What we can learn from Gozoomo’s exit in India
Gozoomo, a very well funded company that had set out to solve the problem of buying and selling used cars in India, recently concluded that this problem was not solvable, returned all its remaining funds to its investors and shut down its shop. In the few years of its operations, not only did Gozoomo manage to get backing from really good investors, but also received raving customer satisfaction scores, exceptional employee satisfaction and a decent number of sales — all signs of a company that could have done really well had they managed to stay in the market for a sufficiently long period of time. Through this article, I want to share my opinions in exploring reasons for Gozoomo’s premature exit and intend to initiate a conversation around untapped opportunities in the used car market in India.
What Gozoomo was trying to achieve
When Gozoomo was launched, searching for a good used car online was a challenge. Online car sales portals were underdeveloped and because India does not have an equivalent of Kelly blue book, prices for same models varied drastically from dealer to dealer. Buyers had to rely on local dealers or mechanics to buy a used car. To attract customers to their shops, dealers often posted fake pictures of the car on sale. Also, there usually was no guarantee on the cars and no post sales customer support. Gozoomo identified these shortcomings and set out to offer customers a centralized and convenient used car buying experience.
Gozoomo set up a user friendly portal to help users list their cars for sales and made it easy for buyers to browse through all the cars in their neighborhood. Gozoomo’s associates took photographs and conducted vehicle inspection for each car that was listed on its portal, thus, ensuring the quality of the inventory listed on their website. They also evaluated fair market price for the car to help the buyers and sellers arrive at a deal.
With Gozoomo selling a decent number of cars in the first few months of its launch in major Indian cities and the growing market for cars in India, its success seemed imminent.
What actually happened
Before understanding what led to Gozoomo’s downfall, it is important to understand the market characteristics of the Indian used car market. Car (or another automobile) and house are the two of the most visible and important purchases that Indians do during their lives. A car is a proud possession and is a major indicator of a person’s wealth or social status. When I was in school, my mom once went to a fortune teller to get advice on my future. Her happiness knew no bounds when he told her that I would own a car at a very young age.
At the same time, buying a used product isn’t considered good decision. With easy financing available for new cars, used car buyers are either very practical people who need a cheap commute for daily needs or price sensitive customers who want to own a car but are unable to spend too much. Either way, price is a very important criteria for this market segment.
Gozoomo experienced firsthand the challenge of selling a car to this market segment. All the sellers wanted to sell for a price higher than the fair value and all the buyers wanted to buy for lower than the fair value. Also, the local dealers always had inferior quality inventory selling for a lower price. So the buyers would mostly quote prices from these local dealers and try to bargain, ignoring the condition or possible hidden problems with the dealer’s car. This led to lower than expected conversion rates, ultimately leading to failure in meeting the company’s sales targets. In the end although Gozoomo had a 0.1% complaint issue rate (after car sales), they were only able to get a 20% conversion rate.
Opportunities and key takeaways from Gozoomo’s experience
- Understand the type of change brought about by the innovation: Gozoomo’s success relied on the rate at which the customer’s changed their behavior. Usually any product that focuses on changing customer behavior takes a longer time to succeed. Amazon is a great example. When it started in 1994, it was trying to change customer behavior by making them purchase books online rather than in store. In initial years, customers did not buy any book that was easily available in bookstore from Amazon. Customers got used to buying all their books online only with time. The most critical part of the story is that Amazon survived long enough to see the market mature and when people started buying books online Amazon was the oldest and strongest brand name in the industry.
- Set realistic goals: Any business that aims at changing customer behavior cannot be scaled quickly. In such an environment, it’s always preferable to target and cater to needs of a niche market first and then scale based on the processes and brand developed through its operations. If the company were valued to scale at a faster pace than possible, it would always be difficult to meet investors’ expectations.
- Accelerate change in customer behavior: A solid branding campaign in the target market segment is a must for any company trying to change customer behavior. Building a brand and marketing the values for which the company is known for would have helped get more customers on the platform. Also this leads to leveling customer expectations, thus resulting in a more satisfactory experience for everyone. In my opinion Gozoomo had an incredible opportunity to become the fair price benchmark (or Kelly blue book) in India. With sufficient advertising and brand promotion, Gozoomo price could have become the benchmark on which all the used cars were valued.
- Initially cater to the existing market: One of the strategies that works in a market where customer behavior needs to be changed is to start with an offering that the customers are used to. Netflix, when it started in 1997, realized this and started as a ‘DVD by mail’ company although it always planned to offer content online. Collaborating with dealers to give them an improved online presence and positioning them as leaders and innovators in their local markets could have been a great foray into this market.
- Regulatory organizations need to be more accessible to startup society. Startup India can succeed only if the regulations in the country complement upcoming startups. Indian regulators need to be more accessible and open to creating regulations to improve customer experience and safety. Steps such as making safety inspection compulsory for cars and holding dealers accountable for the product they are selling would have gone a long way in helping customer appreciate the values offered by Gozoomo.
Like I said in the beginning, I really liked the concept behind Gozoomo and am sad to see them shut down their shop. I intend to start a conversation around used car market in India through this blog so please share your comments and opinions in the comments section. I would love to get your input on this topic.