Beepi was a used car marketplace that raised $150 million
My task was to see whether Beepi would work in the UK market.
Whilst researching ways to improve my car sales business. I saw the rising trend of on-demand delivery happening in online sales for all kinds of markets. Amazon was amongst the leaders in this department. Along with a company called Deliv, Instacart and a handful of others.
Amazon were even beginning to roll out their own staff and vehicles to send products out to their customers the very same day. In some areas they were even aiming for a one hour delivery.
I realised I could bring this same level of delivery and customer service to the car sales market.
At the time customers were expected to make their own way to a vehicle if they wanted to buy it. They would maybe have to spend ages travelling and then spend even more time in a dealership. The customers were then also having to pay for the sales staff and expensive overheads of those glass fronted showrooms. Through increased prices.
I was watching a sales video and one of the world’s top sales people said when booking an appointment with a customer, why wait days for it and then make the customers come to you. You should be going to try to meet the customers asap. Go directly to their home or office. That way you’ll convert the sale far easier too. Lighting struck.
I would start bringing cars to customers.
If someone was interested in a car, they could have a test drive delivered right to them.
The idea being that if the car is good and they believe what you say and trust you then they will more often than not, convert into a full paying customer.
Further research brought my attention to a couple of startups who were constantly changing their business model. They resided in the United States. The companies were Carvana, Beepi, Tred, Shift, Vroom and a couple of others I can’t remember the name of. They were all mostly focussed around the same concept. Bringing technology to the old industry of car sales.
Started out purely as a service for delivering vehicles on behalf of dealerships and also to end customers. They would charge their individual customers $19 per delivery. They would later go on to completing the sale on behalf of dealers.
They only raised around $2.8 million and were one of the first companies out of the starting gates. They had around 10 vehicles running and a few staff.
They then pivoted to copying the other companies out there. By trying to cash in on the peer-to-peer car marketplace buzz. They would try to sell cars on behalf of private sellers, and then deliver the cars to private buyers. Connecting private buyers and sellers.
But their marketing was poor for this marketplace. It was confusing what they were trying to o and they got out-spent. They laid off tonnes of staff from their original concept of deliveries and they didn’t really get anywhere.
I spoke to the founder of Tred. He said delivering cars on behalf of dealerships was an interesting concept. He felt it had legs but because he disagreed with the other Founder about the direction the company was heading. This Founder pulled out. He went onto working on a gardening/landscaping business instead. Bringing technology to that field.
Beepi were behemoths in this space. They were setting the world alight with their rise into car sales glory. The entire world was talking about them.
Like Tred, they too wanted to connect buyers and sellers and make the experience for everyone easy and seamless.
They would take in a seller’s car, re-condition it, store it, photograph and sell the vehicle, then deliver the car to a buyer.
Beepi wanted the entire transaction to be carried out online. Similar to the way amazon products are bought too.
The entire concept was based around people trusting a company enough to buy something without ever seeing it first. They did not offer test drives, they wanted buyers to pay out the full money. But they did offer a 10 day money back guarantee if the buyer didn’t like the vehicle. They called it a “test-own” period.
Beepi raised $149 million. However their business model and operations were flawed.
Beepi Insider Information
Before I had any chance to make a partnership with Beepi, or bring them to the UK, or manage their UK operations, they closed down. Or were struggling so their future was not certain.
The business model of Beepi had great promise. It really did make the transaction easy, safe and profitable for all parties involved in the car sale. They went above and beyond to help the customer, although offering extra help costs money. It eats into your profit margin.
The company would take care of inspecting, processing and eventually delivering the cars to the customers themselves. There was also a similar company called Vroom, but they only required photos before cars were listed, while Beepi sent an inspector for on the spot inspection. This saved Vroom a lot in expenses.
Although every customer was happy with Beepi. In fact great customer service was one of Beepi’s strengths. That still doesn’t make it a fantastic business that makes money.
The company had an ridiculously high monthly burn rate. Somehow spending about $7 million per month.
The company was just wasting money left right and centre. Blowing it on the founders girlfriends and wives. Wasting money on stupidly expensive furniture. Beepi also gave it’s top management staff disproportionately high salary and overtime.
I spoke to one of the higher ups at Beepi. Who worked there and managed the operations. He said that Beepi had the startup company mentality. They were blowing through money like nobody’s business. Because the money wasn’t theirs they just spent and spent and spent.
They paid their staff way too much.
