Carvana (NYSE:CVNA) is a rapidly growing online retailer of used cars. After launching in Atlanta in 2013, the company is now live in 146 markets with about 67% of the U.S. population in its coverage area. The company has grown revenue at a rate of over 100% in each quarter since its founding, and is now the third-largest retailer of used cars nationwide. The company’s completely different approach seems to be enabling a better customer experience. Whether this model is the future of used car retailing depends on whether these perks are enough to make enough consumers comfortable buying used cars sight unseen.
A completely different model
Rather than build out a large number of local dealerships around the country like Carmax has, Carvana sells used cars completely online. Shoppers browse a selection that is now at more than 23,000 vehicles and can place an order online without ever stepping foot into a dealership or talking to a salesperson. They can even get approved for financing with a few clicks.
The vehicle is then delivered to the buyer’s home and the customer has seven days to decide if they want to keep or return the car. Alternatively, customers in some markets can pick up their car from one of Carvana’s patented vehicle vending machines for a unique experience.
Better customer experience
Carvana’s nationwide inventory, which is now at more than 23,000 vehicles, provides a wider and deeper breadth of inventory for consumers compared to traditional used car dealers, which generally carry no more than a couple hundred cars due to space constraints. This inventory advantage seems especially effective in smaller markets where there are fewer dealerships.
Further, the entirely online experience lets customers avoid the notoriously unpleasant experience of traditional used car shopping. In today’s economy, more consumers have come to expect seamless, easy, and instant buying experiences. This is a phenomenon that Zillow Group‘s Rich Barton calls “uberized” consumers — those who’ve been trained to expect instant, on-demand experiences like a car showing up after a few clicks on a smartphone. Carvana’s cars don’t show up quite as instantly as Uber‘s — generally within days or up to five to 15 days if the customer is outside one of the company’s markets — but that should decrease over time as the company builds out more inspection centers and gets closer to more customers.
Food delivery apps are training consumers to expect food to show up at their doors almost instantly, while music-streaming services train customers to think they can play virtually any song ever made instantly. And, of course, Amazon has been training us to expect super-fast delivery, now down to one-day in some cases.
Carvana made the calculated bet that consumers were ready for online car shopping, and so far that bet has been paying off in a big way. Management expects the company to sell about 175,000 cars online this year, up from 2,105 in 2014. At its current trajectory, Carvana could reasonably sell 250,000 to 300,000 cars next year as the company expands into more markets and existing markets mature.
While the company remains unprofitable, it is rapidly approaching breakeven as it sells more cars through its existing infrastructure. If Carvana’s model is the future of used car retailing, the company should sell far more cars in the future and make loads of money.
Long runway to grow in a fragmented market
Carvana has been growing at a rapid rate, but it could still have a long way to go. The used car industry is highly fragmented with the largest retailer, Carmax, selling less than 2% of used cars nationwide. The top 100 retailers combined account for about 7% the market while the rest of the market is made up of smaller retailers and private sales. Carvana’s nationwide market share is only about 0.4%, so if its model is indeed the future of used car retailing, there should be plenty more growth to come. In fact, its market share in its oldest market, Atlanta, was about 1.9% at the end of last year, and is surely higher today. Even if Atlanta’s growth stopped, Carvana’s retail used vehicle sales would increase by over four times this year’s level if its market share in the rest of the country were to simply catch up to its market share in Atlanta.
But Carvana’s largest competitor hasn’t been sitting still. Carmax has been transforming its business into an “omnichannel” model that includes an online buying experience for those customers that prefer that. But given the highly fragmented nature of the market, there appears to be room for both companies to gain market share at the expense of smaller dealers over time.
Airbus, Nasdaq to create derivative trading for airline tickets
An Airbus narrow body plane
Nicolas Economou | NurPhoto | Getty Images
European planemaker Airbus is working with Nasdaq to develop a derivatives-based trading platform that will allow airlines to protect against swings in ticket prices.
Just like airline companies use oil futures to hedge against the volatility in fuel costs, they will soon be able to do the same with the swings in ticket fares, which fluctuate drastically during holidays, events and different weather.
The London-based platform Skytra will enable airlines to manage its revenue risks for the first time by trading futures and options contracts based on its proprietary indices. The company said it has been developing benchmarks to track the daily changes in the price of air travel for two years.
Nasdaq will provide technology to ensure functionality including matching, surveillance, risk management and regulatory reporting.
Airbus has partnered with a company that “tracks every ticket price, pretrade and aftertrade,” Adena Friedman, president and CEO of Nasdaq, said on CNBC’s “” on Thursday at the World Economic Forum in Davos, Switzerland. “They are able to look at certain routes and certain regions in the world and they can say how much the price has changed and they create an index on that.”
“It’s also really helpful for travel agency businesses too,” Friedman said. “They are not offering this right now to consumers. It’s definitely a professional market, but at the same time, the consumers use travel agencies … they should be able to pass that benefit on.”
