Expansion is Carsome's Key Strategy to Expand the Used Car Sales Ecosystem in Indonesia

In recent years, the growing used car market in Indonesia has gradually become more structured due to the availability of more flexible financing terms, standardized and authorized dealer channels, and better information transparency. This is also supported by the presence of online platforms and marketplaces that present different concepts in an effort to maximize market potential.

One of the platforms for buying and selling used cars that is also familiar in the automotive world is Carsome. Starting to enter the Indonesian market around 2017 with a business model consumer-to-business (C2B), Carsome provides a website-based platform for people to sell their used cars. During approximately 4 years of operation, the company has recorded a number of achievements and continues to have ambitions to expand its service range.

The DailySocial team had the opportunity to directly discuss with Carsome Indonesia Country Head Delly Nugraha regarding the company's business journey and strategy going forward. Talking about the used car sales industry, now it's more highlighted awareness. Delly also revealed that the concept of used car e-commerce, like Carsome, is actually still very new both in Indonesia and Southeast Asia. That's why the level of consciousness or awareness from potential customers still relatively low.

"We are still in the construction stage awareness. Until now we are still optimistic, especially in Indonesia. The biggest support comes from the size of the population, the fairly large growth in the middle class, as well as a shift in references and purchasing power of used cars in general, shows that the market potential is still huge," he said.

Business expansion strategy

Throughout 2021, the company has carried out quite aggressive expansion, although it is still focused on Jabodetabek. One of them is to complete the business ecosystem by opening the B2B2C segment. This was marked by the opening of the first Experience Center in March 2021, located on Jalan Sultan Iskandar Muda no.1A, Kebayoran Baru, South Jakarta. Not long ago, Carsome also inaugurated the location of its new Experience Center in the Alam Sutera area.

A transparent, trustworthy and comfortable experience in buying a used car is very crucial for consumers. Through the CEC service, Carsome ensures that all cars offered have passed 175 inspection points. Apart from allowing consumers to buy used cars with a guarantee safely and easily, they are also given the opportunity to do so test drive.

"After expanding the business to the B2C segment, it turns out we see a big opportunity. In the future, because B2C is a very retail segment, in an effort to expand and improve the business, we will start expanding into strategic areas," said Delly.

He did not specifically reveal which areas he would target next, but to date Carsome has 35 inspection centers in 9 cities in Indonesia. In its 4th year, the company successfully processed transactions of more than 100.000 used cars per year with a total transaction value of more than 700 million US Dollars, and was strengthened by around 1.000 teams in all its branches.

As an island country, challenges in expansion come from various sides, but Carsome tries to overcome the obstacles one by one with the support of capable technology. Companies develop internal applications to ensure business processes can run smoothly, then build systems training and human resources that are quite integrated. According to Delly, external matters that may have to be addressed, such as inter-island transportation, consumer education, communication methods in each region are things that make business more attractive.

Another form of Carsome's business expansion is by sharpening its business consolidation strategy. In July 2021, the company acquired equity shares in the offline used motorbike and car auction service company, PT Universal Collection (PT UC). According to Delly, this acquisition will open access for PT Universal Collection suppliers to wider demand opportunities. If this is successful it could expand their accessibility to the used car market.

"We want to build strategic partnerships to help Carsome grow and serve more consumers. In the future we will still look for M&A potential, but now we are still focused on developing Universal," added Delly.

As the business grows, investment into the company also continues to flow. As if not wanting to lose to its closest competitors, Carsome announced new funding in the series D2 round worth $170 million or the equivalent of 2,4 trillion Rupiah. This round brings the company's valuation to $1,3 billion, strengthening its position as unicorn in Malaysia.

Just like other start-up companies, unicorn status is awarded when it reaches a certain valuation. However, Delly personally doesn't think too much about status. According to him, investment support is definitely in line with the team's optimism as the company develops. When asked about the IPO plan, Delly did not want to reveal more detailed information.

In addition to the growth figures and new partners that support Carsome's expansion strategy, several milestone also successfully achieved in 2021. The company is also pioneering an educational institution that focuses on automotive, namely Carsome Academy. It will be the first educational institution to be integrated with the platform car marketplace. Apart from that, the company has also established its own data center to encourage more efficient, effective and business operations data-driven.