They said Beepi spent way too much money and time to get their cars in good condition. In fact he said he’d never seen another dealership go to such lengths. They would spend a ridiculous amount on things like Paintless Dent Removal, valeting and detailing, rim repairs, tyres, brakes, oil changes and fluid replenishing plus sometimes fully blown body work repairs and replacements.
He said that on average they would spend around $600 – $800 on getting a vehicle ready. Which I and he thought was insane seeing that on most used cars a dealer’s margin is about $2000 – $3000.
He also said Beepi paid for 2 meals/day for their staff. They would buy all the expensive furniture you could find. Beepi would pay for all of the staff’s gym memberships. Health insurance and other perks associated with America. They would even fly employees between Beepi locations, and the company would pay for hotels and transportation for months at a time.
Beepi founders also spent way over $2 million on an advert, which in reality cost the advertising company a fraction of that. 90% of that $2 million was kept by dodgy Beepi employees and the advertising company.
But at the end of the day, Beepi was run by younger management. Who didn’t have experience in the car sales business. Beepi did not hold physical stock of vehicles. They didn’t really own anything.
As I’ll explain later, the companies that are succeeding in this field have been going for many years. They already have established car dealerships, who already generate billions in revenue. They have a plethora of stock they offer to customers.
The older companies are offering their old stock by putting a new spin on it through technology.
Beepi had something great going for them however (their software and technology). They couldn’t sell the company as a whole after they were burning through too much cash. So they were forced to sell the company in parts.
The company shut down in December 2016.
One of their most valuable assets, the software, was sold very quickly. It now resides in something called Fair.
I later found out this was the path I should take. Forget about working with Beepi. The real way was that I needed to run my own business. And have my own stock etc.
To date Carvana has raised $960.1 Million.
Carvana was founded in 2012 as a subsidiary of used car retailer and finance company DriveTime.
Drivetime had approximately 145 locations in the U.S. and 3,800 employees. DriveTime buys 150,000 cars annually at various auctions.
It is a standard car sales business model.
After buying cars in auction, the company puts the purchased cars through a 14-day inspection at one of its 24 inspection centers. It makes necessary repairs before sending the vehicles to its dealerships.
Carvana started off by simply delivering cars to people’s driveways. With quick delivery times.
They then started building vending machines. Huge places that looked very fancy. They spent millions on these things. It worked as a marketing tool too. So customers could choose to have a car delivered, or go to a vending machine and collect the vehicle themselves. Carvana would even pay for transportation so customers could come to the dealership and complete the sale.
As Carvana grew. They increased profit margins, by reducing what they offered customers. Their guarantees went to a lower duration. Their delivery times increased. But at the end of the day they were making money.
They have a good little business.
But it is essentially a car dealership, backed by a huge company who has contracts with auction groups to buy 150,000 cars a year.
Although Carvana did spin off to become their own company. Due to their buying power. They may also be creating their own purchasing deals. As DriveTime cannot cover everywhere.
Carvana said they were converting many customers through their offer. It was clear to see that this was a good concept.
Shift had a unique selling point of delivering test drives to people.
Shift has raised $293 Million.
Like Beepi. Shift is an online marketplace for buying and selling used cars. But shift are still going. Shift acts as a personal concierge service, the company details cars, lists them on multiple websites, handles test drives, and finds buyers.
Shift makes money by charging their customers for every step of the process. A Shift Service Fee for registration, car prep services, and sales tax. Shift also provides customers with a 150-point concierge report that includes specs, high-resolution photos, vehicle history, and results on their cars before purchase.
Shift connects private buyers and sellers together.
They might also have commercial clients too, but that is unknown.
When a seller wishes to sell cars directly to Shift, Shift’s employees assess the car, give the customer a price and sign a contract, transferring the vehicle ownership and payment on the spot. Then they bring the car to the Shift facility and prepare it for sale. Once listed, potential buyers can schedule a free test drive and Shift will deliver it to their door and purchase the car on site. Cars sold through Shift include a five-day, 200-mile return policy and a 30-day powertrain guarantee.
After Beepi closed down I needed to find a better and more efficient business model.
I spent more time researching what these other e-commerce companies were doing in the market and then decided to set out and create something of my own in the car sales field.
It operated under something called CarPigeon. Like a Carrier Pigeon For Cars.
The idea being that every car would be delivered directly to the customer.
I wanted to build upon the foundation we had already built with buying cars from auction and reconditioning them, then selling them on.
There were several things I had to do in both my online presence, advertising and behind the scenes with staff, tools, procedures to make sure we could get vehicles out as fast as I wanted. Ideally I wanted to aim to get the cars to people within an hour of them calling.
