| And don't forget flipping a car is a lot faster and easier than flipping a house at much lower capital. This makes each cycle of trial and error a lot cheaper and a lot more frequent. Also there is something to be said for a market where the customer brings the product to your location for inspection, and whose product is considerable faster to inspect more rigorously than a house. Also the products within that market are much more uniform and share several unifying characteristic across even different makes and model so its easier to learn a good and accurate pricing function. That gives them a lot more cycles to improve their algorithms (both human and machine based). Plus when CarMax were starting out they likely did so with a bevy of folks already experienced and profitable at buying and selling used cars at a profit who had the systematic knowledge of how to do so in their heads. It then was simply a matter of building up customer goodwill by focusing on another metric customers cared about, taking a perhaps slight loss to avoid the risk of being considerably ripped off by a savvy local dealer and saving oneself the anxiety induced by high pressure sales tactics. Having said that I think Zillow could still be quite successful in this endeavor however from my experience they didn't deploy their trading algorithm in a prudent way, they massively over-traded an untested by the real world model, they trusted their paper trading (backtesting) way to much, and they didnt focus on the nuts and bolts of building a successful market making system: making actual money over and over at small size and ramping up size as your empirically demonstrated pnl grows. Also putting trading aside they didn't have to be a flipper, they would probably naturally be more fit as an exchange+ or intermediary that provides exchange type backing and reduces the friction in buyers finding sellers, taking on risk by only making an offer when they have a bona fide buyer for fixed or % fee, but glossing over all the hassle of two people who dont know each other making a large trade. Offering services like if you dont like the house you just bought through us we will help your sell it at a cost proportional to renting no questions asked. |
Zillow hasn't gotten to the point where they provide that, but theoretically they could. You could drive around with a Zillow agent and see their 50 homes for sale a lot quicker than coordinating with 50 random sellers.