{"id":3850,"date":"2017-02-26T10:48:09","date_gmt":"2017-02-26T15:48:09","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/a-bumpy-ride-for-beepi\/"},"modified":"2017-02-26T10:48:09","modified_gmt":"2017-02-26T15:48:09","slug":"a-bumpy-ride-for-beepi","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/a-bumpy-ride-for-beepi\/","title":{"rendered":"A Bumpy Ride for Beepi"},"content":{"rendered":"<p>Beepi sought to reduce friction in used cars sales via an online peer-to-peer marketplace that handled the hassle of listing and fulfillment handled for sellers and provided third-party transparency for wary buyers. \u00a0A big part of Beepi\u2019s bet was that their convenience and ancillary platform services could counteract the buyer\u2019s typical need for a test drive before making a purchase.\u00a0 <em>But in a world where buyers and sellers can easily multi-home, limited car inventory slows transaction liquidity, and a dearth of direct network effects made scaling in this highly capital-intensive business especially challenging, Beepi went from being a venture darling to utter dissolution in just under four years.<\/em><\/p>\n<p>&nbsp;<\/p>\n<p><u>Here\u2019s how Beepi works<\/u>.\u00a0 A seller would submit basic information about his car to Beepi and await an in-person, 240-point vehicle inspection and quote.\u00a0 If the seller approves the quote, Beepi lists the car on its site and handles the heavy lifting of photo-taking for the listing page.\u00a0 If no one buys the car within 30 days, Beepi purchases it itself and then re-lists it on the site.<a href=\"#_ftn1\" name=\"_ftnref1\">[1]<\/a>\u00a0 Additionally, Beepi manages car fulfillment, delivering cars for free in California or charging between $600 and $999 out-of-state.<a href=\"#_ftn2\" name=\"_ftnref2\">[2]<\/a>\u00a0 Buyers even get a 10-day window to return the car, no questions asked.\u00a0 An added plus: buyers get their car delivered with a special bow stretched across the hood of the vehicle.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2017\/02\/beepi.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-3849\" src=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2017\/02\/beepi-300x173.png\" alt=\"\" width=\"300\" height=\"173\" srcset=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2017\/02\/beepi-300x173.png 300w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2017\/02\/beepi-600x347.png 600w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2017\/02\/beepi.png 706w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p><a href=\"#_ftn3\" name=\"_ftnref3\">[3]<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><u>Assessment of the platform<\/u>:<\/p>\n<p>&nbsp;<\/p>\n<p>Beepi took a platform-first strategy, increasing liquidity in used car transactions for buyers and sellers and therefore enabling cross-marketplace value sharing.<\/p>\n<p>&nbsp;<\/p>\n<p>Ways they created value:<\/p>\n<ul>\n<li>Reduced cost of transactions for sellers<\/li>\n<li>Guaranteed a higher offer price for sellers than the dealer trade-in value, a $1,000 difference in some cases<a href=\"#_ftn4\" name=\"_ftnref4\">[4]<\/a><\/li>\n<li>Better customer experience vs. hard-to-trust online marketplaces like Craigslist or inconvenient, offline car dealership shopping<\/li>\n<li>Quick buyer financing offered to ease purchase friction (and drive retention and potentially additional affiliate revenue streams)<\/li>\n<li>Indirect network effects: more seller inventory attracted more buyers to the platform<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Things seemed to be going great for Beepi with a projected a $6MM run rate in first year gross sales, of which it would keep its 9% take rate<a href=\"#_ftn5\" name=\"_ftnref5\">[5]<\/a>; 2016 was on-track for $100MM top-line.<a href=\"#_ftn6\" name=\"_ftnref6\">[6]<\/a>\u00a0 It became operational in 16 cities across Arizona, California, Florida, New York, and Washington, as well as the greater Washington D.C. area.<a href=\"#_ftn7\" name=\"_ftnref7\">[7]<\/a> \u00a0Fast forward to these past couple months, when news just surfaced about investors pulling out, a sale attempt to a competitor, Shift, followed by subsequent failed sale negotiations with adjacent players Fair.com and DGDG.<a href=\"#_ftn8\" name=\"_ftnref8\">[8]<\/a><\/p>\n<p>&nbsp;<\/p>\n<p><u>What happened<\/u>?\u00a0 Some thoughts on challenges to scaling the platform:<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>An absence of direct local network effects and inability to convert indirect network effects into direct ones likely exacerbated the capital-intensive nature of the business, driving up costs for both customer and seller acquisition \u2013 and re-acquisiton at that. One could argue that there may be some direct local network effects generated from accumulating a geographically clustered set of sellers.