RALEIGH – A fast-growing tech startup with east coast headquarters in Raleigh is stepping closer to outgrowing its competitors in the digital auto sales industry.
Joydrive, an ecommerce site where customers can buy cars online and have them delivered to their door, has significantly expanded its inventory to over 7,000 new and used selections—up from 500 vehicles last November and 3,000 in March.
The platform has also partnered with nearly 50 dealerships within the last year. They range geographically from the west to east coast, with many in the south-central U.S. region as well. Joydrive dealer member brands are top names such as Toyota, Ford, Ram, Chrysler, Chevrolet and Subaru.
The growth is bolstered by the company’s consistent sales increases this year, mostly due to the rising rate of major dealers signing on as partners.
Earlier this month, Joydrive announced that Tom Durant, president of top Chevrolet dealer Classic Chevrolet, has joined Joydrive’s dealer advisory board. Also on the board is another big industry name—Don Fleming of Northwest Motorsport, the largest independent truck dealership on the west coast.
Joydrive has experienced steady growth since its start only two years ago. It spent all of 2017 in stealth mode for beta testing and kicked off a full launch in February, releasing two ads in this year’s Super Bowl to attract public attention.
Though Joydrive is not the only online car marketplace and deliverer of its kind, it does have some distinguishers to make it stand out from the likes of competitors such as Carvana and Vroom.com.
One of the key differentiating factors is the dealer partnership model, which allows Joydrive to sell both used and new cars, unlike its competitors. This model also enables Joydrive to facilitate a follow-on relationship between the dealerships and buyers, increasing customer retention.
Joydrive Founder and CEO Hunter Gorham says these factors prove the concept, leading the company to set ambitions to become the largest network of connected dealerships in the nation. Gorham believes he and his team will be able to achieve this milestone by the end of 2018 once they expand the service further throughout the country.
Rethinking the automotive ecommerce model
Gorham’s knowledge of the auto industry comes from 14 years as an executive at Ally Financial, the finance arm of General Motors. There, he helped lead its national digital business and worked directly with big digital auto sales players, including Carvana and Vroom.
Like many entrepreneurs who’ve emerged in the last decade, Gorham was motivated to start his own technology business upon observing nearly every industry segment disrupting itself with innovation, from Blockbuster to Netflix, taxi to Uber. The auto industry was adopting its own innovations as well, with used car ecommerce startups cropping up across the U.S.
At that time, Gorham thought of a strategy that other auto sales platforms were not doing—instead of eliminating the dealerships, why not embrace them? Partnering with independent dealers would mean new vehicles could be added to the marketplace and customers could get follow-up service should they decide to purchase another car.
“We are bringing dealers a technology platform to capture incremental customers and to offer a completely new experience to existing customers, dramatically expanding the market area,” Gorham said.
After building out the platform in 2016, Gorham was able to use some of his connections from Ally Financial to attract early sign-ons, mostly in the Pacific Northwest where Joydrive was founded. As it grew, the company quickly established a second headquarters in Raleigh, a decision Gorham says was based on the Triangle’s university network and growth in tech and innovation.
Joydrive then underwent a beta phase with Northwest Motorsport last year, at which time they facilitated hundreds of online transactions and sold cars from California to Montana.
By the start of 2018, Joydrive began signing on even more dealers to the marketplace in prep for a public release. The company also raised two rounds from undisclosed investors: $500,000 in January and $1.05 million last month.
Now, the platform has 48 dealership partners from Washington, Oregon, Texas and Florida, with more in the pipeline.
Dealers have experienced consistent sales results since partnering, a big component to the proof-of-concept. Gorham notes, “Since Joydrive delivers within an average distance of 135 miles, dealers are able to broaden their sales to new geographical markets that they hadn’t been able to reach before.”
At present, Joydrive has just under 7,000 new and used vehicles listed on the platform. Gorham expects that number to nearly triple to 20,000 by year’s end once the company expands into Texas, one of the largest ranked markets for auto dealers in the country. Joydrive just established another headquarters in Dallas to help with this expansion.
Meeting consumer demand for a better buying experience
The growing ecommerce auto sales industry in which Joydrive operates is driven by a few major shifts in market dynamics.
Increasingly, customer satisfaction and online shopping offerings are the two most crucial components to car dealers’ success in today’s market.
Surveys show that around 88 percent of car customers are spending most of their time in the decision-making process combing the internet in search of the best features, brands and deals. For most customers, nearly 60 percent of the process (more than five hours) is spent using third-party platforms to research and shop online.
Slightly less than half of consumers visit a physical dealership in this process. And if they do, they often leave frustrated with the time it takes to fill out paperwork and negotiate the purchase or lease of the vehicle. At the same time, dealerships have less than a 30 percent chance of changing a customer’s mind once they arrive at the lot. Most customers end up purchasing the vehicle they had intended to buy in the first place.
These statistics are indicators of the demand for digital platforms like Joydrive, says Gorham. “To us, that’s basically the consumer yelling, ‘We want a new car buying experience and auto industry.’”
He adds, “There are around 18,000 franchise dealers across the country, and none really have a good solution to the digital experience the customer is demanding.”
According to Gorham, Joydrive is helping address these demands with a simple process.
Customers can shop by dealership location, brand, model/make and price. In the individual vehicle listings, they can see information on the car’s specs, along with a breakdown of the estimated monthly payment if the customer needs a loan.
For transparency, customer reviews for the dealers are linked in the listing, along with the dealer’s name and contact information.
Once the customer has decided on a vehicle, they pay a $500 refundable deposit and can speak directly to the dealer online. If the customer wants to get on a financing plan, Joydrive can connect them to its network of lenders to start the process. They can also trade in their vehicles via the platform.
Within a day, the chosen car will arrive at the customer’s house or workplace by Joydrive-trained delivery personnel who work for the given dealership. The delivery is free if the customer is within 100 miles; otherwise, the delivery fee will show up on the vehicle listing page.
If the customer decides they don’t want the vehicle once it’s delivered, they can return it within five days or 250 miles and get their $500 deposit back.
What’s next for Joydrive
Gorham says Joydrive’s customer base is exceedingly broad in demographics. The digital platform is used by customers of all ages, with the average user being 48 years old. Customers have been as young as 18 and as old as 92.
There are three main segments of customer buckets, Gorham explains. “The biggest one has been busy professionals and stay-at-home parents who don’t have six hours to spend going to dealerships. The second bucket is the millennial, digital-savvy customer who wants a digital-first purchasing experience. The third is the experienced car buyer that’s interested in a dealership-free purchase experience. They may be willing to buy from a dealer, but they don’t have any desire to spend a Saturday at a dealership office.”
For all of these customer segments, Joydrive’s overall value is that it gives them back their time.
Sales are rapidly growing as existing customers are now referring their friends and family to the platform.
“We expect the pace to continue to improve as we expand the marketplace nationally,” Gorham says. Achieving this national footprint is the main priority for Gorham and his team in the coming months.
Profitability is another target within reach in the near-immediate future.
“Other [digital auto sales] businesses out there are hemorrhaging cash with a model contingent on multiple ongoing massive funding rounds; they’re selling themselves to pay the bills effectively,” Gorham adds. “But we’ve built a sustainable and scalable model that offers a win-win for customers and dealers. This lets the business fund itself—being self-sustainable allows us to be stronger.”