Opaque pricing. Guesswork. Pressure. Haggling. Reams of paper. Hours to complete a transaction. Topped off with a trip to everyone’s favorite place, the DMV.
Those are just a few reasons why buying a car –– especially a used one –– is about as appealing as getting a root canal, being stuck on a packed airplane taxiing on a runway or using a porta-john at a burrito festival.
Toby Russell, the cofounder and co-CEO of Shift, is here to change all that.
“Finding the right car –– and buying it or leasing it –– is a really hard problem,” he says. “It’s the biggest purchase you’ll make in your life. Or the second biggest, if you buy a house. It’s a huge financial commitment.”
But, says Toby, the process is stuck in analog mode. So he and his co-founder, George Arison, built an online used car marketplace that features transparent pricing, concierge service and a generous return policy. Founded in 2013, San Francisco-based Shift has raised $293 million in venture capital and brought in a cool $135 million in revenue last year. Word has it, the company plans an IPO in 2021.
Can a startup disrupt a massive industry that’s still largely offline, stubbornly unresponsive to consumer habits and intent on obfuscating its inner workings?
Read on for Toby’s thoughts on how and why his startup is creating a paradigm Shift in the marketplace.
The ‘car guy’ is you
Scott: The lease on the Technori-mobile is up soon. I’m having a hell of a time buying another car, so our conversation is fortuitous. How will we buy cars in the future?
Toby: You can buy just about anything online. But the largest retail category on the planet –– the automobile market in the U.S. –– is still essentially a non-online offering. And it openly discriminates against huge swaths of the population. That’s why the used car salesman gets such a bad reputation. Women, folks who are new to the country or people new to buying cars just know that they’ll be shaken down. And we act like that’s okay.
Women, in particular, say they get their “‘car guy” –– like a husband, brother or friend –– to buy a car on their behalf because they’re not empowered to do it. That’s insane.
However, technology is leveling the playing field. At Shift, we think anybody should be able to go online, find the car they want, tap a button and either buy it or have it come to them so they can test drive it without a pushy salesperson.
Scott: Tell me more about how Shift changes things.
Toby: We use technology to eliminate the current information disadvantage so people can sell their car with no hassle. We allow people to access used cars with the peace of mind they’d have when buying a new car: the ability to test drive it and return it. Ultimately, it’s a peer-to-peer exchange.
Scott: Walk me through the user experience.
Toby: There are two users: sellers and buyers. As a buyer, you’ll go to shift.com. You’ll see listings of cars. Tap “see this car,” and schedule a time [for a Shift ‘concierge’] to bring it to you, on your terms. Test drive it. If you want to buy it, we have an iPad you can use to apply for financing.
You can get a manufacturer-style, like-new warranty. You see all of your lending options and a totally transparent price. There’s no negotiation, no haggling, and you can do it all in your driveway, at your home or wherever you’d like to meet.
No fear, no middlemen
Scott: How did you decide that this was a field you wanted to disrupt?
Toby: The personal experience of being really nervous about buying a car –– and the challenges around selling them. I jokingly say that I have a PhD in political economy and I’m afraid to walk into a dealership. I rarely bought a car because I thought it was such a terrible experience. When I did buy one, I paid about $25,000 for a BMW –– which was a big deal for me. A couple of years later, I wanted to trade it in. The dealership offered me $13,000 saying, ‘we can’t be certain about your car.’ But they were listing the same model on their website for $19,000.
Typically, dealers don’t directly sell a trade-in or a car that has been leased. They offer it up to their dealer network. Then it might go to a broader [car sales] network or an auction. These middlemen stack up a bunch of costs.
The best cars out there are the ones people are driving. At Shift, we’re cutting out the middlemen by moving the car from one person to another rather than running it through a big infrastructure.
Scott: What’s the business model?
Toby: We’ve found that sellers want their money up front, so we built a platform where they get an instant quote. We front them the money. Then Shift sells it to a buyer, floating the difference.
Scott: Unlike the current clunky, ridiculous model, where everyone who touches a car gets a piece of it, you presumably get a better return without gouging the customer.
Toby: Right. When you’re selling, you’re not negotiating with a salesperson who knows more than you do. You enter information into an algorithm. We send someone to pick it up. They do a walk-around, check it out and enter information about its condition into an app. If you’re like, ‘yeah, that’s the price I’m cool with,’ we wire the money to you electronically.
Scott: The beauty of a good business model lies in its simplicity.
Toby: Exactly. The thousands of variables in our business –– make, model, mileage, year –– are all handled by our software.
We think of ourselves as more of a technology and logistics platform than a retailer. Most retailers would say, we’re a store, and our website drives traffic to a store. In our case, technology drives the logistics.
Invention, innovation and a dash of magic
Scott: Tell me a bit more about your background.
Toby: I grew up with an outsider’s perspective. I was born in the Midwest and when I was very young, my mom went to go work for the military in El Paso, Texas as a doctor. My father taught surgery at Texas Tech. So I grew up on the U.S.-Mexico border in a diverse Hispanic community. I had to learn Spanish and always felt like I was observing and learning. I went to college on the East Coast and then moved to the United Kingdom, where I earned a PhD in Russian foreign policy.
I always wanted to understand how people think and why they make decisions. It’s core to the entrepreneurial journey and the product development mindset: understanding the needs of others. You build companies around customers’ needs: What’s the challenge? What would make their lives better?
I’ve been a lot of different places and seen a lot of things. I like to connect dots. Innovation is different than invention. Innovation is taking concepts that might exist elsewhere and applying them in a different zone.
Scott: Tell me about your first company.
Toby: In 2007, my cofounder George and I thought that mobile computing was going to become a big thing, particularly for ground transportation. We had the crazy idea of building a Java app for BlackBerry devices –– you could push a button and a taxi would come pick you up. Then you could pay for it with your credit card, electronically. We later built apps for Windows devices and iPhones. It was called Taxi Magic.
This was a couple of years before Uber. It was like the Netscape of the Uber space. We invented the concept of mobile ground travel.
At first, everybody looked at us like we were crazy: ‘What are you talking about? That’s not possible!’ And we’re like, no –– the world is going to be very different in five years.
It’s the same thing with cars. People say nobody will buy a car online. But in five to 10 years, you’re going to look back and wonder, why would anyone go to a dealership?
Scott: A lot of founders get stuck on creating the biggest, newest, shiniest object and lose sight of the fact that 70-plus percent of our daily behavior is more or less trying to accomplish the same goals as hundreds of years ago: eating, getting around, protecting our family, finding shelter. It’s all the same.
Toby: I totally agree. People think Facebook invented social networking. And I’m like, no, it didn’t –– it created a novel technical solution. People have been engaging in social networking since they sat around a fire in a cave. It’s just a different way of doing it.
There are data businesses and then there are what I call ‘material’ businesses. I’ve always gravitated toward doing something material for a user, like push a button to get a taxi –– online to offline, real world, making a difference.
I’m not against social media, but it comes with problematic challenges around who owns data and the use of that data.
Shift doesn’t buy or sell your data. Straight up, we’re going to pay you x or for this car, and another person’s gonna pay a bit more, and we’re transparent about it. It’s a clear business model and there’s a material impact.
We’re living in an era where the greatest minds of our generation are applied to serving up better ads. Is that the best use of the best talent our society has to offer? It’s lucrative, but I’m not sure it’s the best way for us to advance as a civilization.
Scott: I agree. How should the brightest minds in tech be spending their time?
Toby: Applying technology to level the playing field. Empower people to do things they couldn’t have done before –– or do it for them. I say: Good technology lets you do stuff. Great tech does it for you.