Shift Technologies Inc., an online marketplace for buying and selling used vehicles, launched operations in Portland, Oregon, and Sacramento, California, via a partnership with its top investor, car dealership Lithia Motors Inc.
With the addition of Portland and Sacramento, Shift now operates in nine markets along the West Coast. The other markets are San Jose, San Francisco, San Diego, Los Angeles, Riverside, Orange County and Oakland, California.
Shift operates five retail facilities and uses an undisclosed number of Lithia Motors dealerships under a partnership the two companies started last year. Shift also uses other reconditioning and parking facilities, the number of which changes continuously depending on Shift’s inventory.
Shift touts that it provides a convenient, transparent car buying process that allows shoppers to see detailed information about the cars listed and arrange test drives at home, says Shift CEO George Arison. While online, consumers can arrange to have a car brought to their homes for test drives or arrange to test drive up to three vehicles at a Shift location, which include some facilities owned by Lithia Motors. Buyers also can apply online for financing via banks and credit unions partnered with Shift.
Shoppers from anywhere in the United States can buy from Shift, but the company’s focus is on serving local consumers in the markets where its cars are stored, Arison says. He says Shift competes mainly with “the traditional way of doing things,” which includes local car dealerships and sales by individuals.
Arison says the relationship with Lithia Motors makes sense because of the resources and physical footprint the dealership group brings to the table.
“Lithia is so large there is a lot we can do together,” Arison says. For now, Shift is not considering similar partnerships with other dealership groups, he says.
Besides the use of Lithia Motors facilities, the partnership includes a data-sharing collaboration that pools Lithia’s transactional data with Shift’s data analytics. The data agreement was set up to help both companies do a better job of anticipating market demand, pricing vehicles and managing inventory.
Industry publication Automotive News says Lithia Motors is the third-largest dealership group in the United States, ranked by 2018 new-vehicle retail sales. The company operates 183 dealership locations. In 2018, Lithia Motors reported revenue increased 17.0% to a record $11.82 billion, up from $10.10 billion in 2017. Lithia Motors invested $54 million in Shift during 2018 and is Shift’s largest shareholder, a Lithia Motors statement says.
As an online used car retailer, Shift is similar to larger, publicly traded Carvana, but Shift’s business model is somewhat different. For example, while Carvana focuses only on newer used cars—typically up to 2 or 3 years old—Shift sells vehicles up to 10 years old, Arison says. Like Carvana, Shift’s cars receive a 150-point inspection. Buyers can return vehicles for up to five days, or 200 miles, and each car sold comes with a 30-day limited warranty.
Shift, which launched in 2014, generated $135 million in revenue in 2018, which was 45% higher than in 2017, Arison says. He projects 2019 sales to reach $210 million to $220 million. Shift sold roughly 8,500 used cars in 2018, a 70% increase from 2017. This year, the company expects to sell 13,000 to 15,000 cars.
The company says its immediate goal is to continue growing on the West Coast. It’s possible the company will expand into other regions, but it has no plans to do so now, if ever, Arison says. Shift might eventually go public, but there’s no timetable for doing that, Arison says.
Last month Shift raised $40 million, bringing its total funding to $293 million, according to Crunchbase data. In addition to Lithia, backers include Alliance Ventures, BMW iVentures, Goldman Sachs Investment Partners, G2VP, DCM, Threshold and Highland Capital.
Online car buying, while still relatively new, is having a noticeable impact on the market, according to a recent Cox Automotive survey of 3,086 car buyers who used the internet during the shopping and buying process and purchased a vehicle in the preceding 12 months. The survey found car buyers now spend about 61% of active shopping time online—up from 57% in 2017. Also, consumers who negotiated online or completed paperwork online spent 45 minutes less time at the dealership and reported being more satisfied with the dealership experience, Cox found.