Nearly every aspect of our lives have changed due to COVID-19 pandemic this year. Everything, from the way we grocery shop, socialize, and work, has shifted to accommodate our new stay-at-home lifestyle and increased hygiene measures. Auto sales are no different.
The way we shop for cars—and how much we’re spending on them—has changed during the pandemic, too. We want to spend less money as our income certainty decreases, and we want safer and more sanitized shopping environments. The days of walking into a crowded dealership are long gone, at least for now.
Enter: car vending machines.
Meet Carvana, the startup responsible for car vending machines
Carvana, an Arizona-based startup founded in 2012, is on a self-proclaimed mission to change the way people buy cars. With Carvana, consumers can shop independently, without the need for traditional car salespeople, by shopping online and picking up their car at one or 24 car vending machine locations. Customers can easily return the car within 7 days if it doesn’t meet their expectations in person.
Founder Ernesto “Ernie” Garcia was inspired, in part, by the speed of wholesale car auctions, as he explained in a 2019 interview with Entrepreneur. In these environments, car dealers are making quick purchasing decisions but retain the option to back out of the deal if the car doesn’t meet expectations. So why couldn’t the experience be as quick and painless for consumers?
“I thought, could we get customers closer to that 30-second experience instead of the four-plus hours that was the status quo for car buying?,” said Garcia. “If we could do it that fast and with lower costs, could we also make it simple…maybe even fun?”
Thus far, it‘s proved to be a valid concept.
The important thing is that there is zero human contact throughout the entire buying process, making it an ideal option during a pandemic. The company’s 2020 first-quarter earnings report reflected this loud and clear.
According to the quarterly report, Carvana saw an increase of 43% YoY for retail units sold, and a 45% YoY revenue increase. Considering the fact that many other car retailers are seeing significant decline in sales and revenue, this is a pretty big deal.
“We’ve been building a business that’s grown—it’s roughly doubled 6 years in a row—so it’s growing very very quickly as consumers have moved from buying cars at dealerships to buying them online,” said Garcia in a May 2020 interview with CNN. “Our expectation is that this new world will likely accelerate these trends, and so we’ve been investing in the business to give customers that experience across the country… and today we’re very excited to announce that we’re opening a hundred new markets to provide this same offering to customers in many more locations as there’s been so much demand for it recently.”
What it’s really like to buy a car through a vending machine
The idea is simple, and as far as we can tell, it’s actually simple in practice. Here’s what we learned from the how it works page. Similarly to any other eCommerce shopping experience, you browse, choose, purchase, then get your item delivered or pick it up at a vending machine. And just like other online retail experiences, you can return the car within 7 days if it’s not exactly what you wanted.
That said, we’re skeptics — so we decided to dig further than the website. Fortunately, YouTube delivered with non-sponsored vlogs of Carvana customers taking us through the journey.
Although it’s not obvious on the Carvana website, the pick up transaction seems to be fulfilled with a coin system that feels equal parts futuristic and vintage. Drop in a coin, and the vending machine spits out your item. Just like a real vending machine (except it’s a car, topped with a giant bow).
If nothing else, the novelty of the vending machine experience is admittedly really cool. But will increased demand for human-free auto sales have any lasting impact?
The future of auto sales in a post-pandemic world
While it’s too soon to say that traditional dealerships are dead, one thing is clear: online auto sales are here to stay.
In fact, according to a 2018 study by Cox Automotive, 60% of consumers would prefer not to visit a dealership at all. And that was 2 years ago.
Coronavirus or not, it’s undeniable that we live in an “Amazon Prime” world where consumers want every buying experience to be easier, faster, and on-demand. And while this may mean continued job loss for in-person roles like car salespeople, it could also mean the increase in digital jobs. Online retailers need more developers, digital designers, chat bot builders, and remote customer service reps than their brick-and-mortar counterparts.
What’s still unclear is how auto retailers will cope with the changes. As some experts point out, features like car deliveries are hurting margins.
In a recent article, The Print spoke to Kevin Tynan, director of automotive research for Bloomberg Intelligence. “Margins at most dealers are under 5%, so you’re on a razor-thin margin, anyway,” he explained, “So how are you going to incur these additional costs?” It’s a valid question, and one that car retailers may have to answer much quicker than they expected.
As for the future of car vending machines, only time will tell.