SAN DIEGO — A fleet of technology startups are aiming to upend the old way of buying and selling used cars, remodeling the often torturous processes into pleasant ones that require little or no work at all.
One such company, Shift, is pulling into the San Diego region with a Web and mobile used car marketplace designed by former Googlers. The San Francisco company, backed by more than $73 million in capital, encourages car sellers to sit at home and click or tap their way to a sale price that is 30 percent greater, on average, than what is offered by traditional dealers.
The year-and-a-half-old startup hopes to capture a sizable portion of the $105 billion used car dealer market, as estimated by industry researcher IBIS World, with an approach that should feel more glamorous than gut-wrenching.
“We offer a hassle-free, white-glove experience if you want to sell your car,” said Minnie Ingersoll, co-founder and chief operations officer at Shift. “You get an easier experience than Craigslist, and a better price than a dealership.”
Ingersoll, who helped to create Google Fiber during her 11 years at the Mountain View Internet titan, said the idea behind Shift first clicked after she tried to unsuccessfully sell a car on Craigslist. She ended up at a dealership, opting to accept an unattractive offer over dealing with strangers.
With Shift, interested sellers need only visit the company’s website and enter some basic information about their vehicle to receive a quote. The company then dispatches an employee, called a “car enthusiast,” to the seller’s location to perform a 15-minute evaluation of the car and make a firm offer. The price is calculated by dissecting car sales data in local markets.
“We use an algorithm, and it’s based on how fast we think we can sell your car, or demand from markets,” Ingersoll said.
Should the seller accept the deal, Shift takes the car into its possession, puts it through a rigorous inspection and detailing process, snaps professional photos and uses its founders’ Google prowess to intelligently list the vehicle across a variety of sites. And, if Shift sells the car for more than the original offer, it will split the extra proceeds, 50-50, with the customer. Plus, no matter what, the seller will always receive at least the amount originally offered.
The selling process, Ingersoll said, generally takes less than 30 days, and, if Shift can’t find a buyer, the seller is paid after 60 days.
Shift operates a two-sided marketplace, meaning the company offers a similar, hands-off experience for would-be buyers who also want to avoid the dealership experience. Shift’s buying component, however, won’t arrive in San Diego until the company establishes a warehouse locally, which it plans to do early next year.
Currently, Shift operates warehouses in San Francisco and Los Angeles, and uses the locations to house and prep its for-sale inventory. The idea is to keep cars in close proximity to local buyers, as part of Shift’s twist is to deliver a car, on demand, to a prospective buyer’s home or office, leaving one of the core tenets of old-fashioned car-buying intact: the test drive.
The test drive, however, turns out to be a divisive detail in the debate as to whether online used car players can effectively sell direct to consumers.
“Our experience at (Kelley Blue Book) is that people still want to see the car they want to buy,” said Jack Nerad, an executive market analyst with Kelley Blue Book.
Yet startup Beepi, a licensed online dealer of used cars, has been operating its alternative auto business, a competitor to Shift, in San Diego since March and insists the test drive is a thing of the past.
“We think of car buying and car selling in a completely different way,” said Alejandro Resnik, CEO of Beepi. “We eliminated the test drive from the process. It’s better for sellers; better for buyers.”
For sellers, he said, the advantage is being able to keep — and continue to drive — your car while Beepi works to sell it online. Whereas with Shift, you need to hand your vehicle over to the company during the sale process.
Those who buy with Beepi may not get to kick the tires, but they do get the reassurance of being able to return the vehicle for any reason in 10 days. That plus a 240-point inspection should allay any reservations about buying cars sight unseen, Resnik believes. And shoppers do benefit by not having to limit browsing to local-only inventory. With Beepi, a buyer can choose a car from any of the startup’s markets, which span nine states and 15 metropolitan areas.
“If you like it, you buy it,” Resnik said. “Seven days later, a beautiful car will show up with a bow on top.”
Test drive or not, Shift, Beepi and other tech novices looking to change the age-old car-selling game are fighting against a tried-and-true formula that may not be as ripe for disruption as the companies’ think.
“There is a perception, real or not, and I think not, that the current system is broken,” Nerad said. “It’s great that people are always trying to find a better mouse trap, but there are some things that, I think, are going to be hard to change.”
Consumers may not always love the car-buying process in the moment, he said, but most are pretty satisfied once it’s completed.
“When you have convenience plus (a better) price, it’s not a hugely difficult thing to change consumer behavior,” said Emily Melton, a partner at venture firm DFJ and a Shift board member.
Melton may be biased, but her firm isn’t new to the automotive business. DFJ, which co-led Shift’s Series A financing round with Highland Capital last fall, was a substantial investor in electric car-maker Tesla. And Highland Capital was an investor in CarMax, the current leader in used car sales.
The easiest sell is convincing people to turn to Shift or Beepi when looking to offload a vehicle. All you really need to feel comfortable in that scenario is a big check that won’t bounce.
When Najé Evans of El Cajon was looking to sell his 2015 Kia Optima Hybrid, he went back to the dealer where he bought the car. After the experience proved disappointing, a friend who worked at the dealership pointed him to Beepi.
“At first Beepi priced (the car) $6,000 over what Team Kia (of El Cajon) was offering, but Beepi actually ended up giving us $7,500 more,” Evans said. “Beepi made it easy . I can do thing everything without lifting a finger — literally.”
The testimonial suggests the online-only model has real legs, or wheels rather.