It meant that cars would have to be brought in from auction, turned around quickly and be in a ready state that people would be blown away and buy them immediately.
I also realised that I needed to develop some software to back all of this up. DPD had quite interesting software. So I set out to create my own whereby people could track exactly where the vehicle was on the road in real time. THey would get updates via SMS etc. This would automatically happen when they ordered a test drive / purchased a vehicle.
I also thought of fun ways to market the business and get attention too.
– Getting the attention of customers in online listings would be a challenge. As with one particular car you usually have about 10 options or more within a given radius. Customers usually only want to travel / search say within 25 miles of their premises. But if they widened their search it meant we needed more reason to stand out from the competition.
– Getting the vehicles transported from the depot quickly and the ownership details transferred over fast enough from the auction management group so that we can turnover enough vehicles in the week would be a challenge.
– Getting keys produced for vehicles to save money would be a challenge. Some vehicles had their wheels locked and so needed keys to access the cars or start the engines.
– Getting vehicles repaired quickly enough to the right standard would be a challenge.
– Making people trust that you have gone over the car properly would be a challenge. Customers want to know the car they are buying is fantastic and that it won’t break down. It was important to devise a solution that would meet the needs of all customers. So we were extremely transparent.
– Getting cars delivered to people fast enough and at the right price would be a challenge.
– Creating a software solution so people had an easy way to track everything and know where you are without having to waste time on a phone call would be a challenge.
– Creating a car buying marketplace and the software to go alongside it so people could order cars online and get them delivered would be a challenge.
– Marketing the business online would be a challenge
– Dealing with customer complaints might be a hurdle that needed to be overcome. Especially since some of these cars were not brand new. There would be disputes about parts that went wrong under wear and tear. After all a car is only designed to last so long. Eventually parts will reach the end of their lifespan and need to be replaced. Some customers, especially the ones with no money, expect a Ferrari for the price of a mini metro. They moan for the sake of it and try it on. I had to come up with a way to keep these customers quiet.
– Creating photos that stood out would be a challenge.
– Giving customers all the relevant information about a vehicle online so they know everything about it would be a challenge. Although it would reduce time wasters.
– I initially tried connecting private buyers and sellers together in a peer to peer marketplace fashion.
– Acquired use of a multi-car transporter.
– Got a key machine after trying to use a key person.
– I recruited staff that had a self employed mindset. They understood about hard work in an effort to get the repairs done quickly and to a good standard.
– The advertising resources needed for a peer to peer marketplace and the profit margins per sale meant that it would need actual capital ploughed into it if it was going to make any noise in the industry. What is the point of having a marketplace if no one knows about it, or if you only have 40 cars for sale. We were also running out of storage space. The conditions of the storage space also weren’t as good as I wanted. So taking in nearly new cars from customers wasn’t the best strategy. There was a chance the cars would get damaged due to problems of other businesses in the area. But the plus side of this storage and workshop space was that it is cheap. A fraction of the cost of standard working environments. Thus what would normally be an expense turned into pure hard cash and profit. Exactly what a business needs at the end of the day.
Why pay out tens if not hundreds of thousands of pounds for facilities and tax if the rates are just going to the government and the landlord.
Owning land in freehold isn’t a bad idea though, as the money isn’t lost forever. We could make enough money for the time being without having to worry about the extra storage space.
I also saw a decline in the American companies tackling this peer to peer marketplace in cars. They had already raised millions in capital and even they were struggling. So if they couldn’t make it work. Then there would be no point in me trying and seeing if I could do any better. I’d rather focus on something that is proven to be successful. A winning formula. Only a fool would think they could manage a company better than someone who has already raised $300 million and has some of the top automotive companies and investors on board.
– I did a deal with someone local to use their multi-car transporter to ship out 7-10 cars in one trip. Sometimes if that wasn’t available, a few of us would go down and drive the cars back. Getting it all done on the same day. 7 cars a day was a good enough start. But the auction group had cut off times up till about 4pm and they arrived at 8/9am. So there really wasn’t too much time in the day to collect the vehicles.
– We would also sometimes get a key man to come down to the vehicles to make a key before we got there. To save time. But the key man tried to be clever and then think he could start buying the cars for himself. However you need to register and be accepted by the company to purchase the vehicles.
Needless to say due to the cocky attitude of this bloke, the auction staff and us agreed to block him from buying cars. We also kicked him out and never let him do a car key again.
We decided to just buy our own key machine.
