Vroom: Operational Challenges to Scale

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If I understand correctly, selling higher value and newer cars was a strategy to attract more prime customers, who would have a higher conversion rate in terms of financing?

The challenge is to get the pricing right. If we buy a car in Seattle and ship it to our local reconditioning center, and then discover issues that we didn't account for in our pricing algorithms - and the customer wasn't aware of something like frame damage - we're stuck with it. Even though we technically have the right to send it back, we never did that because it wasn't cost-effective. If we find a problem during reconditioning, we might decide it's not a retail-grade vehicle and send it to auction, which can impact our margin. So there's risk there.

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So, you provide me with a price.

This part of the process involves sending documents via FedEx, following up with the customer, and ensuring that all documents are signed correctly. On average, this part of the process takes about 10 days. At this point, we have a signed contract and we've agreed to send you the payment.

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After you send me the money, who comes to pick up the car?

Initially, we predominantly used third-party carriers, which was quite challenging. Most logistics companies in the United States, and probably in Europe, that transport vehicles are B2B businesses. They typically transport vehicles to dealers and do not deal directly with customers. We were trying to fit a square peg into a round hole. We had drivers who were not professional, using eleven-car haulers, showing up in customers' driveways. It was not a good fit. We had too many relationships to manage. Eventually, we took a page from Carvana's book and built our own fleet. We would have a one-car hauler come to your driveway, pick up the vehicle, and then take it to our nearest hub, which was typically a Manheim for reconditioning.

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