Generation Start-up: Carzaty rides on technology to disrupt the GCC’s auto industry

by carzatyblog

The online platform is leveraging data to upend the traditional business model of auto retailers following the pandemic.

Marwan Chaar, managing director of Carzaty, says what truly differentiates the auto retailer from its counterparts is how it uses proprietary data to buy and sell used cars. Photo: Reem Mohammed / The National

The GCC’s automobile retail industry has long been ripe for disruption. One player who is pioneering a technology-driven change is Carzaty, an online car retail platform founded in Muscat, Oman, in 2017.

The platform, which launched operations in the UAE during summer this year, specialises in used car sales but with a twist. It uses proprietary data and market intelligence to buy specific cars, which are in demand, but scarce and likely to sell out fast.

The automotive retailer also rigorously checks and reconditions the cars before selling them to end-users.

The automotive retailer, which is currently in Seed A stage of fund raising, has bagged about $5.5 million in equity funding from several strategic and high-profile investors, including the government of Oman’s sovereign wealth fund’s venture capital arm – IDO Investments. Other strategic shareholders in Carzaty include family offices of automotive conglomerates in Oman and Bahrain, as well as DriveArabia, a regional automotive consumer portal.

“For instance, the bulk of cars on our website today are in the affordable category such as Toyota, Nissan, Honda and Kia. We also have a few premium car brands such as Volkswagen, Infiniti and Mazda listed on our website,” says Marwan Chaar, managing director, Carzaty.

“As the market evolves, there will be a shift in used car preferences as well. We will then add premium brands such as Mercedes, BMW and Audi, etc. Our in-house data analytics tell us what cars to buy. That’s a big shift from traditional used car retailers,” adds Mr Chaar, who earlier worked for a start-up called GlassPoint Solar that focused on doing solar projects for the oil and gas industry.

Hassan Jaffar, managing director and board chairman of Carzaty, says the platform collects nearly 30,000 car data points every day. The data is then cleaned and classified to determine a car’s fair market value, says Mr Jaffar who previously worked for global consultancy McKinsey and a hedge fund in New York, before relocating to the region in 2011.

Carzaty also operates digital showrooms in both Muscat and Dubai. These are physical spaces, where “CarMatchers” or salespersons, show customers their entire digital inventory and can then arrange for test drives.

The company is able to keep a lid on costs by disconnecting inventory from its digital showrooms. This helps reduce major overhead costs that come with running a traditional showroom. “That allows us to scale the business without increasing costs,” says Mr Chaar.

The platform has adopted an omni-channel sales approach, where customers can view cars online through 30 high-res images along with specifications and features. They can then narrow their choice and test drive specific cars when they visit Carzaty’s digital showroom. End-users can also browse more cars on digital screens in the showroom.

Carzaty operates digital showrooms in both Muscat and Dubai, where CarMatchers show customers their entire digital inventory and can then arrange for test drives. Photo: Reem Mohammed / The National

“We want to give consumers a dependable, trustworthy source of high-quality used cars. Across the GCC, the options for a customer to buy a reliable used car are very few,” says Mr Chaar.

“Most resort to classified sites where they typically buy directly from other individuals, and while cost-effective, it brings with it a slew of issues, primarily the quality of the car and the lack of any recourse if something goes wrong, in addition to the inconvenience of finding the car, searching/speaking to many individuals, the difficulty to get the car financed, and so on.”

Our in-house data analytics tell us what cars to buy. That’s a big shift from traditional used car retailers” Marwan Chaar, Carzaty

Carzaty provides the full range of services to customers. It helps with the trade-in of a customer’s existing car and also facilitates financial services to fund their new purchase.

The retailer uses various channels to buy used cars. These include direct purchase from consumers or from fleets and leasing companies.

“Building a brand around high quality cars is challenging as you need to convince customers to pay slightly higher than market price even though they are certain to save in the long run due to lower maintenance and repair costs on the vehicle. Not to mention the added value of having a car that’s reliable,” Mr Jaffar tells The National.

The owners say Carzaty’s competitive advantage of quality cars, fair prices and customer service, will help provide customers across the GCC with a larger selection of cars.