\u00a0 For example, this could lead to better infrastructure to support faster sales, i.e. deploying mechanics quickly for pre-listing vehicle inspections and delivering cars faster.\u00a0 But key to achieving this critical mass was accumulating enough inventory, which Beepi failed to build.<\/li>\n<li>A fundamentally illiquid market exacerbated inadequate platform liquidity. Car purchases occur infrequently, and one wonders if Beepi offered adequate vehicle inventory to drive customer engagement.\u00a0 Its competitor Shift recently partnered with Hertz to bolster its used vehicle supply, likely to address this very challenge.<a href=\"#_ftn9\" name=\"_ftnref9\">[9]<\/a><\/li>\n<li>Low switching costs contributed to high multi-homing, which, when coupled with low network effects and illiquid market fundamentals, prevents platforms from expanding the used-car market and crowds out players like Beepi. Competitors abound with the likes of Vroom, Carvana, and Shift, some of which differentiate on offering pre-purchase test drives and richer inventory from strategic partnerships.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><u>Ultimately, what could Beepi have done differently to compete?<\/u><\/p>\n<p>In addition to the points made above on differentiating with a more holistic customer experience, one wonders if Beepi could have done more to leverage sellers as a buyer acquisition channel and vice versa.\u00a0 Focusing first on a hyperlocal strategy could have aided in initial cost management and brand building, though admittedly would limit the richness of available inventory.\u00a0 Finally, to this last point, there could be value in engaging with dealers to off-load their used car business, which contributes to expensive brick and mortar overhead.\u00a0 While dealers may balk at losing a key driver of their in-store business through trade-ins, I\u2019d argue that show-rooming is already dampening revenue capture here.<\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> http:\/\/www.recode.net\/2014\/12\/30\/11634080\/used-car-site-beepi-lands-12-million-from-yuri-milner-and-angellists<\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\">[2]<\/a> http:\/\/www.recode.net\/2014\/7\/8\/11628634\/you-can-now-buy-a-car-with-bitcoin-and-have-it-delivered-with-a-bow<\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\">[3]<\/a> https:\/\/techcrunch.com\/2016\/12\/07\/used-car-marketplace-beepi-shuts-down-outside-of-ca-merges-with-stealth-fair-com\/?ncid=rss<\/p>\n<p><a href=\"#_ftnref4\" name=\"_ftn4\">[4]<\/a> http:\/\/www.recode.net\/2014\/7\/8\/11628634\/you-can-now-buy-a-car-with-bitcoin-and-have-it-delivered-with-a-bow<\/p>\n<p><a href=\"#_ftnref5\" name=\"_ftn5\">[5]<\/a> http:\/\/www.recode.net\/2014\/8\/13\/11629840\/car-buying-site-beepi-in-talks-to-raise-50-million<\/p>\n<p><a href=\"#_ftnref6\" name=\"_ftn6\">[6]<\/a> https:\/\/www.nytimes.com\/2015\/04\/23\/technology\/personaltech\/an-online-tune-up-for-the-used-car-marketplace.html<\/p>\n<p><a href=\"#_ftnref7\" name=\"_ftn7\">[7]<\/a> http:\/\/fortune.com\/2016\/12\/13\/shift-partners-hertz\/<\/p>\n<p><a href=\"#_ftnref8\" name=\"_ftn8\">[8]<\/a> https:\/\/techcrunch.com\/2016\/12\/07\/used-car-marketplace-beepi-shuts-down-outside-of-ca-merges-with-stealth-fair-com\/?ncid=rss<\/p>\n<p><a href=\"#_ftnref9\" name=\"_ftn9\">[9]<\/a> http:\/\/fortune.com\/2016\/12\/13\/shift-partners-hertz\/<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Peer-to-peer used car marketplace Beepi has gone from a successful $149MM capital raise to a desperate fire sale in less than four years.  What led the company to take a turn for the worse?<\/p>\n","protected":false},"author":972,"featured_media":3851,"comment_status":"open","ping_status":"closed","template":"","categories":[615,449,382,1211],"class_list":["post-3850","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-car","category-p2p","category-two-sided-marketplace","category-used-car"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/growing-businesses-in-the-age-of-platforms\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>A Bumpy Ride for Beepi - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/a-bumpy-ride-for-beepi\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Bumpy Ride for Beepi - Digital Innovation and Transformation\" \/>\n<meta property=\"og:description\" content=\"Peer-to-peer used car marketplace Beepi has gone from a successful $149MM capital raise to a desperate fire sale in less than four years. 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