Then we would buy the blank keys from the internet and then cut them to the code of the car. If it was a key fob. You just buy the same remote online and code it in the car using the standard manufacturers process. Key machine was handy for this.
– The repair people I recruited were very good. I told them the standards the car needed to be in and then they followed suit and fixed those jobs that only needed doing.
I created an inspection worksheet. I also got my Father, someone that I knew who was an expert in mechanics to look over and inspect every vehicle to see what was wrong with them. So we could price up the estimated repairs and see if they were worth fixing.
The mechanic would mainly focus on the major repairs. Things that required a lot of physical labour. Or jobs that require knowledge of electronics and computers. A lot of cars in modern times are very fiddly, sensors go wrong on them all of the time. It is only due to past experience can a mechanic know what the problem is without spending years researching it and then fix it quickly.
We would also use software that gives you the recommended labour times for each repair job. So you know realistically how long something will take to repair. And therefore how much the mechanic guy will want to be paid.
I agreed hourly rates with the mechanics which were more than good enough for them to have a reason to get out of bed in the morning.
I think sometimes we agreed rates ahead of time, per job required on a car. So a gearbox would be a set price. So the mechanic was financially incentivised to finish the job quicker. Making it better for everyone.
If employees are on an hourly rate, they can tend to let things drag on to collect the most amount of pennies possible.
– This inspection worksheet would have all the repairs carried out logged into it too. Every part that was put on would be logged. Including all servicing carried out. The inspection worksheets were uploaded online to the car listings so people could see what had happened to the car.
– The inspection worksheets were also shown and given to the customer when they test drove the vehicle and bought it.
– I decided to make videos of every repair that was carried out. Along with photos. So we could prove all the work had been taken care of and it wasn’t just hearsay.
– I also decided that each car needed a Jeremy Clarkson style test drive video made for it. This was a great way of advertising each car and the business as a whole. I would take people on virtual test drives. They would feel like they were walking around the car with you. They could hear the engine, see how it performed.
– The virtual test drives were a good way of increasing the conversion rates of customers. Although the odd few would still want to see and feel the car in person. Some women for example needed to check they could reach the pedals and see over the dashboard.
– I decided to make super high quality and transparent photos for all cars. I would take about 50 photos to show off every single part of the vehicle. Including all the blemishes and scratches if there were any. This would add to the confidence of the buyer. Thus making them more likely to buy from you.
– I decided to detail everything that was bad about the car online in a text format too. So people could put the photos and words together to understand which parts of the car they should be aware of. This cut out a lot of tyre kickers.
– To get the cars delivered to people fast enough, I couldn’t employ another company to help me because they wouldn’t be able to sell or have the same passion. So I enlisted the help from other people. I recruited some staff to help. Finding delivery people who can talk and sell was a lot easier than finding intelligent mechanics. But mostly it was me and my Father who handles the sales side.
We would either take the car to people on a recovery truck. Or to save money on fuel costs. Drive 2 cars down there, then bring 1 back. Or if it was too busy. We would go out individually, and take a taxi or bus back.
Of course I did deals to get taxis at a discounted rate.
I also had to make sure people adhered to the schedule and timetable set out for every vehicle. So that when a customer rang up. The car would be able to leave when the customer wanted it. Not 2 weeks later when our staff felt like they would be ready. Even 2 hours is too long. The customer has so many options, that if you’re too slow, they will go elsewhere.
– I also made sure the phone would be answered immediately. Not let it ring out. If it wasn’t answered. They would be called back straight away. Any task you said you would do for the customer would also be dealt with immediately. Say if you need to send them documents over, or scan something. It would be done there and then.
A lot of people leave things or never get back to you, a sure fire way of losing that customer. I wanted to close the sale on every customer that came our way.
– I implemented the same warranty scheme as beforehand. But added in safe measures in case the cars developed problems due to wear and tear. The customers were free to get their own mechanics to check the parts against the age and mileage of a vehicle. We knew we were always correct.
Some cars were too old to be covered by a warranty by the warranty company. So we took a gamble and covered it ourselves.
– I created a self-owned warranty policy. Wrote up the wording and coverage. I also put money aside to cover all the repairs that might need doing in a worst case scenario. However, it was near impossible a car would ever need fixing because it would be too old. Customers can’t expect to buy an old car for peanuts, then have everything replaced or fixed later on down the line if it somehow develops a problem.
This was one of the reasons I was moving away from the idea of used car sales in the lower end of the market. There were a lot of moaners, or people with no money and still expecting the world.
They don’t realise you also need to make money too.