“Skytra has been created in collaboration with the air travel industry and players outside it to enable more financial predictability in a volatile market,” Christian Scherer, Airbus’ chief commercial officer, said in a statement.
Airlines have long been exposed to uncertainties around short-term revenue. Up to 90% of the tickets are booked within 90 days before take-off, and reduced demand or increased seat supply can hurt sales significantly, according to Airbus.
Financial Times first reported Airbus’ plans to launch such a venue.
Powerball jackpot is at $373 million. Tips for claiming if you win
If you happen to hit the next Powerball jackpot, brace yourself for the life-changing decisions ahead of you.
With no one matching all six numbers drawn on Wednesday, the top prize has jumped to $373 million for Saturday night’s drawing. And while winning such a huge amount could open a world of possibility, formulating a detailed plan for when and how to claim it would be a key part of protecting your windfall, experts say.
“It’s exciting to win but, when it gets to numbers this big, you have to take a step back and realize the magnitude of it and plan for it,” said David Desmarais, CPA member of the AICPA Personal Financial Planning Executive Committee.
Justin Sullivan | Getty Images
The jackpot has been climbing for more than two months through twice-weekly drawings. Whoever ends up winning will face options before even heading to lottery headquarters — some of which depend on where the ticket was purchased.
For example, you may be able to shield your identity, which experts say is important if it’s possible.
While just a handful of states allow you to claim anonymously, others may let you collect your windfall via a trust or other legal entity to keep your name out of the public eye. In other states, though, you might have no choice but to publicly reveal yourself.
You also have some leeway on the timing of the claim. You typically get three months to one year, depending on where the ticket was purchased. Generally speaking, the sooner you claim, the better — with a caveat.
“You’d want to get the money as soon as possible so you could put it to work for you,” said certified financial planner Jennifer Weber, vice president of financial planning at Weber Asset Management in Lake Success, New York.
“But the more important thing is to get a team of advisors behind you before you claim,” Weber said.
That team should consist of experienced professionals — including an attorney, CPA and financial advisor.
One of the major decisions that your team can help you with is whether to take the prize as a reduced cash option or as an annuity paid in annual installments over 30 years.
First up is taking an honest look inward and making sure you have the discipline to take the cash option and handle it responsibly, said Howard Pressman, a CFP and partner at Egan, Berger & Weiner in Vienna, Virginia.
“If the answer is no, then the annuity may make the most sense, as the payments would be spread out and limit the winner’s ability to blow it all,” Pressman said. “This may be more important than making the highest-yielding economic decision.”
The annuity option is structured in a way that annual payments increase over time (by 5% annually). For this $373 million Powerball jackpot, the first year’s payout would be roughly $5.62 million, based on a formula provided by the Multi-State Lottery Association. The 30th (and final) payment would be more than $23 million.
More from Personal Finance:
Here are the smartest things to do with that bonus check
Where most Americans really get their retirement income
How to find a great career in your golden years
On the other hand, if you take the lump sum, you potentially could earn more over time than with the annuity, depending on how you invested it.
“If you can earn 3% [after taxes], you’d be slightly better off than taking the annuity,” Desmarais said.
For this Powerball jackpot, the cash option is $253.7 million. That amount would be reduced by a federal 24% withholding, or about $60.9 million, leaving you with $192.8 million.
However, because the top marginal rate of 37% applies to income above $518,400 for single tax filers ($622,050 for married couples filing jointly), much more would be due at tax time — which would be April 2021 for prizes claimed in 2020.
State taxes also may be withheld or due. Those levies range from zero to more than 8%, depending on where the winning ticket was purchased and where the winner lives. In other words, you could end up paying more than 45% in taxes.
There are ways to reduce your taxable income, although not many. For the charitably inclined, contributing to a donor-advised fund or a family foundation could help reduce your taxable income.
However, any decisions should be made in the context of a full plan that ideally is done with the help of experienced experts to avoid making mistakes in the claiming process.
“The most important thing is to surround yourself with the proper advisers,” Desmarais said. “There’s still plenty of time in the calendar year to do tax planning.”
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U.S. Signals Crackdown on Counterfeit Goods Sold Online
WASHINGTON—The Trump administration is moving to curb the sale of imported counterfeit goods over the internet, warning electronic commerce platforms and warehouse operators of greater scrutiny and penalties if they don’t help ferret out fakes.
The Department of Homeland Security is set to release a report Friday outlining its immediate actions and longer-term goals for enlisting e-commerce players to combat counterfeit products that officials say undermine U.S. technology and manufacturing, harm bricks-and-mortar retailers and endanger consumers.
The new initiative, led by U.S. Customs and Border Protection and the White House, comes the same month as an initial trade agreement with China that requires Beijing to take steps against counterfeiters or risk enforcement actions that could trigger new tariffs.