Integrated services

Carsome has quite close service integration with several marketplaces outside the company ecosystem, such as Tokopedia, Blibli, etc. This is driven by a shift in consumer behavior which is increasingly moving towards online platforms for shopping. Vehicles like cars, said Delly, are not products consumer goods, In the process, there are many stages that must be passed. Therefore, Carsome wants to build good relationships with partners in other marketplaces in order to foster innovation with cross branding/cross selling.

"The hope is that more and more people will experience or at least try the experience of buying a car from offline to online. Just by opening a gadget. Things like this will change the way consumers shop, this is what we are encouraging penetration into the market by partnering with marketplaces," said Delly.

In terms of payment, credit transactions still require a third party financial service provider. Therefore, the technology or digitalization applied depends on the partner company. If lease It is fully digital, this will make it easier for Carsome in the transaction process.

The steps for buying a car are quite long, half of the process has been prepared by Carsome via a digital platform. For cash payments, the process will be more concise, but when it comes to credit methods, companies simply depend on the readiness of 3rd parties in digitalization. This is one of Carsome's considerations when establishing a partnership for payment matters. Currently, his team admits that they already have a very good information system. A process that used to take weeks can now take days.

The pandemic itself has a big role in digitalization. Previously, it took almost 10 years for one platform to become known to the public. During the pandemic, penetration and growth rates could double in just 2 year.

Build internal resilience

One important thing companies have learned from the COVID-19 pandemic is that mental health support has shifted from a “nice to do” to a business necessity. It's not easy to balance personal and work life when we are still working from home. Because of this, his team has dedicated “mental health days” with specific activities for individuals and teams.

Beyond chat and conversation, the company wants to expand this support into something more tangible. For this reason, his team collaborated with the mental health platform, Doctor Anywhere, to provide this Mental Health Self-Assessment Tool for Carsomers to self-assess and recognize signs of anxiety.

Mental health issues are familiar to employees at all levels of the organization. One of the triggers is the pandemic which affects various aspects of life. Not only for automotive industry players, but also others. Workers are required to be able to balance personal and work issues. Carsome understands that these times are challenging for individuals. Especially those who are not only responsible for themselves but also for their families. Sandwich generation. This is what we are aware of, so we have a self care month initiative. To help Carsome family members so they know that the company cares about their aspirations.

"We also understand that situations like this can encourage employees to work better, fulfilling their mental needs. This applies to all Carsome teams spread across Jabodetabek and several other areas," added Delly.

Potential of used car buying and selling platforms in Indonesia

From year to year, consumer interest in buying used cars continues to increase. The main supporting factors are a flexible payment system and trusted used car dealers, as well as cheaper prices. The Used Car Industry in Indonesia is said to have grown at a CAGR of 4,5% based on gross transaction value during the 2014-2019 period and at a CAGR of 2,0% based on sales volume.

The pandemic that occurred in early 2020 triggered an overall economic slowdown, as well as a slowdown in the automotive industry due to a decrease in consumer purchasing power. In research entitled "Indonesia Used Car Market Outlook to 2025" published by Ken Research, the used car industry is expected to recover from the Covid-19 pandemic and witness growth in 2025. Increasing demand from tier-2 cities for personal mobility is expected to encourage industrial growth.

By its very nature, the industry is highly fragmented and competitive with >8.000 dealers operating in the market. Many brands such as Toyota, Hyundai, Suzuki, Mitsubishi, BMW, and Mercedes also have certified used car programs in the country. However, with the emergence of various online platforms and marketplaces in recent years, the growing attraction towards online platforms is expected to force dealers to expand their presence online. Several players such as OLX Indonesia and Car are two of the biggest players in this industry.

Recently, the government has been massively encouraging the development of electric cars or electric vehicle (EV). However, Delly revealed that this would not have a negative impact on the running of the used car sales business itself. According to him, there is a benefit in itself, namely a greater supply of cars. For those who wish shifting to electric cars or want to upgrade, will sell their cars, so B2C has more options.

In 2021, the company claims to have succeeded in changing the way people view buying used cars.

"In 2022, the big goal is to be closer to consumers throughout Indonesia where we can provide services that can be enjoyed all over. Expansion will be one of our keys to becoming a bigger platform in 2022," said Delly .