Carvana expands next day delivery capability

Next day delivery will be available to more customers buying a used car from car retailer Carvana.

With its recently announced acquisition of the nation’s second-largest used-vehicle auction company and its 56 locations in the United States, Carvana will have facilities within 50 miles of 58% of the nation’s population, compared to 16% currently.

During the auto retailer’s fourth quarter earnings call on Thursday (February 24th), company executives said the acquisition of ADESA US, which was announced the same day, will allow Carvana to accelerate deliveries of cars to customers.

“This will reduce shipping times to our customers nationwide and lay the foundation for eventually offering same-day delivery to many of our customers,” Carvana CEO Earnie Garcia said on the call. .

The company’s loss in the period widened to $182 million, from a loss of $145 million a year ago, on revenue of $3.75 billion. For the full year, the company lost $287, an improvement from its loss of $462 million a year ago.

Benefit from proximity to customers

In one presentation which was released to accompany the appeal, Carvana said the shorter delivery distances will enable same-day and next-day delivery to more customers, reduce the risk of delivery delays and provide a better customer experience. which will lead to a higher Net Promoter Score (NPS).

This will also save money. This will increase customer conversion rates, reduce customer acquisition spend, accelerate inventory turnaround times, reduce inbound transportation and logistics costs, and reduce shipping costs. to customers.

“As a measure of how powerful proximity can be, sales that are delivered to customers from an inspection center within 200 miles of our customers today have a unit savings that is approximately $750 above our average transaction,” Garcia said on the call.

Triple the capacity to inspect and recondition used cars

Carvana, which lets customers buy used cars without leaving their device and then have the car delivered the next day in select markets, will also benefit from the acquisition in other ways, Garcia said.

The addition of ADESA US’ nationwide inspection network will also increase Carvana’s vehicle production capacity – its ability to inspect and recondition used cars – by 2 million units per year once fully built. With an estimated total capacity of over 3 million units, this will more than triple its current capacity of 880,000 units.

In addition, the acquisition of the auction company – which conducts 1 million auction transactions per year – will also strengthen Carvana’s auction capabilities.

“We look forward to working with our new clients, creatively finding new and exciting ways to work together and valuing them in the same way that we have always valued all of our clients,” Garcia said.

Dealing with the shortage of drivers

Like the rest of the automotive industry, Carvana has been impacted by the pandemic and its effects on employees, production and logistics. Garcia said on the call that the company experienced high call rates from drivers during the latest wave of the pandemic.

“When you look at the rest of this year, I think the main driver right now is our logistics network, which is much more limited than any other part of the business,” Garcia said. “I think from there it’s a matter of catching up and then figuring out where we are for the rest of the year.”

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