Not many students go to Wharton to get their MBAs and become used-car salesmen.
Jean-Mathieu "Jim" Chabas and Venkat Jonnala did, but then again, they aren't working a weedy lot wearing plaid jackets. They used their previous business expertise to start ZenKars L.L.C., an online retailer of used cars that has an inventory, but not actual possession of any vehicles.
Rather, ZenKars taps the cars and trucks owned by fleet-management companies that are constantly culling their holdings via the auction circuit. About eight million vehicles are sold at auction annually, and it can take seven days for a car to wend its way through the auction process.
That's time ZenKars uses to try to sell a fleet vehicle to a consumer over its website, said Chabas, who graduated from Wharton last month.
Fleet-management firms keep detailed maintenance records of their vehicles, and each one sent to an auction lot undergoes an inspection. All of that information is pulled via an application-programming interface and uploaded to the ZenKars site, Chabas said.
ZenKars gets access to cars through ARI, one of the nation's biggest fleet managers and a unit of Holman Automotive in Mount Laurel. ARI uses 19 Web-based channels, including ZenKars, to market vehicles it is trying to sell, said Bob Graham, ARI's vice president of vehicle remarketing.
In the name of making car-buying "peaceful" for consumers, ZenKars uses a fixed-price model like used-car dealers such as industry giant CarMax Inc. and the local CarSense. But it's firmly in the e-commerce end of the $692 billion auto-sales business, following on the heels of AutoTrader.com, Cars.com, and TrueCar.com.
Everything about the auto industry is big and crowded. The auto-information service Polk says there are more than 100,000 registered dealers in the United States. And many of those dealers use their own websites, eBay Motors, and other online tools to try to drive sales.
CNW Research of Bandon, Ore., estimated that 27 percent of the $40.5 million in used-vehicle sales in 2012 involved shoppers who either completed the transaction over the Internet or used the Internet as the primary source of information about the vehicles they bought.
That's an encouraging trend for ZenKars, which hopes consumers who are confident shopping for all sorts of things online will be bold enough to buy a car that gets delivered to their door for a flat $299 fee - without ever test-driving it.
Chabas, 30, and Jonnala, 26, have gotten a lot of attention and a smattering of investment over the last year. ZenKars participated in the DreamIt Ventures accelerator program in the fall, attracting $20,000 in investment. It won the $30,000 grand prize in the Wharton Business Plan Competition in April. In late May, the Philadelphia Dorm Room Fund, which focuses on student-led start-ups, invested in ZenKars. (The fund does not disclose the amount of its investments.)
ZenKars even has a little competition from another Pennsylvania start-up trying to make used-car buying easier. Rather than ZenKars' fixed-price model, AutoRef Inc. wants to make negotiating the price easier for consumers by allowing them to compare offers from local dealers.
AutoRef of Pittsburgh recently raised seed funding of $850,000 from investors who include the venture arm of Deutsche Telekom and two former executives of Fore Systems, according to Michael Bailey, AutoRef's director of marketing. It has assembled a network of about 5,000 new-car dealers who sell used cars.
With any luck, both start-ups will avoid the stumbles of TrueCar.com, a Santa Monica, Calif., company that also says its mission is to make car-buying simple. In 2012, TrueCar's dealer network declined to 3,100 from 5,000 when dealers rebelled over tactics that led to many vehicles being sold at a loss.
Disrupting an entrenched industry is rarely peaceful.