“We will have car hubs in every city that we operate in as we scale across the GCC. Our immediate short-term focus is on the UAE and Oman. We see huge potential for growth in these markets. Beyond that, we aim to expand across the GCC, including Saudi Arabia,” adds Mr Chaar.

Carzaty is also one of Nissan Middle East’s official sub-dealers for new cars. It has similar relationships with other dealers and brands. The “new cars that we sell are priced significantly lower than the agencies”, Mr Chaar says.

Hassan Jaffar and Marwan Chaar, managing directors of Carzaty. Mr Jaffar previously worked for McKenzie and a hedge fund in New York, while Mr Chaar earlier worked for a start-up called GlassPoint Solar that focuses on doing solar projects for the oil and gas industry. Photo: Courtesy Carzaty

The start-up aims to grow in existing markets by expanding its inventory selection. It has also expanded its capital allocation for inventory purchases.

“In terms of revenue, we have consistently been doubling annual revenue since we started. Now with the launch of our Dubai operations, we expect continued growth,” Mr Chaar said.

Carzaty collects nearly 30,000 car data points every day”, Hassan Jaffar

But the landscape changed with Covid-19. Though the stay-at-home measures necessitated by Covid-19 were hard on Carzaty at first, the business turned a page with heighted health concerns and people pivoting to online shopping.

“We were closed for about three months and it was financially challenging for our entire team. However, upon restarting operations, we were pleasantly surprised by the demand for used cars,” says Mr Chaar.

He adds that three major trends have been supporting Carzaty’s business following the pandemic. Firstly, customers are more willing to shop online, even when it comes to buying cars. “If you buy from an individual on a classified website, they will not have this level of professionalism or attention to detail. On the other hand, if you buy from a trusted retailer, you can buy with a guarantee of quality. We have even sold cars to customers without them coming to our showroom at all,” says Carzaty’s managing director.

Another trend supporting car sales is people’s reluctance to use public transportation in the wake of Covid-19.

Used car sales have also picked up due to their cost effectiveness. The median value of a used car sold in the UAE is 30 to 35 per cent lower than that of new cars, which appeals to a growing number of clients, especially younger buyers who are often not able to afford new cars, according to a report by consultancy Frost & Sullivan. As a result, used car sales in the UAE are set to experience double-digit growth rates in the next five years.

“The GCC will see a major conversion in buying from new to used cars in the coming years. When you are trying to save money in a tough economy, you are most likely to buy a used car,” Mr Chaar concludes.

The bulk of cars listed on the Carzaty website today are in the affordable category such as Toyota, Nissan, Honda and Kia. This is a reflection of customer preferences today, say Carzaty founders. Photo: Reem Mohammed / The National

Q&A with Marwan Chaar and Hassan Jaffar, managing directors of Carzaty

Who was your first investor?

Hassan: The first investor to commit to our seed round was Sansar Capital, a New York-based fund focused on emerging markets.

What already successful start-up do you wish you had started?

Marwan: LittleBits. It’s a phenomenal success story. In the GCC and wider Middle East, there is a lot of exaggeration of what success is. LittleBits is the story of a Lebanese woman who started this business after identifying a niche, raised the right type of funding, grew her business slowly and steadily and sold it to a larger company. This is what we need to aspire to as entrepreneurs in the Middle East. Younger entrepreneurs need to be inspired by businesses that make fundamental economic sense.

What is your next big dream to make happen?

Marwan: I want to return to the energy industry and work in the global transition to a low-carbon future.

Hassan: Invest in technology start-ups with an impact angle.

What new skills have you learnt in the process of launching your start-up?

Hassan: Prior to Carzaty, I always worked with people who came from a similar background as mine. Learning how to work with people from very different backgrounds was the biggest skill I gained.

Marwan: Learning the dynamics of a very unique industry, which is used cars.

If you could start all over again, what would you do differently?

Marwan: I would avoid the worst global crisis in recent history.

Who is your role model?

Hassan: Bill Gates as co-chair of the Bill & Melinda Gates Foundation.

Marwan: Salman Khan, founder of Khan Academy.

Where do you see yourself after 10 years?

Marwan: Working on another venture on a beach in Ras Al Khaimah.

Hassan: Investing and supporting entrepreneurs embarking on journeys to solve real problems.

Article Published by The National News, Read Full Article H

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