Is Now The Right Time To Buy Car Retailer Stocks?
By now, the idea of buying goods online no longer feels alien regardless of age group. This gives rise to online car retailer stocks. The whole idea of buying a used car online without having seen it first might sound like a crazy idea. But, the increasing success of certain online car dealers has proven the future of used car retailing is online.
Since the coronavirus pandemic, people have been buying things online, be it essential items or luxury goods. With e-commerce platforms streamlining many processes of car dealerships, there is no reason why we shouldn’t look at this area right now. Traditionally, shopping for used cars from a local dealership can be really unpleasant for some. It could be very tedious and time-consuming for consumers who are not auto lovers. After all, they just want a car that can bring them from point A to B.
Online Car Retailing To Revolutionize Car Dealership Industry
The integrated online car sales model allows customers to conduct the whole buying process from the comfort of their home. For this reason, consumers can now pick and view their favourite car, arrange for financing remotely, and trade in their existing car for a new one. How convenient is that?
Retail trends suggest that many sectors will continue to shift online, and the automotive sector is no exception. But why is it worth banking on retailer stocks that focuses on car retailing? What you would have noticed is that none of Amazon or other e-commerce giants are currently focusing on the car segment. It’s normal to assume that Amazon or Walmart would start selling cars. But automobiles are highly expensive and are an infrequent purchase. Retailers may need to have a sizable inventory to operate smoothly. They also need salespeople who are deeply knowledgeable about the product. For these reasons, consumers do not go to a general retailer to buy a car. They go to a retailer that only sells cars.
Vroom Signals The Strengths Of Online Used Car Industry
First, up the list, Vroom (VRM Stock Report) grabbed the spotlight this week as the hottest IPO stock to have a breakout. The US online car sales company raced off the starting line on its first day of debut. The freshly listed stock more than doubled in price as investors continued to show strong demand for the company’s shares.
Vroom, which competes with traditionally used car sellers such as AutoNation (AN Stock Report) and CarMax (KMX Stock Report), priced its stock sale at $22 a share. Shares of VRM closed at $47.9 on its first day of trading. From the stark performance, it seems that Wall Street agrees with the consensus that more consumers are going to buy cars online in the future. With the pandemic not likely to end anytime soon, the online car retailing business is here to stay.
What consumers like about Vroom is its nationwide selection of cars, compared to what you would see at the local used-car lot. In addition to that, Vroom also adopts transparent pricing and claims that it avoids haggling, which most consumers don’t like. With the car dealership industry scattered across the US, there’s plenty of opportunities for Vroom to disrupt the current landscape.
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Carvana To Lead The Disruption In The Used Car Industry
Carvana (CVNA Stock Report) is the Amazon of the online used car industry. The company is a fast-growing e-commerce platform for buying and selling used cars. Since the company’s debut in NYSE in 2017, it has been enjoying a good run, with revenue more than quadrupling between 2017 and 2019.
Why Do Investors Love Carvana Stock?
There are a few reasons why investors have been strong fans of Carvana. The company has proven that online car retailing works. From the company’s record, used-car sales volume surged from 6,500 in 2015 to 177,500 in 2019. Now that the company has more transactions than before, it also helps that Carvana has seen a high customer satisfaction from the surveys. This shows us that consumers really enjoyed the overall process of buying cars through online platforms like Carvana.
Shares of Carvana have been climbing steadily until $110 per share this year before plunging 70% during the March sell-off. Since then, CVNA stock has gone up more than 280% and is currently trading at $113 per share. With more and more car purchases being done online, can we expect CVNA stock to continue its rally for the next 5 to 10 years?