Zirra Spotlight On Vroom

Vroom is an online used car shop that includes all three aspects of the car buying process. Vroom incorporates buying, financing, and selling cars into the company’s online system in an attempt to simplify car transactions for customers and save them time, money, and effort. Vroom refurbishes and prepares cars in one of two facilities before shipping them all over the country to buyers’ homes with the goal of delivery within 48 hours of purchase. Delivery is free and Vroom offers thousands of cars. By using big data, Vroom provides customers with cash offers to purchase their cars sight unseen in less than five minutes.

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Commentary:

Business & Marketing Strategy: Vroom is looking to take the leading position in the online used vehicle market in the U.S. by adopting an Amazon-esque approach in addition to their direct sales facilitation. Building on their model of directly refurbishing approved cars, finding buyers and delivering the vehicles, they are working on creating a network of distribution centres from which they can bring people their new cars in as little as one day. They have currently named Indianapolis as the planned site for one such centre, in addition to what they acquired from Texas Direct Auto, and it has been said that they believe that they will be able to reach nationwide one day delivery with a total of 7-8 regional locations. They have also opened up further revenue streams by engaging in the financing process and a partnership with eBay Motors that allows them to make direct offers to sellers who experience an unsuccessful bidding round on eBay.

HR Situation & Reviews: Over the last two years Vroom has grown from 94 to 178 employees on LinkedIn, though this number may not be up to date after the late September shutdown of their Israeli R&D department. Currently 17 employees in Israel still list Vroom as their current job and it can be assumed that for the bulk of them this is no longer the case. In addition, during the summer Elie Wurtman and Allon Bloch, who were referred to as co-founders in previous news articles, left the company, followed by Marshall Chesrown in September. In addition to Vroom, there is their acquisition, Texas Direct Auto, who count 237 employees on Linked in, meaning that currently there are at least between 400 to 500 employees. Currently they are hiring four engineers, a product manager, and two for business development in New York and one lot coordinator for the Dallas area. Public reviews by four employees indicate frustration with the fast change that goes with a young company but seem generally happy with the overall situation.

Competitive Position: Vroom has a competitive landscape that can be dissected several ways. First of all, there are the traditional used car dealerships who have physical lots as well as selling online. These players in the US are the likes of CarMax, AutoNation and similar. There are also established online only companies, such as eBay Motors and Cars.com, who serve as further indirect competitors for Vroom. Competitors who are closer both in stage and technology, however are Carvana (founded in 2012), Shift (founded in 2013), and Beepi (also founded in 2013). These companies have raised $300M, $74M and $149M respectively and are seeking to disrupt online car buying. However, both Shift and Beepi are focused on enhancing the peer-to-peer buying process while Carvana and Vroom are working more as dealerships. Carvana currently has lots in nine states throughout the south, including Texas, Vroom’s current locus, which may account for Vroom’s first planned expansion being in Indianapolis.

Market Forecast & Exit Indicators: Currently Vroom is making great strides in this increasingly crowded marketplace. There is plenty of potential in this market, however, due to the large number of used cars sold in the US, 38.3 million vehicles in 2013, and the fact that it is very fragmented between private lots and online dealers. This is testified to by the fact that one of the biggest names in the online business, CarMax, only accounts for 2% of the used vehicles sold, online or otherwise. This also demonstrates that the largest obstacle will be convincing the majority of Americans to make such a large purchase online, a process that Vroom and its competing startups are trying to make as painless as possible in order to convert general public sentiment. The more people who become comfortable alongside their expansion, the better their hope for getting a large piece of the $400 billion annual market. Partnerships, such as theirs with eBay, are a way to grow in the market as there are no current indicators they are looking for an exit.

Inside Scoops: Vroom has experienced significant turnover recently, as mentioned, both in their R&D departments and among founders. In regards to the R&D department there was negative local press in Israel regarding the manner in which the department was swiftly closed without warning. However, with Vroom’s capabilities acquired from Texas Direct Auto, it is likely this consolidation makes sound business sense. However, a lot of questions arise from the inconsistencies in the founder’s narrative and the impression given is that Allon Bloch and Elie Wurtman are in the process of being scrubbed from the company’s history, an impression that casts a negative shroud on the company and only raises suspicions about transparency. Marshall Chesrown’s more recent departure, around the time of the latest fundraising also raises questions at this pivotal time for Vroom.

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Author: Assaf Gilad

An ex-journalist from Calcalist, a leading business and tech news outlet in Israel, I'm now writing about startups for Zirra.com.