How CarDekho is thriving in a year of slump for the auto sector

• CarDekho reported a 62% growth in its revenue to Rs 260 crore in the year ending March 2019, despite the major slumps in auto industry.
• Gaurav Mehta, Chief Marketing Officer, CarDekho says the major driver of this growth was used-car segment, which helped it grow by 264%, backed by strong some ROI-driven marketing initiatives.
• The company also increased its marketing monnies by 150% as it turned its focus back to offline marketing after a four-year gap.

The Google-backed auto-classifieds portal, CarDekho has had a good year so far. Earlier this year, the platform reported a 62% growth in its revenue to Rs 260 crore in the year ending March 2019. This performance came on the back of a strong growth witnessed by its used-car segment.

CarDekho achieved this growth at a time when the auto sector has been facing one of its worst slumps in years. However, CarDekho believes that its focus on understanding that every consumer has a unique need and addressing those needs with a 360 degree approach has helped them stay on track, in terms of growth.

We recently caught up with Gaurav Mehta, Chief Marketing Officer, CarDekho Group who walked us through the platform’s growth story so far, and its future plans to retain its growth.

Edited excerpts:

In a year when the auto industry is struggling, you have been able to post impressive growth figures. How have you achieved this?
There's a widespread belief that when the times get tough, which the auto sector is facing right now, one should turn to more ROI-led and measurable methods of marketing. While the auto industry is facing some headwinds, it’s not like the entire marketing monies have fallen out of the system. They continue to spend with us in ROI-inductive methods. And that’s what’s led to a 44% growth for our new car’s division for the first quarter of the financial year. Also, last year, our used car businesses started to come together as an ecosystem, which has led to the immense growth we saw in the first quarter of this year. We grew upwards of 264% because used cars as an industry hasn't slowed down. People are more open to buying used cars now, the Tier II-Tier III demands are picking up and it’s becoming more structured and digitized. The company recorded a massive revenue growth of 92% in its overall business compared to the same quarter last year.

From an organization perspective, what have you done differently that has led to this growth?
Over the years, with the use of our content and marketing, we’ve become good acquiring users at a fairly reasonable cost. Because of our product experience and content play, people stick around for a long time, and they complete their journeys online. And on the back of an interested audience in automobile, we were able to come up with options like car insurance and car finances. These small steps that we started some years back have become sizable over the last 12 months. The biggest problem for any digital player is to get a sticky audience at a nominal cost. That’s where upfront costs in marketing become high but we’ve been good at it. With 41 million sessions on CarDekho itself, August was our highest-ever traffic and this was primarily driven by great SEO, content and performance marketing. Secondly, we consciously wanted to work across the extended industry. We work very closely with the BFSI sector for loans and insurance and with used car dealers. Getting into a tech integration with a bank or insurance player is not as easy as it sounds because we have to maintain gold standard levels for data security, SLAs etc. So we had to work on a lot of issues to work with the larger ecosystem. Work in the last 3-4 years has led us to this place where we are seeing this kind of growth coming in, despite the headwinds.

It is important to win your consumer’s trust in the segment you function in. How have you built that trust?
Cars are a high-involvement purchase decision. While buying a car will take about three months, even buying a two-wheeler takes about 15 days, because people research a lot. And that's where our content play becomes superbly important. CarDekho group and our chief editor believe that the editorial ethos and integrity cannot be compromised upon. Our editorial ethos is that we’ll help our consumers find the right car for their needs. We don't believe there's a bad car, but that there’s a right car for every person and that's how our content play completely shifted two years back. Now, people are getting their answers and they knew we are impartial and completely unbiased. Secondly, people drop leads on our platform and want us to put them in touch with different dealers from whom they can buy cars. We’re very cognizant of the fact that this is a big responsibility, so we only match them with dealers that they want to be matched with. Thirdly, because of the loan and insurance pieces, a lot of financial data flows through our system. The payouts, the data security are all imperative for us to be a trusted ecosystem. These three things have helped our consumers put their complete trust in us.

From being an online entity to moving offline, how did that progression happen?
There’s a segment of customers and who are convenience seekers, which is where this model (CarDekho Gaadi Stores) works well because you can go and sell your car within two hours without any problems & with transfer of documents. We are currently present in 15 cities with 56 stores and within seven months of operation, we’re number two in the market. We’ve received a fairly strong traction because we understand that different users have different need gaps. So while the classified takes care of a certain kind of user, the Gaadi store takes care of another kind of user. We're just trying to map our proposition as per the needs in the market.

How many stores do you plan to open by the end of this financial year?
If we're lucky, it will definitely be above 150 stores in about 27-28 cities.

How has CarDekho as a platform evolved over the years?
Ours is one of the few big digital sectors that got consolidated fairly early. We acquired Gaadi and ZigWheels and CarTrade and CarWale came together. And for some time, these were the only two big auto-tech companies. However, with time more players started entering the category and more business models started coming in. But when you have a large number of interested users, you can open up the whole ecosystem fairly rapidly. When we acquired ZigWheels, it combined with BikeDekho to become the largest destination for two-wheelers, just like CarDekho and ZigWheels together became the largest four-wheeler ecosystem in the country. Then we pivoted towards the Gaadi stores and there’s a lot of B2B play. We issue almost 55,000 auto insurance policies per month, from a B2B perspective. And that's a very large number. It all depends on the goal of keeping the consumer funnel healthy and engaged.

For the financial year ending March 2019, CarDekho posted revenues of Rs 260 crore, a 62% increase. Do you have any target for yourself for the next financial year?
We are fairly confident we will be growing by about 70-80% over our last year’s numbers.

You’ve come out with a TVC this year promoting the Gaadi stores. What kind of increase has your marketing spends seen this year?
We came back to offline marketing (TV) in March 2018, after a four-year gap. So there’s going to be an increase in marketing budget because of the offline marketing to the tune of about 150%.

Going ahead, what will be your marketing strategy?
The current size of the ecosystem gives us very strong numbers where 90% of all car-buying audience in the country goes through us. But initiatives like the Gaadi business model, or any other product that we might launch in the future, will require consumer behavior shifts and education and that's where a lot of our marketing investments will go. At some point, two-wheelers will become an interesting play because they aren’t as penetrated as cars are. There are about 18 million two-wheeler buyers in the country, and around 3.3-3.5 million new and 4 million used car buyers. This together forms the personal vehicle buyer segment. So there are a total of about 25 million people who have either bought a used car, new car or a two-wheeler. Two-wheeler is a larger number, more of a Tier II, Tier III, smaller town phenomena. That might be a big growth for us in the future. Our task would be to become the first digital medium of choice for this audience, when they look for two-wheelers.