Vroom, Carvana, & Optimising Vertical Integration | In Practise

Vroom, Carvana, & Optimising Vertical Integration

Cofounder at Vroom

Learning outcomes

  • How data science is at the heart of Vroom’s business model
  • Why Vroom started selling only low mileage, later models
  • How to think about optimising vertical integration
  • Why reconditioning is potentially less important than last mile logistics for online used car platforms
  • How Carmax could compete with online retailers
  • Limitations to online players scaling to 1-2m retail units sold per year
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Executive profile

Elie Wurtman

Cofounder at Vroom

Elie Wurtman is the cofounder of Vroom, one of the largest online used car retailers in the US, and has over two decades of experience as an entrepreneur, executive, and investor. He is also the co-founder and Partner at PICO Venture Partners, a venture capital firm that led the first financing round in Vroom in 2014. Elie started his career as a serial entrepreneur and company builder. He launched his first company in 1993 and took 3 companies from founding to IPO. As co-founder and CEO of Deltathree, Jerusalem’s first unicorn, Elie led the company from its founding to 60 points of presence globally with operations in 35 countries. Elie has led the second chapter of his career as a venture investor and social entrepreneur. Elie was previously a General Partner at Benchmark Capital Israel. Prior to Benchmark, he was CEO of JVP Studio, before founding Vroom in 2014. Elie is passionate about education, social impact, and positioning his hometown Jerusalem at the forefront of innovation. He is also an Aspen Institute Global Leadership Fellow, and sits on the boards of the Tower of David Museum and Regavim.Read more

Elie, can you share some context to the genesis of the idea for Vroom?

Many big ideas start with a drop of naivety. I found myself visiting a dealership, for the first time and I could not believe that this was the way that people bought and sold cars. Who would have imagined at the time – 2014 – that you go in, you speak to a salesperson. You don’t, necessarily, trust the process; there is a lack of transparency and you have to wait a long time to get through all the paperwork.

As a digitalpreneur, I said to myself, there must be an easier way to do this. I quickly sketched out, in my head, that we could buy and sell cars online and deliver them directly to your front door. Granted, I didn’t think through all the downside of delivery to your front door, anywhere in the United States; it’s a pretty big country. But the original spark was there and the original opportunity, to fundamentally disrupt a very poor consumer experience to, hopefully, a transformation to a very good one, is what we set out to do.

What were you focusing on in the early days?

There were a few big things. Today, we think that we take it for granted that you will buy a $30,000 item, sight unseen, and have it delivered to your front door. It’s not like buying a toothbrush, on Amazon, where you could send it back. The first real challenge was, will people buy it without kicking the tires or taking a test drive, which has long been thought to be the backbone of selling cars. My analysis is that that was just a sales tactic. The idea that we come and look at the vehicle, get in the car for a test drive, was much more about it being in the high-pressure sales pitch. There is no reason that, with proper warranties and guarantees, we wouldn’t be able to convince people to buy the car, sight unseen.

Fast forward six years, to today, I think most people accept the premise that you can buy a car without seeing it first. From that perspective, I think it’s a real victory, in terms of behavioral change and consumer perception of what you need to do before you buy a car.

When looking at the essence of Vroom versus Carvana, CarMax or any of these other businesses, what is really the difference in the essence of Vroom versus the other players?

I think each company has its own flavor. I used to think of CarMax as the big box retailer. You go to a physical store and while it’s a much better process than most other dealerships, nonetheless, it is still a retail experience. Obviously, they are trying to update that and I’m sure they will. Carvana and Vroom are really two similar companies, but very different companies.

Carvana still has these vending machines, whereas Vroom is really about full, online experience, door to door delivery, white glove service and really focused on delighting the consumer. In the end, everyone is selling cars; everyone wants to be a more responsible seller and everyone wants to provide a high-quality experience. I think Vroom is probably the most consumer centric but they are all doing it in a slightly different way.

Why would you say Vroom is the most consumer centric, over other players?

You asked about the culture and the culture of Vroom has always been delighting the customer. It’s going one step beyond what is to be expected. Our top priority, when we set up the business, was always measure customer satisfaction. Are we doing everything, along the line, from the person reconditioning the car and taking out the slightest dent, to the person handling the delivery, to the person who might be helping you on the phone? The single most important metric was customer delight. I think that is a culture that is very strong, when you try and build a new brand, which says that the customer is first. It’s not about maximizing the profit for the dealership; it’s not about other things, such as making the most money on F&I. The customer comes first and that’s how we built our brand at Vroom and how, I believe, our culture stands out.

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Vroom, Carvana, & Optimising Vertical Integration

January 11, 2021

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