Online used car retailer Vroom is shutting down its digital retail business following a struggle to raise funds in an increasingly competitive environment. Joining us today on CBT Now to share his expert insights into the matter is Marc Cannon, Former Chief Customer Experience Officer at AutoNation.
Launched in 2013, the eCommerce brand Vroom, once rivaled other major online dealership platforms such as Carvana and boasted an initial market valuation of roughly $2.5 billion. However, the company’s performance began to noticeably deteriorate in 2021, during which unfavorable market conditions created by the COVID pandemic began to take their toll on automotive retail giants. In a press release published this Tuesday, Vroom revealed it would no longer sell used cars but divert focus to its other business operations instead.
In the days leading up to this announcement, the company had sought to raise enough capital to extend its vehicle floorplan facility past its current expiration date of March 31, 2024. As Vroom CEO Thomas Shortt explained, these endeavors ultimately failed. “Despite significant efforts to do so, we ultimately were unable to raise the necessary capital in the current market,” he commented. “Obviously, we are very disappointed with this outcome.”
The former used car retailer will now prioritize its subsidiaries: automotive finance company United Auto Credit Corporation (UACC) and data analytics platform CarStory. In a filing with the Securities and Exchange Commission, the business noted it would be laying off roughly 800 staff members, leaving just 10% of the former Vroom workforce intact. The terminations do not affect UACC or CarStory.
With Vroom bowing out of the used car business, other digital car retailers are likely to see a new wave of uncertainty take hold of their already apprehensive stockholders. Although Carvana and CarMax share prices exhibited only minor declines in the wake of their competitor’s announcement, both brands are navigating their own financial problems, such as difficulties acquiring inventory, stagnating demand, and heavy debt. Careful money management and speedy recoveries will be necessary to ease investor anxieties, but it is unclear whether the challenging market will allow for either.
