News

Online Car Platforms Strive to Right-Size Inventory as eCommerce Volumes Plummet

Earnings reports indicate that the profitability of the largest players in the online car sales market is declining amid the actions of retailers to reduce inventory.

Online Car Platforms Strive to Right-Size Inventory as eCommerce Volumes Plummet

Source: Pixabay.com

The results of the American company Vroom, based in New York and specializing in the sale of used vehicles, indicate a decrease in the number of e-commerce units by almost 80%, to 3,933. This happens against the background of the company’s focus on profits, not on sales volumes. The company’s revenue from e-commerce decreased by about 80%.

The average cost of selling a car per e-commerce unit decreased by 5.8%, amounting to $31,555. The company also announced an increase in the terms of the sale of vehicles. The average number of e-commerce days before the sale increased by more than 206%, to 279 days.

Tom Shortt, CEO of the company, said that in the first quarter of this year, 77% of the units sold were in circulation for more than 180 days. In the third quarter of last year, this figure was 49%.

The firm expects that in the second quarter of 2023, a significant part of sales will come from outdated cars, which will be a factor of sensitive pressure on gross profit. The company also predicts that sales of cars with a shorter service life will increase in the second half of this year.

Revenue of CarGurus, a Massachusetts-registered web platform for research and vehicle purchases, decreased by 46% year-on-year in the first quarter of 2023, amounting to $232 million. Revenue from digital wholesale decreased by 76%. The total number of transactions of the company in the first quarter amounted to 17,500 compared to 68,754 a year earlier. The firm’s revenue reached $14.1 million.

Carvana, an online used car store based in Arizona, sold 79,240 vehicles in the first quarter of this year, which is 25% lower than a year ago. The stocks of goods on this platform are decreasing.

During a conference call with analysts, Ernie Garcia, CEO of Carvana, said that against the backdrop of a difficult macroeconomic and market situation, e-commerce existing within the automotive industry faced challenges that forced it to move away from the concept of prioritizing growth. According to him, the company’s product stocks have decreased by 55% year-on-year as of today.

Ernie Garcia emphasizes that in difficult economic conditions, the cost of cars has increased, and the susceptibility of potential buyers to advertising has decreased. He also said that his company can reduce operating costs, including marketing. Separately, Ernie Garcia noted the emergence of sectoral and macroeconomic obstacles in the form of costs and interest rates.

According to the results of special surveys, it was testified that in the United States, less than 25% of consumers estimate the probability of buying a car in 2023 as high.

As we have reported earlier, eBay rolls out the new app for buying and selling cars.

Serhii Mikhailov

2108 Posts 0 Comments

Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.