Businessmodel of Vroom

Customer Segments

Vroom has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

• Car Sellers: Used car owners who want to sell their vehicles.
• Car Buyers: Consumers who want to be able to purchase used cars online. ### Value Proposition

Vroom offers five primary value propositions: convenience, price, cost reduction, risk reduction, and brand/status.

The company offers convenience by making many processes easier for car buyers. To start with, it assesses millions of vehicles to identify the best-quality used cars, saving consumers time. It also provides full-service support, assisting with trade and finance and handling all of the paperwork typically conducted by sellers and buyers. Vroom identifies 30 financing partners through this service.

The company offers a pricing value proposition. It sets prices as low as possible, utilizing data from respected price-comparison resources such as Kelley Blue Book, Truecar, and CarGurus. It estimates that this process saves buyers an average of $2,545. Consumers who trade their used car in for another on the site save an average of 6%. Lastly, the company offers free delivery and pickup.

The company reduces risk through various features. Before selling any cars, it sends them to a “reconditioning center” so they can be assessed for quality and improved. The outcome is a vehicle in superb condition with no accidents and a clear title – what Vroom calls “Supremely Certified.” The company also reduces risk by allowing buyers to drive a car for seven days or 250 miles to determine if it is a good fit for them; if it is not, they receive a full refund. Finally, every car comes with a 90-day, 6,000-mile warranty that covers almost all mechanical parts. Customers who sign up for a vehicle service contract with a program called VroomCare can obtain even greater benefits:

• Mechanical coverage up to 10 years or 100,000 miles
• Coverage for up to 1,500 vehicle parts, from the engine and transmission to brakes and steering
• Access to repair service nationwide, at any authorized facility
• 24-hour roadside assistance for emergencies
• Reimbursement of towing costs to customers’ nearest service provider
• Reimbursement for rental cars used when buyer’s car undergoes overnight repairs
• Trip interruption coverage for overnight repairs far from home and breakdowns
• Transferable coverage for owners who want to sell their cars to a private party The company has established a strong brand because of its success. It bills itself as the world’s biggest online car store, with over 1,600 available vehicles and over 169,230 vehicles sold. It is highly-respected among customers, with over 90% of respondents giving it a rating of 9 or 10 (out of 10) in reviews. It has garnered positive coverage in numerous respected publications, including Business Insider,* Fortune, Bloomberg, *Fast Company,* Yahoo! Finance,* and USA Today. Lastly, it has received many honors. For example, it was recognized as one of the “Hottest E-Commerce Startups of 2015“ by Forbes and as one of the Hottest Startups in New York City“ in 2015 by Business Insider.

Channels

Vroom’s main channel is its website, through which it acquires most customers. Potential buyers/sellers sign up for the service by creating an account. The company promotes its offering through its social media pages.

Customer Relationships

Vroom’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through its website while having limited interaction with employees. The site provides answers to frequently asked questions and a section called “The Vroom Insider” that offers useful tips and tricks – for example, “making the most of your 7-day test drive” and “the easiest way to sell a car”. That said, there is a community component in the form of a forum where visitors can interact with fellow customers and a personal assistance element in the form of phone and e-mail support.

Key Activities

Vroom’s business model entails maintaining a robust common platform between two parties: car sellers and car buyers.

Key Partners

Vroom’s key partners are the 30 banks that provide financing to vehicle buyers and the facilities nationwide that it authorizes to provide repairs for its customers.

Key Resources

Vroom’s main resources are its human resources, who include the team that it utilizes to scout the U.S. for the best pre-owned vehicles; the team that it hires to pick up and deliver cars to sellers and buyers, respectively; and the customer service staff it employs. The company also depends on a physical resource in the form of the “reconditioning center” in Dallas (covering 100 acres) that it uses to enhance cars prior to sale. Another center is being built in Indianapolis that is expected to be able to deliver vehicles within two days to those in a 300-mile radius. Lastly, as a new startup it has relied heavily on funding from outside parties, raising $203 million from 12 investors as of December 2015.

Cost Structure

Vroom has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely transaction expenses, which consist of the costs incurred to accept a customer’s source of payment and reconditioning the car. Other major drivers are in the areas of customer support/operations and marketing.

Revenue Streams

Vroom has one revenue stream: a small commission fee it charges sellers for each car sale. The amount of the fee is not publicly available.