From Disruptor to Disrupted: The Story of Carvana’s Rise and Fall.

Carvana is an online platform that allows users to purchase and sell cars through a completely online experience. The company was founded in 2012 by Ernie Garcia and went public in 2017. The idea behind Carvana was to create a more convenient and hassle-free way to purchase a car, one that didn’t require haggling with a car salesman or spending hours at a dealership. However, despite initial success and an innovative approach to car sales, Carvana’s journey has not been without its struggles and setbacks.

THE RISE OF CARVANA

Carvana launched in Atlanta in 2013 and quickly expanded to other cities across the United States. By 2015, the company had raised $300 million in funding, including a $160 million investment led by Goldman Sachs. This funding allowed Carvana to continue its expansion, and by 2016, the company had a presence in 21 cities and had sold over 30,000 cars.

One of the reasons for Carvana’s early success was its unique business model. Instead of buying cars from traditional dealerships, the company purchased them at wholesale auctions, inspected them thoroughly, and then stored them in giant vending machines, which customers could visit to pick up their purchases. This approach allowed Carvana to offer a wider selection of vehicles at lower prices than traditional dealerships.

Carvana also differentiated itself from other online car buying platforms by offering a seamless online purchasing experience. Customers could search for cars on the company’s website, view high-quality photos and 360-degree virtual tours, and even get financing without ever setting foot in a dealership. The company also offered a seven-day return policy, giving customers the chance to test drive their cars before committing to the purchase.

THE FALL OF CARVANA

Despite its early success, Carvana has faced significant challenges in recent years. In 2019, the company reported a net loss of $364 million, up from $181 million the previous year. This loss was due in part to the company’s aggressive expansion efforts, which saw it enter new markets at a rapid pace. Carvana opened 32 new markets in 2019 alone, bringing its total to 146 markets across the United States.

However, this rapid expansion came at a cost. Carvana had to build new facilities, hire more employees, and invest in advertising to reach new customers. These expenses, combined with the costs of acquiring and inspecting cars, led to a steep increase in the company’s expenses.

Another factor that contributed to Carvana’s struggles was its dependence on technology. While the company’s online platform made it easy for customers to purchase cars, it also created a significant challenge for the company’s logistics team. Carvana relied on a complex system of algorithms and automated processes to manage its inventory and deliveries, but this system was prone to glitches and errors. As a result, some customers experienced delays or other issues with their purchases, which hurt the company’s reputation.

Furthermore, Carvana’s reliance on wholesale auctions also created a vulnerability in the company’s supply chain. As the COVID-19 pandemic swept across the United States in 2020, car auctions were canceled or postponed, creating a shortage of vehicles for Carvana to purchase. This shortage led to a decrease in the company’s inventory and a slowdown in sales.

THE FUTURE OF CARVANA

The future of Carvana is somewhat uncertain, despite the company’s recent success in the online car sales market. While Carvana has seen significant growth over the past few years, there are a number of challenges and uncertainties that may impact the company’s future prospects.

One potential challenge for Carvana is increased competition in the online car sales market. As more companies enter the space, Carvana may find it difficult to maintain its market share and continue its growth trajectory.

Additionally, the future of the car sales industry as a whole is somewhat uncertain. With the rise of alternative modes of transportation and changing consumer preferences, it remains to be seen whether the traditional car sales model will continue to be viable in the long term.

Despite these challenges, Carvana has shown a willingness to adapt and innovate, and the company’s focus on customer experience and transparency may help it to succeed in the years to come. However, the future of Carvana is far from certain, and the company will need to navigate a number of challenges and uncertainties in order to maintain its position as a leader in the online car sales market.


Photo Credit: Carvana

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