Ryan Keeton of Carvana: Using Amazon’s Playbook, Car Vending Machine to Disrupt Used Car Industry

In general, people really don’t look forward to the car buying process — new or used.  We like the cars, just not what you have to go through to get them, including the amount of time to complete a purchase, negotiating a price, getting a good trade-in offer, dealing with salespeople and understanding financing options.

This prompted Carvana to re-imagine the used car buying experience and turn it into an online experience where one in five of their customers go from picking a car to selecting a delivery date and signing a contract — in 20 minutes or less.  And if they prefer to pick it up, they can go to the used car vending machine and get it like they were grabbing a coke.

Ryan Keeton, Carvana’s co-founder and Chief Brand Officer, shares with us how Amazon inspired the company to change the way people buy used cars, like Amazon did with books and everything else. And if you plan on being in the Atlanta area next Thursday (March 17) you can hear more of the story from Carvana co-founder and CEO Ernie Garcia at ExCom 2016, a free day-long event for small businesses focusing on where technology is driving customer experience and commerce. And maybe pick up a Coke and a used car from the vending machines while you’re here.

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car vending machineSmall Business Trends: Give me a little bit of your personal background.

Ryan Keeton: I’m a Harvard grad, spent some time in private equity and finance, also in consulting and operations, and then, ultimately, in the marketing world. All my career path has been more entrepreneurial. My background was able to lend to a lot of different parts of the business that we were initially building for Carvana.

Small Business Trends: Maybe you can tell me a little bit about what Carvana is and then let’s talk about how you’re changing the way people buy cars or buy used cars.

Ryan Keeton: Carvana, we like to say, it’s Amazon for autos. We believe we’re an alternative to the traditional way that folks buy a car these days. A lot of consumers are out there spending a lot of time online, researching vehicles, finding the right car that’s for them, but ultimately all of those channels push a consumer to the dealership to consummate that transaction.

When we looked at starting a business, we looked at it more from a customer experience and also from more of an economic standpoint of what do consumers get when they go to a dealership? They get a big brick and mortar location. They get a lot of different vehicles that they can view. They can take a car for a test drive that typically lasts about 10 minutes. And it’s full of right turns. All of that comes at a cost. If you look at some of the public filings for some of the larger automotive companies out there, it’s about $1,500, $2,000 per transaction that get’s passed on to the consumer just for that brick and mortar experience. Again, just to walk you through. Those costs are overhead, like I said the brick and mortar, the salaries for the sales staff.

We realize when you talk to consumers, a lot of people are saying it takes too long. There was a lot of unease, and a little bit of mistrust. It wasn’t a great experience going through that. We approach it very much with the customer in mind when we were thinking about Carvana. If you’re going to do that, what you have to build to replace those certain functions to create a great experience. Hopefully by doing so, you get to create some real value for the customer that they get to keep.

When we were starting Carvana, that’s why we approach it just like a dealership. We acquire cars. We test them. We re-condition them. We photograph them. We own those vehicles. Through our technology, we enable consumers to view those cars in 360 degrees, all the way down to the smallest detail. We let people see the features of those vehicles as well as the imperfections if there are any, so there’s no surprises. We also realize that why it takes so long at the dealership, up to four hours is financing, and all the backroom, and selling products, and trade. It takes a lot of time.

We wanted to eliminate that time and cost. We need to enable that whole process online. That’s why we built a fully transactional platform that enables consumers to get financing in seconds that is the exact terms that they would receive for every single car in our inventory. If they choose to buy a car with financing, they want to put 500 bucks down or $1,000 down. Those exact terms they select will be what’s on their contract.

Essentially, through our transactional process, people can find contracts online. They upload documents for title and registration and verification. They schedule whether they want to have that car delivered or picked up. And then we facilitate that by bringing the car to them. Every vehicle comes with a 7-day no-questions-asked return policy. We figure that was a really cool experience that enabled us to do everything you’d be doing at a dealership completely online. The best part of that is that we’re able to do all of that, even with the car delivery and the 7-day return policy, at about $500 per transaction. Essentially, we enable a full vertically integrated experience to buy a car online and have it delivered as soon as the next day. Consumers are able to save, on average, $1,600 versus Kelley Blue Book on every vehicle we sell.

Small Business Trends: Tell us a little bit about the used car vending machine you have.

