Carvana: Post-COVID Challenges

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What about the logistics of getting cars to the reconditioning centers? Considering the online model, I found it interesting when they acquired ADESA. If you look at their production or reconditioning footprint, a lot of it was in the middle of the country. They had nothing in California and very little in the Northeast, where most of the large population centers are. They bought more cars than they sold from consumers, and they also bought at auctions. There's a lot of retail activity on both the buying and selling side across the country. However, a significant portion of the reconditioning footprint was centralized in the middle of the country. It seems highly inefficient to buy a car in California, take it back to Arizona, and then send it off to Portland. Did you handle the logistics part at all, or were you only involved once the car arrived? There was a whole journey for that car before you even saw it.

Today, Carvana is a massive, robust logistics network that doesn't exist in any other group, including CarMax.

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Could you please elaborate? I'm interested in understanding what changed. What was achievable before? Did they need ADESA to get there? Or could they have performed better without ADESA?

Leveraging ADESA is how they will grow without adding a ton of operating cost because they already have it. It’s already incurred.

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Previously, there was no clear distinction between the first and second options, but now the first option is free and the other might be the 17th option with a delivery charge. I understand.

Another significant aspect, which can be overlooked, is how the vehicle is staged and pulled. From an associate's perspective, who is physically doing all the work, they have to sift through 6000 units to pull one, stage it, and get it ready to be on a truck by noon. They don't start pulling those cars until it's funded. This is a change from six to nine months ago, and everything prior to that, when they would start staging a car once the customer had put in their information and showed commitment.

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