CarLotz Inc (LOTZ)

A. Business Overview

CarLotz Inc. is a company that operates a consignment-to-retail used vehicle marketplace. Their goal is to create the best vehicle buying and selling experience in the world. They utilize a technology-enabled buying, sourcing, and selling model that offers a diverse selection of vehicles and an omni-channel experience. Their proprietary technology provides real-time performance metrics and data analytics for their corporate vehicle sourcing partners, allowing for vehicle triage optimization between wholesale and retail channels.

B. Products and Services

CarLotz offers their products and services to three main groups: corporate vehicle sourcing partners, retail sellers of used vehicles, and retail customers looking to buy used vehicles. Their corporate vehicle sourcing partners include fleet leasing companies, vehicle rental companies, banks, finance companies, third-party remarketers, wholesalers, corporations with fleets, and OEMs. They offer a pioneering "Retail Remarketing" service that integrates with their partners' existing technology platforms.

For retail sellers, CarLotz aims to provide a hassle-free experience with their consignment model. They offer a physical location for displaying the vehicle, detailing, photography, marketing, a degree of separation between the buyer and seller, and the confidence associated with a national dealership. Buyers can browse inventory online and access integrated financing and insurance options.

C. Segments

CarLotz currently operates twenty-two retail hub locations across the United States. Their hubs act as showrooms for retail sales and consignment centers for sourcing, processing, and reconditioning vehicles. The company initially launched in the Mid-Atlantic region and has since expanded to the Southeast, Southwest, Midwest, West, and Pacific Northwest regions.

D. Strategy

CarLotz aims to improve their operating and financial results by pausing their real estate growth efforts in 2022. However, they still plan to open one hub in 2022. They source vehicles from both corporate and consumer sellers, auctions, and other wholesale channels. They maintain long-term sourcing relationships with national accounts and pursue sales from new accounts. Their technology platform supports the assignment, reconditioning, sale, and remittance of vehicles for their corporate sourcing partners.

E. Marketing and Target Group

CarLotz's marketing efforts focus on attracting retail sellers, corporate vehicle sourcing partners, and retail customers looking to buy used vehicles. They offer a hassle-free selling experience for retail sellers, providing them with an easy-to-navigate online portal to track the sale process. They advertise their inventory online through their website and attract retail customers through integrated financing and insurance products.

F. Revenue Generation

CarLotz generates the majority of its revenue from contracts with retail customers for the sales of vehicles. They also generate revenue from value-added products such as financing, insurance, extended warranties, and other vehicle protection products, which are provided by third parties. They sell vehicles to wholesalers or other dealers primarily at auctions.

G. Intellectual Property

CarLotz seeks to protect its technology and intellectual property through trademarks, trade secrets, copyrights, contractual agreements, and security procedures. They require employees, consultants, and certain third parties to enter into confidentiality agreements. They currently hold rights to the "CarLotz.com" domain name and other related domain names.

H. Government Regulation

CarLotz operates in a highly regulated industry. They are subject to federal, state, and local laws and regulations governing the advertising, sale, purchase, financing, and transportation of used vehicles. They must comply with state laws related to titling, registration, and wholesale vehicle sales. CarLotz is also subject to regulations governing the internet, e-commerce, and privacy regulations. They are regulated by various federal governmental agencies including the FTC, Department of Transportation, and the Consumer Finance Protection Bureau. They are also subject to state dealer licensing authorities.

I. Competition

The used vehicle market in the United States is highly competitive and fragmented. CarLotz faces competition from traditional used vehicle dealerships, national car dealers, online and physical auction businesses, rental car companies selling used vehicles, online marketplaces, and the peer-to-peer used vehicle sales market.

J. Insurance

CarLotz maintains various insurance policies to cover directors' and officers' liability, crime, property, workers' compensation, automobile, general liability, and umbrella insurance.

K. Human Capital Resources

As of December 31, 2021, CarLotz had approximately 492 employees. They are all paid via W-2 and are not represented by a labor union. The company has not experienced any labor disagreements that resulted in interruptions of operations. They acknowledge that their employees' industry knowledge may be difficult to replace.