an old car to trade in. More recently we launched a national campaign. We have a part of the site that's set up where if you have a car you want to sell, we'll make a binding offer and we'll do that sight unseen, which is a pretty radical when you think about it, right? Because traditionally you can go and get a Black Book estimate or a Blue Book estimate or any number of other quote unquote estimates out there. But those are just guidelines, they aren’t binding. And certainly nobody's willing to write you a check for that amount until they seen the car and driven the car and so on.
But Carvana has a really innovative program where you can go, putting the information about the car, and we'll give a binding offer and, if you accepted it, we'll send a truck out to pick up the car from your driveway. And that has been going extremely well for us. It's strategic. It gives us access to cars so that we don't have to buy at auction or source in any other way.
John on the evolution of car subscription services
Scot: Maybe there's a tiered system like Clutch for example, has worked with a lot of dealers to offer something like this where, you know, for 500 up to maybe a 1000 a month, if I could just kind of have subscriptions to a variety of cars, that could be a lot of fun as a consumer, right? Maybe you've always wanted to try the convertible, but it's not really practical. And so maybe I could just go get that for a week and then I'm going to the mountains and I need a 4Runner or whatever. So it seems like you guys could be in a position if you chose to do that, because you've made all this stuff so simple and you've got all the inventory and all that. It's easy to say what I just said, but you're going to need the reconditioning centers, you're going to need the photography, you're going to need the delivery, all that stuff. It seems like you guys have actually kind of built all the stuff you would need to do something like that.
John: Yeah. On a personal interest level, I've spent a lot of time thinking about and exploring subscription models and like you, from a consumer experience perspective, I think it's really attractive, right? Like I want a convertible for the weekend, but I need a pickup truck next weekend because I'm doing some yard work or whatever. I think it's very compelling. I also probably have a greater appreciation that most for, for the other side of the equation and you know, it's really just a question of fleet utilization. I think that's where there's still a lot of question marks, right? If you don't get the fleet utilization really high, then the cost of operating that sort of subscription model is just beyond reason. You'd have to charge consumers such a premium that it probably isn't viable.
I think the only examples where it's working today are fleets for Uber drivers or similar company-wide fleets. I don't think we're there yet. I think it's a really exciting area for us all to keep our eyes on and see what happens. And to your point, to the extent that there is a viable model there, I think Carvana could be well positioned to take advantage of it, but it's not something we're doing today.
We here at Spiffy were thrilled to have John as a guest on the Vehicle 2.0 Podcast. Between his career experience in the industry and personal beliefs, informed by a background in engineering, this installment has a lot to offer for anyone interested in the most immediate changes in the automotive retail space.
If you don’t want to miss a future episode of the podcast, then be sure to subscribe via your favorite podcast app or website and stay tuned for new releases every other week!
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