The Beverly Hills-based automotive technology company, which launched in 2016 offering subscriptions to its inventory of used cars, is changing up its strategy. In the first quarter of 2022, Fair will roll out subscriptions on leases for used cars provided by third-party vendors — with the larger goal of transforming into a central hub for all automotive retail.
“We want car shopping and transacting to be elegant, beautiful and immersive,” said Brad Stewart, who took over as Fair’s chief executive in 2020. “We want to have the deepest, widest breadth of inventory available for shopping.”
The original strategy had huge backing. By late 2019, Fair had roughly $2 billion in debt and equity funding, a partnership with Uber Technologies Inc. and a remarkable $1.2 billion valuation.
But the business quickly faltered. It weathered layoffs and a leadership shakeup. It even took its app offline — twice.
“We are moving … (toward) becoming a true tech company, which is fixated on brand and consumer demand, as well as product and technology,” Stewart said.
Customers would find and subscribe to a car through Fair’s app, show their identification to the dealer and receive the car. They’d have three days or 100 miles — whichever came first — to return the vehicle for a full refund. If customers weren’t happy with their vehicles after that initial period, they were able to return their cars and end their subscriptions with no penalty, granted they paid the subscription fee through the end of that month.
Investors rallied behind Fair. In September 2019, the startup scored a $500 million revolving credit facility from Japanese tech investor SoftBank Group Corp. to scale its partnership with Uber. The ride-hailing giant planned to use Fair to help its drivers rent cars on short-term, weekly deals.
Fair’s business model had never proven profitable, and the company tumbled as a result. A month after gaining the funding, Fair laid off 40% of its staff, including then-Chief Financial Officer Tyler Painter. One week later, Tyler Painter’s brother, company founder Scott Painter, stepped down from his position as chief executive; he said he did not see eye-to-eye with SoftBank’s strategy to involve Uber in Fair.
In October 2019, the company shut down its app as it hired a new management team and planned a relaunch. In February 2020, it pulled the plug on its partnership with Uber. It restarted its app in that month, only to shut it down again and pause new orders this past April.
There are 5,000 users still driving cars from Fair’s original model, but once those cars are returned, they are sold wholesale to a dealer though commercial auto auctions. The company did not release how much it has made from these sales.
“It became clear that our subscription business was not ramping (up) as quickly as investors would like it to,” Stewart said. “That really spurred the development of our new business plan, which started in the fourth quarter last year, and it really has continued to progress throughout all this year.”
“This is the place to go for people purchasing vehicles and ultimately managing their mobility post-transaction,” Stewart said. “My dream is that if people want to shop for cars, the only place that they really feel comfortable and safe in doing so is on Fair.com.”
The industry — which generated $980 billion in sales in the United States in 2020 — is ripe for disruption, said Ruhell Amin, equity research analyst for Playa Vista-based investment advisory firm William O’Neil and Co. Inc.
According to Amin, nearly “90% of vehicle shoppers in the U.S. want some part of the vehicle purchase to be online.”
He said companies like Carvana, CarMax Business Services and TrueCar Inc., the last of which was co-founded by Scott Painter, have become hits in the used car space due to consumer behavior trending toward ecommerce.
“Auto consumers generally want to feel like they’re in more control of the buying process without being pressured,” Amin said. “They want their transactions to be more convenient and on their own desired timeline, and that really plays into this trend toward online that we’ve seen.”
As part of its brand evolution, Fair will change its legal name from Fair Financial Corp. to Fair Technologies Inc. and has relocated its headquarters from Santa Monica to Beverly Hills.
Its new model centers on partnering with used car dealerships to provide leases, rather than owning its own inventory of vehicles.
And it will focus on “consumer-facing technology” instead of infrastructure and inventory, Stewart said. Some of the platform’s new features will include connecting users with loans, car trade-ins and customizable insurance plans.
The platform will also allow customers to extend their warranties and schedule car service appointments.
Fair executives would not disclose if they had secured new financing or investments to fund the development of the new platform.
But to make all this happen, Stewart said, Fair will rely heavily on partnerships. In addition to forging deals with local dealerships, the company is working with financial institutions, such as Ally Financial Inc., JP Morgan Chase Bank, Wells Fargo and Co., Bank of America and Hancock Park-based Westlake Financial Services, to offer loans. Fair is in the process of selecting a partner to offer car insurance through its platform.
Users will be able to lease a car online with a seven-day money-back guarantee. If the deal is local, users will have the option to take a test drive prior to buying.
“Our intent is to offer the benefits of (both) online retail marketplace shopping and a traditional dealer,” said Nehamen.
Nehamen said the company aims to log 100 transactions daily through its platform after a year back on the market, but the company’s goals will be “untethered” to transaction volume.
“The whole organization will be focused on listening to, and learning from, every customer to refine the build,” Nehamen said.
On the consumer side, Nehamen plans to integrate AI-driven assistance and recommendations; transparency related to the condition of cars, their prices and the dealers; and flexibility to take any step of the car-shopping experience online or in-person.
New tools will be released throughout the quarter with the first launch set for California, followed by its debut in other states by the end of 2022.
“The consumer experience is going to be much broader and much more immersive,” Stewart said. “What we’re going to offer consumers is a best-of-breed ecommerce experience.”