Pushing for Car E-commerce

Although almost everything a consumer wants can be obtained online with a simple tap or click, there is one commodity that is globally still mostly traded in person: automobiles. However, during the last five years, automotive e-commerce players, such as US-based Carvana and Vroom and UK-based Cazoo have come to the fore. Carvana, for example, an online trader of second-hand cars established in 2013, sold over 94,000 such vehicles online in 2018 and 128,179 in 2019 (source: Digital Commerce 360) and expects to sell at least 200,000 cars annually online in the next few years.

In Pakistan, CarFirst and Vavacars are the first automotive e-commerce companies to offer consumers the opportunity to sell used cars online. UK-based Vavacars has been operating in Turkey since 2019 and in Pakistan (Karachi) since January 2020.

According to Mujahid Khan, Country Manager, Vavacars Pakistan, “Vavacars is designed to be a solution for a number of pain points car owners experience when trading used cars. When selling a car, options are limited (advertising, reaching out to friends and family or going through a car dealer) and each one has a set of problems; your phone number is floating around the internet, you receive calls from random people (sometimes even years after making a sale) and there is no reliable way for an individual to determine the value of your car and payments are tricky. The alternative for individuals is going through an intermediary, but this comes with a lack of transparency and can, often, add several weeks for selling a car.”

Vavacars say they tackle these issues and make the selling process as hassle-free as possible. A customer visits their website, enters their car details and immediately receives an “indicative value” for the car. This indicative value is the result of an algorithm that is constantly fed with ongoing market research and Vavacars’ own research and data.

“Currency fluctuation, socio-political factors, supply-demand factors, a car’s condition – all are threaded into our pricing mechanism. If the customer is satisfied with the value, they can book an appointment to visit our purchase centres or have a mobile purchase unit visit their location; this entire process is free of cost.”

Vavacars’ main attraction is that a car can be sold within 45 minutes. They inspect the car for 30 minutes, write a condition report and procure a selling price and if the customer is satisfied, Vavacars buys the car on the spot via a pay order or online transfer. Vavacars also provide this service to the corporate sector, whereby they buy multiple cars from companies via a bidding process (if there is one), directly or hold an auction on their behalf.

To create awareness and build a footprint, Vavacars have focused solely on digital marketing via Facebook, Google Search, Instagram and Twitter. Khan says that once the company grows, they will use traditional media as well.

The main barrier (common to all e-commerce platforms) is the “inherent mistrust” among consumers when shopping online. Despite a 32% increase in online shopping activities this year (source: Navigating the New Normal published in Aurora’s July-August 2020 edition), Pakistan has one of the lowest financial inclusion ratios in the world (only 21% have access to traditional banking services). Yet the potential for growth is, according to the World Bank, “tremendous.”

To build this trust, Khan suggests that “as people are not comfortable trading a car solely online, the journey with us starts online but ends with an in-person transaction. The trust battle is two-fold. Firstly, going from an unorganised to organised method of car trading, and secondly, moving from offline to digital. At the moment the traditional model is unorganised and offline, but we anticipate the shift to digital and organised over the next four or five years. We must first provide transparency and it is up to all the market players to build that trust collectively and independently. Consumers must believe that the online transaction is as safe as it is in person.”

To do this, certain initiatives must be taken. Carvana and Vroom for instance are bringing used car trading to digital by building trust through initiatives such as a seven-day money back guarantee.

According to Vavacars, they have grown their customer base by 28% per operational month and purchases from consumers are growing by more than 30% per month, while consumer purchasing has grown by almost 450% since launch. Unexpectedly, Vavacars’ audience is not limited to male car owners. “We also want to cater to a major, growing segment that is ignored usually in the car trading space – women. Unfortunately, it is a nightmare for female car owners to sell a car without the help of a man. She will not feel safe giving strangers her number or having them show up at her doorstep or feel comfortable at a dealership. Our service is ideal for women, because it is quick and hassle-free and our purchase centres are secure. Consultations and transactions are appointment-based and one-on-one. The customer’s car is driven inside the shop and customers can see it being inspected through a glass partition.”

Given that Vavacars launched shortly before Covid-19 struck, Khan says the pandemic did have a slight impact, although the lockdown provided the opportunity to analyse two months’ worth of data to see where improvements could be made. He again emphasises that to encourage digitisation, trust is a must. “A car is usually the most valuable asset people own (after a home), and we believe and understand that whether they are selling your car for financial reasons, or are upgrading, changing or buying a new car, the transaction needs to be treated with respect.”

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