Facing market pressures and steep financial losses, Shift Technologies Inc. is launching a major restructuring that entails scaling back operations to focus on its West Coast presence and positioning itself as a retailer of budget-minded used vehicles.
Revising Shift’s business plan is vital to getting the retailer on track for long-term profitability, Shift President Jeff Clementz told Automotive News last week. After posting a $109.2 million loss through the first half, Shift has moved into cost-cutting mode, as have other online used-vehicle retailers.
Shift has closed seven of its 10 maintenance and customer relations hubs — four in Texas, two in California and one in Washington. It also announced a planned merger with CarLotz, a used-vehicle consignment company based in Richmond, Va., and said it would cut 650 jobs through the end of this year.
Clementz, 47, who will succeed George Arison as Shift’s CEO on Sept. 1, said the San Francisco-based company’s best shot at setting up future profitability comes from closing the hubs — physical locations where consumers could go to test drive vehicles before purchasing — and concentrating on deliveries to buyers using Shift’s online sales platform.
The retailer’s hubs in Los Angeles; Oakland, Calif.; and Portland, Ore., remain open.
“We will still have sufficient capacity in those three hubs to achieve our profitability plan,” Clementz said, adding that prioritizing online channel profits should help the company offset its shrunken footprint.
Shift still plans to ship cars and trucks across the country to consumers buying through the online platform. But it is pausing test drives for the foreseeable future to trim costs and because more consumers are opting for a fully online buying process, Clementz said.
Shift’s pivot includes infusing its inventory with more so-called value cars and trucks, a process it started in the last few months. It defines value vehicles as those older than 8 years or driven more than 80,000 miles.
Value vehicles typically have better front-end gross profit per unit, and they “sell just as well” in Shift’s online channel as they do via test drives, Clementz said in an Aug. 9 call with analysts. Shift is seeing more consumers seek those vehicles because of economic uncertainty, Clementz said.
In April, Shift cut a tenth of its corporate staff and paused its expansion into the Las Vegas market.
And until Shift is “able to scale in a profitable way,” expanding into additional U.S. markets is on hold, Clementz said last week.
Clementz declined to talk about Shift’s pending merger with CarLotz, which is slated to close by the end of the year.
If completed, the tie-up will broaden Shift’s reach on the East Coast, where CarLotz already has several retail stores.
The combined entity would ultimately have an expanded purchase channel, with consumers able to complete vehicle transactions either in-store or online, both companies said upon announcing the deal.
