How a Southern California startup is bringing the luxury car market into the digital age

Luxury retailers have seen their profits soar during the pandemic

Much has been made of the “K” shaped economic recovery spurred by the COVID-19 pandemic. Disposable income has increased for those who have taken advantage of these unique circumstances, as major everyday expenses such as travel have been curtailed. Armed with this new stock of cash, many have turned their attention, and their wallets, to luxury goods.

Although the vast majority of luxury brands suffered losses at the height of the pandemic, a handful of big-name brands weathered the volatility better than others. According to a report from Northeastern University, “cartier recorded a 30% increase in sales in the last three months of 2021 compared to the last quarter of 2020, while the Italian fashion house Prada gained 8% more this year than before the pandemic in 2019.”

Big hitters Louis Vuitton Moet Hennessy and Kering have been able to outshine their small and midsize counterparts through a combination of brand reputation and e-commerce expertise. Last June, LVMH went so far as to announce a 5-year strategic partnership with Google

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centered on artificial intelligence and cloud-based innovation.

Consumers are increasingly comfortable buying a wide range of products online

Above all, the resilience of luxury brands during the pandemic has been supported by consumers’ growing comfort in buying big-ticket items online. According to UNCTAD, global e-commerce sales reached nearly $27 trillion before the peak of the pandemic. In recent years, the success of companies like Wayfair

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(an online furniture retailer) have upended the idea that some items are simply not suitable for digital consumption.

“As we move beyond the initial shock of the pandemic, we see consumer confidence starting to return, with many customers now shopping online for the first time,” said Chris Morton of Lyst.

Ripple effect in the automotive market

The automotive industry has also benefited from this increased consumer confidence in online shopping. Arizona-based Carvana, founded in 2012, boasts a valuation north of $50 billion and an annual growth rate of 42% in 2020. Despite this, the company controls less than 1% of the fragmented US auto market. The untapped potential is considerable: estimates indicate that the size of the used car market is larger than that of clothing or consumer electronics.

There are many factors behind the slow growth of digital in the used car sales market. Operational complexity presents a major challenge, as well as the importance of test-driving a vehicle. It’s easy to return a jersey that’s the wrong size or color – good luck returning a car with a subpar paint job. However, that hasn’t stopped buyers from giving it a shot. “There has been a seismic shift in the outlook for the e-commerce industry,” freeway director Tom Leathes told the Financial Times.

This opportunity for increased digital penetration has not gone unnoticed by intrepid entrepreneurs.

Los Angeles-based startup poised to capitalize on growing luxury car and e-commerce market

Motorenn is a Los Angeles-based e-commerce startup specializing in used luxury and high-end vehicles. A military veteran with years of corporate strategy experience at CarMax

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and Edmunds, co-founder David Chou is modernizing what has traditionally been a cumbersome, non-digital experience. With low overhead, data-driven pricing models and a digital-first mindset, Motorenn is able to price its careful selection of vehicles competitively and transparently.

Motorenn has been able to attract consumers to this model. Less than a year after incorporation, the pre-seed startup has surpassed $2 million in monthly revenue and continued its rapid growth, recently expanding into a larger facility to accommodate its team, inventory, and technology. growing clientele. Although the majority of their customers buy or trade in their vehicles remotely, local Southern California drivers can take advantage of their new office and a fast in-person checkout process.

Chou and his co-founder, Austin Haldeman, envision Motorenn not just as an e-commerce platform, but as a community for fellow car enthusiasts.

“We are car enthusiasts sharing our passion and knowledge of these marvels of modern engineering. We want to make sure that we provide a great retail experience and that our customers feel informed about their vehicle and can get the most out of it,” said Haldeman, former engineer at Honda Racing.

What shortage of chips?

The success of luxury car makers during the pandemic adds to the appeal. Much like their apparel counterparts, brands such as Rolls Royce, Bentley and BMW have been able to boost sales and circumvent production problems caused by the global chip shortage to tap into a younger, money-saving customer base. Bentley was able to increase sales to a record 31% in 2021. Similarly, Porsche grew by 11%, supported by increased demand in the United States, Europe and China. Meanwhile, Volkswagen’s eponymous brand saw a drop in sales of around 8.1%.

“We are hardly affected by the chip shortage,” said Alain Favey, sales manager at Bentley Motors Ltd.

Additional tailwinds for luxury car makers include increased demand for electric vehicles. According to the Wall Street Journal, “Porsche said its electric sports sedan, the Taycan, sold out the company’s iconic 911 sports car last year, marking a symbolic shift as even Porsche customers are starting to embrace electric cars.”

Motorenn is well positioned to capitalize on the trend of increasing digital and fully remote sales in a niche market. The types of premium cars that Motorenn specializes in selling and buying require in-depth knowledge and specialist services, which Haldeman and his operations team are well equipped to handle.

Whether you buy Bentleys or Breguets, one thing seems clear: the future of luxury is digital.