Sometimes, new business ideas can come about when you least expect it — and that’s exactly what happened with Tred.
The original plan for the Techstars Seattle 2012 alum was to partner with dealerships and allow customers to conduct test drives from their homes. But after working with so many people who needed to not only buy a new car, but sell their old vehicles, Tred realized that there was another part of the car buying experience that could be improved.
The company originally rolled out a “sell your car” service in May and told customers that it would buy their vehicle at a certain valuation if the dealerships offered anything less — and in fact, that’s what kept happening. The startup then soon realized that the dealership could actually be completely removed from the process.
“We saw a real market opportunity between the floor value that a lot of wholesalers might offer you in cash and what we can actually sell these cars for online,” Tred CEO Grant Feek explained.
Feek noted that dealerships often have to cover expenses for inventory and parking lots. As a result, they don’t offer consumers what their car might be valued at on websites like Edmonds or Autotrader.
“We thought we were valuing the trade-ins conservatively, but the dealers wouldn’t pay it,” Feek said. “They assume we’d just go away, and the customers would take their valuation. We said screw it — we’re going to start buying these cars.”
While a car owner can sell their vehicle privately on their own, Feek pointed out that this process can take months and “a lot of work.” Instead, Tred can come to your house, inspect your vehicle, take some pictures, and then list the car on its own website or other platforms. When the car sells at a price the owner has authorized, Tred takes a five percent cut.
In beta tests, the average wait time for a Tred sale has been less than two weeks. Feek noted that his company has made more money through the new selling service in one month than it ever did with the test drive program.
“If a customer elects to visit a dealership to sell her car, she will lose 20 percent of its value since dealers aim for a minimum 20 perecnt gross margin when they resell the vehicle,” he added. “Not only is our platform 15 percent better, it also allows a shopper to continue using her car as though it wasn’t for sale, until it sells for a price she’s happy with.”
Tred still plans on developing a better way to buy cars, but perhaps with less of an emphasis on the test drive. The idea is to build what Feek calls a peer-to-peer transaction-enabled car marketplace — a dealership without the cars, lot or salespeople.
“Our hope is to make it easy for the consumer to sell and buy the way that makes the most sense for them,” Feek said. “Whether that means we come to their house, whether it means they use us as a springboard — we definitely want to be on both sides of the transactions moving forward.”
There are others doing something similar and having success. Bay Area-based Beepi just raised a $60 million round, while Carvana is growing quickly in the Southeast. Tred, which has raised $2.5 million from Maveron, former General Motors CEO Rick Wagoner, angel investor Chris Sacca, and others, wants to do the same in the Northwest with an idea it stumbled upon earlier this year.
“There’s definitely a market need around people selling cars,” Feek said.