Used Car Retailer Shift Goes Public Wednesday, Ready for Quarantine Shoppers
Used car retailer Shift is going public today, and continues its promise to make car shopping a breeze during these here Quarantine Times. But will their not-so-unique (and now public) model make a dent in the market?
Though they’ve been around since 2014, your author hadn’t heard of Shift until this writing. Working on a consignment model, Shift allows you to buy or sell a car through their service and skip the dealership. Much like CarMax, Shift owns the cars it has on sale, has its own process of inspection, takes its own pictures, and is a no-haggle dealer. The prices are fair, they say, because they keep track of actual cars for sale in the marketplace.
Given The Current Year, Shift is selling on safety. You can browse, trade, finance, and complete a purchase online from the comfort of your home. They offer a concierge program for their cars as well (if they’re close enough), where someone will bring a car to you for a no-fee test drive. Speaking of fees, it’s not cheap dealing with Shift. They won’t tell you what they charge on their site, but it was elsewhere online. When you sell your car to Shift the seller pays 8 percent of its assigned value. Later, they’ll charge the buyer of any car a 3.75 percent service fee on the car’s value. Nearly 12 percent on each ride sold. The concierge fee exists on all purchases, test drive or no. Shift says it helps to pay for the inspection, paperwork, and other niceties they provide. Forking over $1,875 so I don’t have to visit a dealer for my used $50,000 BMW sounds a bit steep.
The company has big-name financial backers like Goldman Sachs, BMW, and the Renault-Nissan-Mitsubishi group. Announced in the summer, the company sought (and completed) a reverse merger. A new company was created, Insurance Acquisition Corp, which was created solely to acquire Shift. This special purpose acquisition vehicle (SPAC) will raise $185M of capital by selling shares, and then combine with Shift for a total company value of $730M, per Reuters. It’s an easier way to go public, and avoids lots of regulatory filings because the public company is brand new and essentially a shell for what it’s about to buy. Catch them on the Nasdaq, SFT.
Doing some investigating into Shift, I thought I’d see if there’s a store near me, and what car I might have delivered. With my Ohio ZIP code inputted, Shift showed me they had 1,404 cars. “All local,” I thought, not bad. But no! They have 1,404 cars in their system total. Their site filtered to the closest car to me, a Focus, which was in San Diego. A little more snooping told me Shift’s locations were limited to four places in California, with an additional location in Portland. The company’s site doesn’t say “By the way we service California and Oregon only, Ohio resident,” but they were willing to cover $350 of the cross-country shipping if I bought the Focus then and there without seeing it. Generous!
This IPO is surely a way to expand rapidly. But with the proliferation of “buy without a salesman” car services already in place across the nation (Zoom, Carvana, CarMax), breaking out of 1,400 cars in California may prove challenging. And all those investors will want a quick return.
[Image: Shutterstock]
Interested in lots of cars and their various historical contexts. Started writing articles for TTAC in late 2016, when my first posts were QOTDs. From there I started a few new series like Rare Rides, Buy/Drive/Burn, Abandoned History, and most recently Rare Rides Icons. Operating from a home base in Cincinnati, Ohio, a relative auto journalist dead zone. Many of my articles are prompted by something I'll see on social media that sparks my interest and causes me to research. Finding articles and information from the early days of the internet and beyond that covers the little details lost to time: trim packages, color and wheel choices, interior fabrics. Beyond those, I'm fascinated by automotive industry experiments, both failures and successes. Lately I've taken an interest in AI, and generating "what if" type images for car models long dead. Reincarnating a modern Toyota Paseo, Lincoln Mark IX, or Isuzu Trooper through a text prompt is fun. Fun to post them on Twitter too, and watch people overreact. To that end, the social media I use most is Twitter, @CoreyLewis86. I also contribute pieces for Forbes Wheels and Forbes Home.
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Some of these Internet sales ideas aren't so great. Last year we bought a used car for our daughter (a 2012 Forte) from a local seller through TRED.com, a person-to-person outfilt. The car was okay, but not as clean as we'd like. Then, I got rear-ended on the way home from taking delivery, and the car was totaled. Under TRED's model, the seller signs the title and mails it to TRED, and they handle the title transfer. The problem was, I had a car that was totaled, a title not in my name (I didn't even have it yet). And, it turned out that the seller (he was moving to the UK, the reason for selling the car, along with everything else he and his wife owned) didn't even sign the title correctly. He just signed his name over the whole block where you're supposed to sign your name and write in the odometer reading. So, it took tons of calls to TRED (to get them to mail the title to me), and and going through the bonded title process with my county, since the ownership chain was broken. That cost me $350, plus paying the sales tax on the car. All this to get a title I could hand over to the insurance company of the woman that hit me, so I could surrender the car and get a payoff. What a complete cluster.
The conventional car-buying, or even leasing, process is often a hassle filled with irritation, annoyance, and even harassment, as your new car dealer, protected by his/her state's laws, tries to fleece you, at every turn. Carvanna makes it easier and spares you this harassment. But, how do they do it? Well, it seems to me, they charge more up front. You pay more for less hassle. But, if you google Carvanna, and their CEO, chances are, you will find that a lot of Carvanna's success is contingent on cheap money and low interest rates. They sell to a lot of sub-prime borrowers. Apparently (I jest, as I state the obvious), most people must finance even used cars. THis is the dealers', or Carvanna's, ace in the hole: WE FINANCE. As others have noted, the business itself loses money, though the CEO is a millionaire. The CEO's father is a convicted felon--some type of fraud during the Saving and Loan crisis that is too complicated for me to relay. IN any case, he was convicted of breaking the law--yet did not serve time in prison, just 3 years probation. Must be nice. And the CEO, and pere, are both very wealthy people. Just sayin'.... it's this type of thing that makes people--let's call them, some of the masses-- angry and resentful. So these nifty internet outfits are really little better, and probably worse, than your neighborhood con artist at your friendly new car dealer. Just as Walmart first, now Amazon, displaced local businesses, by optimizing and cutting costs, and concentrating the profits far from Main Street, this is what these outfits are doing. But they are costing the consumer more money, and adding to the debt bubble that will turn our lives upside down when it pops.