Online used-vehicle retailer Vroom Inc. has undergone a significant reduction in its workforce, cutting around 120 employees or approximately 11% of their personnel majorly through severance packages, spanning several departments. This reduction comes as part of an “organizational restructuring” while the company re-examines “all facets of the business.” Since January 2022, the company has reduced employees and contractors by about 55%. The company cites this as part of its continuing efforts to pursue a long-term, cost-cutting-focused business plan which it switched to since last year. This plan puts more emphasis on growth priorities, focused on improving customer and employee satisfaction, enhancing liquidity, maximizing profitability, and overall unit economics. Vroom spent $2 million on the latest reduction and expects about $42 million in the annualized cash saving for the two most recent reductions.
According to a survey by Forbes, the online automotive marketplace, by its nature – eliminating the physical locations that characterized traditional retail – would reduce the size of the workforce needed to manage sales and operations but increase the talent level required to manage IT and data analytics. The reduction in the size of the workforce in online automotive retail has been evident in the operations of several companies such as Carvana, Autotrader, and now Vroom. As the companies shift operations from face-to-face retail to digital, they are now more well-positioned to meet customer needs, offer competitive pricing, and quickly move vehicles in their inventory.
Vroom has expressed that the decision to reduce staff was difficult, but it is consistent with its objectives to prioritize unit economics and growth, improve customer experience, reduce cost per unit while maximizing liquidity. Vroom measures profitability on their per-unit economics approach instead of gross revenue, allowing them to create a more streamlined process that emphasizes costs per unit over units sold as it began to prioritize customer lifetime value by using discounts, communicating more frequently with customers through phone calls and video chat, and even hiring more people to manage customer care. However, this also led to widespread problems, from the necessary pandemic-driven shift to remote sales to an ongoing shortage of microchips, disrupting supply chains and prompting problems throughout the dealer network.
In a recent interview with Automotive News, Vroom CEO Tom Shortt stated that the company is focused on finding ways to do more with less and that they would take necessary steps to improve their vehicle economics and costs per vehicle. As Vroom looks to the future, its long-term business plan will continue to prioritize a cost-cutting approach focused on profitability, customer satisfaction, employee satisfaction, and improving consumer needs.
The company also finalized the acquisition of United Auto Credit Corp, a captive finance firm, in February 2022. The move will complement Vroom’s current platform with financing solutions while providing additional benefits to customers – who can acquire financing directly from the Vroom platform instead of going through a dealership. All in all, this move is expected to expand Vroom’s services and capture more of the used car market share.
In conclusion, Vroom’s decision to reduce its headcount by around 11% is consistent with its objectives to prioritize unit economics, customer satisfaction, employee satisfaction, and maximize liquidity. The company’s long-term business plan also aligns with these objectives and will continue to focus on cost-cutting as components. Vroom’s internal restructuring is a move towards enhancing their current online platform while improving efficiency and profitability. Vroom’s strategic acquisition is expected to expand the firm’s reach and increase its market share in the used car market.
