A Brief Reminder That Online Shopping Hasn’t Been Around That Long
Shopping online is a relatively new behavior, and you don’t have to look far to see how uncommon it was for someone to buy something on the internet. Results from a Pew Research study on American online shopping behavior showed that in 2000, roughly 1 in 5 Americans had made an online purchase.
Fast forward to 2019, where that number jumped to 8 in 10 and we can reasonably expect this number to be similar in developed countries with similar or better access to internet as the United States. But while the act of buying something online has become much more commonplace, the average order value of these purchases remains relatively low, with the average order value on desktop devices just under $130.
With this dollar value in mind, it’s also reasonable to infer that buying a car online, isn’t a common occurrence, especially with the average used car price exceeding $20,000 – 15,284% more than the average order value on desktop devices per our previous stat.
But this inference doesn’t appear to be hurting the valuation of online car dealers, with Carvana leading the way and competitors, Vroom starting off strong after going public earlier this year.
How Much Money Has Been Invested in Online Car Vendors?
A quick look at investments in Carvana, Vroom and up-and-coming competitor Shift using Quid’s Market Intelligence data sets, shows just how much is being invested in the top 3 brands, with $1.2B invested in just these three companies over the past 7 years, and more than half of these investments being made on or after 2018.
The list of investors also features a diverse set of firms, ranging from investment banks or management companies like Goldman Sachs and T. Rowe Price, to auto dealership groups like AutoNation and Lithia Motors. We can also see that BMW’s venture arm threw its name into the hat and interestingly, is the only automaker that appears in this list.
News Coverage Validate These Investments
If we take a look at news coverage of online car sales with Quid’s media intelligence data set, it all starts to make sense when it comes to investments being made in this market. In the chart below, you can see that news coverage of online car shopping has continued to grow year over year and looks to follow that trend in 2020.
What’s also interesting to note is how there has been a significant spike in articles about new business models for used car sales this year, which has primarily been driven by COVID-19’s impact on traditional dealerships that are looking for ways to continue generating revenue.
In our network view, we can see that this cluster of articles focused on new business models is central to other conversations, from dealerships transitioning to the web, as well as online platforms…and unsurprisingly, one that specifically addresses Carvana’s business model.