Ryan Keeton: Carvana, like I said before, is all about focusing on the customer and developing a really cool customer experience. We’re also about building a brand that’s known for being tech forward, and creating great word of mouth. One of the things we’ve realized was that when we initially launched, it was only through delivery of that car to consumers. In some cases, people might be totally comfortable with that. In some cases, they may not. We’re trying to break through a lot of the psychology of people traditionally going to the dealership to get that vehicle. They may not have felt comfortable of having someone bring that car to them at their home or office, even though they’re going to get that 7-day, no-questions-asked return policy. We wanted to create a pickup option. By doing so, we wanted to create one that was radically different but also grounded in what our brand was all about.

That’s how we came up with our car vending machine. We have one in Atlanta and our newest one in Nashville. They are fulfillment centers. Everything still happens online as I walked through before. Customer finds a car, completes the transaction, selects pickup. We’ll give them a code or in the case of Nashville, when they show up they get a cool coin. When you put the code in or you put the coin in our vending machine, our vending machine goes and gets the car that is brought to that location, and brings it down to them, that they then can take and begin to test drive and 7-day return policy.

We didn’t want it to feel like a dealership at all. There’s no sales staff. There’s no up-selling. It’s literally fulfillment. If people show up, they’re greeted by a friendly Carvana advocate. They get their coin. They put their coin in the machine. The vending machine comes to life, grabs our car, brings it to them, and they drive away. Today, that plus the delivery, it’s been fantastic, the customer response. All of that.

Going back to customer experience in ecommerce, we basically have over 1,900 reviews, and they’re 4.9 stars. Our net promoter score is like 95, which is pretty much off the charts if you look at the other ecommerce or consumer companies out there. What we’re excited about is people are digging the model. We just built a vending machine to give another alternative for people that still doesn’t really add any incremental cost to the transaction. They’re able to get that car, pick it up for free, and still save that 1,600 bucks that we’re creating through our new model.

Small Business Trends: Tell us a little bit about customer service. How does that experience change with buying a car from Carvana?

Ryan Keeton: Carvana is a customer service company that uses technology to sell cars. We are technology but that’s not the focus. We do retail vehicles but we’re not a dealership. That’s literally, from when you’re starting a business to thinking about how we’re going to approach every touch point that a consumer would go through, whether online or offline, to the type of staff we’re going to build through our customer advocates.

Even the name that we call them. They’re not sales. They’re not customer service. They’re literally customer advocates that are billed very much like the Zappos type model. Even in the USA type model, where they’re generalists, they’re able to help the consumer through all facets of the transaction. They’re there to guide them, to better understand what our model’s all about, and also to find the best that’s for them. They’re not trying to up-sell. They’re not trying to switch people from one car another. They’re literally to help that consumer find the car that’s right for them.

All of those things, thinking through it holistically, from when someone is calling in, to when they’re chatting in, when they’re uploading the driver’s license, proof of insurance, the verification. All of those things are literally thought through the lens of the customer is the absolute focus of our company. What’s great about it is, we have been asking people to do something online that has never been done before — before we launched.

It’s the second biggest transaction aside from buying a home, to buy a car. It’s done with a company that is new but it’s emerging and building a name for themselves. At the end of the day, as I mentioned before, all of that focus is manifesting itself in 4.9 stars across 1,900 plus reviews, and an incredibly high enough promoter score. I think that’s all because we are laser, laser focused on the customer experience. That trickles down to every decision that we make, especially for our customer advocate staff.

Small Business Trends: Ryan, this has been awesome. It’s really interesting what you’re doing. Like you said, you’ve only been around for three years. Tell us a little bit about, in terms of revenue numbers, how customers seem to be taking to this approach.

Ryan Keeton: I’ll give you two metrics here. We launched in Atlanta in March 2013. As of a couple months ago, we’re already the second largest retailer of late model used cars in the whole state. That’s essentially cars from 2011 to 2015. We went from zero to being right behind Carmax, which is number one, in that amount of time. That just shows the growth that we’re experiencing and achieved and I think the consumer acceptance of our model that continues to grow. Essentially, right now, we’re at a roughly 275 million dollar run rate in terms of annual revenue. We’ve been growing hundreds and hundreds of percent from year one to year two.

This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.

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Brent Leary Brent Leary is the host of the Small Business Trends One-on-One interview series and co-founder of CRM Essentials LLC, an Atlanta-based CRM advisory firm covering tools and strategies for improving business relationships. Brent is a CRM industry analyst, advisor, author, speaker and award-winning blogger.