The Trump administration is seeking to pressure e-commerce giants including
which increasingly hosts lucrative third-party sales on its platform, as well as financial firms, logistics services and other companies that are positioned to help stem the rising tide of counterfeits and pirated goods.
The DHS report, which was reviewed by The Wall Street Journal, says law enforcement will begin identifying cases immediately and “seek all available statutory authorities to pursue civil fines and other penalties against these entities.”
It also calls for new laws “to explicitly permit the government to seek injunctive relief against third-party marketplaces and other intermediaries dealing in counterfeit merchandise.”
“This is not about any one e-commerce platform—this is about e-commerce playing by a different set of rules that simultaneously hammer brick-and-mortar retailers, defraud consumers, punish workers and rip off intellectual-property rights holders,” said White House trade adviser
who is helping lead the initiative. “It’s Amazon, Shopify, Alibaba, eBay, JD.com, Walmart.com and a constellation of lesser players that provide the digital hubs.”
Spokespeople for Amazon,
Alibaba Group Holding Ltd.,
didn’t immediately respond to requests for comment.
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As part of the enforcement effort, the report says customs agents will treat domestic U.S. warehouses and fulfillment centers, such as those operated by Amazon and others, as the “ultimate consignee” for goods that haven’t been sold to consumers, giving officials power to scrutinize shipments even after they have cleared the border and moved to a regional warehouse.
U.S. officials will share information with such warehouses about counterfeit goods and “request they pursue abandonment and destruction with the rights holders of any identical offending goods in their possession,” according to the report.
Authorities also seek to better scrutinize fulfillment centers in Mexico and Canada that they say have long skirted U.S. trade law. They say large shipments sent to these facilities are often broken up into individual packages and shipped to U.S. consumers—free of duties and formal customs paperwork as long as the shipped item is valued less than $800.
Customers and Border Protection “has existing authority to require formal entry (and the complete data set for any shipment) for any merchandise, if deemed necessary for import admissibility enforcement purposes; revenue protection; or even the efficient conduct of customs business,” the report says.
Many online sellers of consumer goods have little incentive to comb through their transactions or shipments for counterfeits, contributing to a rising tide of fake or unsafe items. Related reading:
The U.S. and other governments say the fake-goods problem is growing as consumers gravitate toward low prices on the internet and cheap international shipping. In three “blitzes” last summer at international mail facilities, express-delivery hubs and other locations, customs agents found violations in nearly 14% of the 20,861 shipments that were inspected, including roughly 5% of shipments that contained counterfeit goods, according to the report.
“An acceptable rate of customs discrepancies for counterfeit products and other contraband, such as fentanyl or gun silencers coming in from countries like China, would be under 1%,” Mr. Navarro said.
The size of the problem—and any likely solution—is growing. The incidence of infringing goods at U.S. borders has increased from 3,244 seizures in 2000 to 33,810 in 2018, according to DHS data.
Previous administrations and local law enforcement have long sought to work with the owners of legitimate patents, copyrights and trademarks to stamp out imitators, including through trade agreements. Trump administration officials are seeking to extend that approach, although it isn’t clear whether they could secure more manpower or funding. Acting DHS Secretary
Chad F. Wolf
said in a statement that the private sector is “critical to helping secure supply chains to stem the tide of counterfeit and pirated goods.”
Companies that profit from myriad small shipments have little financial incentive to comb carefully through their transactions or shipments. Online marketplaces don’t face the same legal liability as physical stores, and major changes to the legal landscape would require new legislation from Congress, officials say.
E-commerce operators say they have safeguards in place to curb inauthentic goods. “The industry will continue to work with law enforcement, policy makers and industry to protect consumers from counterfeit goods,” said
trade policy director at the Internet Association, whose members include Amazon, eBay and
The bigger e-commerce platforms say they are already working internally and cooperating with governments to address counterfeiting. Alibaba said in a news posting Wednesday that “ever-improving technologies and close partnerships with brands and other external stakeholders” have helped it to identify and remove counterfeit goods from its platforms.
Amazon said last month that “combating counterfeit requires collaboration across the industry—from retailers, brands, law enforcement, and government and we continue to be actively engaged with these stakeholders.”
The Journal reported last year that Amazon allowed third-party sellers to market dangerous products on its platform with limited oversight.
The Trump administration is considering adding some of Amazon’s overseas operations to a list of global marketplaces known for counterfeit goods, in what would amount to a public shaming of the e-commerce giant, according to people familiar with the matter.
One new tool is the initial trade pact signed this month by U.S. and Chinese officials. The agreement requires Beijing to boost the number of trained personnel to seize pirated goods aimed at exports markets, with requirements to destroy fake goods and to cooperate with the U.S. on counterfeit medicines.
“Over the next six months, we expect to see a quick and dramatic reduction in the rates of counterfeits and other contraband,” Mr. Navarro said, adding that “absent such a reduction, the deal will be enforced accordingly.”
A spokesman for the Chinese embassy in Washington didn’t immediately respond to a request for comment.
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