More expensive, newer used cars don’t really go wrong. You also get nicer and more understanding customers, so it is better all around. They are also much better payers.
– I came up with a way to make the vehicles stand out in the road and in photos. I created a huge pink furry bow to attach to the front of vehicles. Whenever you went out on the road, people would honk their horns, wave. Ask about it and why it’s on there. The customers were also laughing a lot too. It gave the a wow factor. A good positive note. Something for them to remember.
That is the hardest thing to do in business, get the customer to remember you and come back again. To stand out in the marketplace. This pink bow certainly achieved that.
I marketed the business by first of all actually putting the cars for sale. Cash is king and getting sales was the most important. I then created consistent content on the blog to get organic traffic from Google search. This content would then be re-published in different formats across social media. To give people an insight into the business and to build their trust.
– I also created content to show customers every stage of the business. How it got to where it was. This helped tell the story so they buy into you.
I developed software that would allow ordering and purchasing of all cars through a website. You could even sign some documents on there too.
Most importantly I developed delivery software.
I recruited the help of some Chinese/Indian people for hardly anything to make a similar version of software to what was already on the market. Delivery software and live tracking is not hard. They all use the Google Maps API. And you just need to link it to an SMS messaging service. It was a simple but effective programme.
Add a logo and company website to the software and it looks like the bee’s knees.
At the end of the trip, customers would be notified of when we had arrived, they would see a photo of who the driver was. They could then also sign for the vehicle etc on this software.
This software made a great impression on customers. Nothing else was around like it in the car sales industry. I am still unsure if anyone has made anything like it. I know car dealers haven’t because it would require each member of staff to turn the app on and use it.
Overall the car sales business with my software and technology model could generate enquiries and convert customers into real sales very quickly and easily.
I think I was converting about 8/10 customers.
So it really did pay to deliver test drives to people’s doors.
Better still, I am not sure if anyone did reject a car if they got to the stage of receiving a test drive because they already knew the price and the condition of the vehicle due to the great lengths I went to of showcasing everything online.
Some customers had to be convinced I was genuine though. One woman I remember said “it sounds too good to be true”. They didn’t believe we could offer such a great value to her and to everyone. But we could and did.
I knew the software I had created was also something that had legs and could be used for other applications. So I wanted to try it working for other dealerships, to get a consistent income flowing in. That’s where DealerDrop started.
The major hurdle with the car sales was that circumstances changed. The person I was mainly working with got a bit ill. So I am in the process of re-jigging the entire business to fill their void.
The business of car sales as I later discovered will also not get me where I want to be.
I also do not really wish to be known as a second hand car salesman.
There are two ways to grow a business. You either grow organically. Slowly. Year by year. Using the money generated from sales to re-invest and grow again. You can also hope to raise some investment to speed this organic growth along.
Or you can grow by acquisitions. Buying other companies and by definition the customers they have.
Acquiring other car dealerships would be problematic in the new car sales sector. Most of the locations worth buying are held by the largest groups. Those groups do not wish to sell, or would sell but for an unreasonable price. They are not motivated sellers.
The smaller new car dealerships do not generate a high enough revenue to be worth the trouble, compared to their overheads. So the risk would be fairly high. However it could still be achieved, it just means you would have to focus on buying the entire group of the small dealership chains.
On the other hand you have used car dealerships which could be acquired, most of these make no money at all. They aren’t worth buying, they don’t really have a business. They are usually one man bands who buy cars from auctions and they sell them on. So they have no security of revenue. There are no barriers to entry for competition.
Whereas at least with a new car dealership, you are the sole focal point in a given area for a particular manufacturer. You also have the backing of the manufacturer which is a good sales point.
Large Car Supermarkets
There are some much larger used car sales places, who have thousands of cars through their multiple branches. They acquire cars on a regular basis because they have secured contracts with huge auction groups to buy all of the cars as a job lot. Or they have contracts with dealership chains to take over their part-ex vehicles.
Acquiring these used car marketplaces could be something that works however I do not see these lasting. You are still effectively seen as a dodgy second hand salesman. They have to also charge a lot of money to make a profit on each sale.
If no cars come to auction or part-ex. Then they will be down on sales.
Whereas with a new car, the sale is much easier to convert. You are targeting a much better audience with great manufacturer marketing and luxury buildings.
The larger chains worth buying are around £35 million, add a multiple of 4-6x. £120 million. A lot of them I have spoken to are not motivated sellers. They have a consistent revenue coming in and that is all they have going for them. So to get rid of that, they question what else will they do with their life.
I would also rather focus on new car sales.