Meet the entrepreneur putting va-va-voom into car sales

Carwow is trying to muscle in on the crowded auto market.

by Rebecca Smith
Last Updated: 22 Jan 2016

Property and cars have long been two of the most difficult purchases for a whole host of reasons – not least the pushy salespeople who can make the experience as enjoyable as pulling teeth.

But it’s taken a long while for these kinds of purchases to make the shift to online. Property has begun to transition with the rise of digital players and over the past couple of years, Carwow, an online marketplace for new vehicles, has quietly set about trying to do the same in the automotive sector.

Founder James Hind wants to make buying a new car a much less painful experience. As it stands, the process typically involves wading through an array of models, optional extras, trade-in deals, service plans and financing with the dealers themselves. Before Carwow, Hind claims ‘the only way to compare was to spend hours travelling around multiple dealers’, but the site allows consumers to compare dealers’ prices on new cars online, making the process less time-consuming. 

Hind launched the company in 2013, after leaving university, interning at a fund manager group (which ‘put me off that career path for life’) and deciding to start his own business. ‘Initially we thought of a car review aggregator and it did gain quite a bit of interest, but we quickly realised that although we could make money it would take time to build up the traffic,’ he says. ‘So we switched to helping people choose which car to purchase, as we realised the process of buying a car was a far bigger problem.’

The site itself is set up to help buyers select a car – they ‘build’ the car they would like to buy, specifying make and model. An alert is then sent out to the 1,000 or so dealers registered online. Dealers contact the customer with their final, best offer and once the customer decides, they can either message the dealer anonymously through the platform or call them directly. Hind said the firm previously took a flat commission of £250 per transaction from the dealer, but it was now ‘more variable, more contract-based’.

Carwow has already served enough consumers for turnover to reach £3m last year and its workforce is also growing rapidly. There are now 50 employees, up from 14 last year, and Hind predicts a hiring spree to take the workforce up to 100 by 2017.

Hind raised a round of angel funding after persevering with a deluge of cold emails, and that was followed at the end of 2014 by a £4.6m Series A round led by Balderton Capital, with Episode 1 Ventures and Samos Investments also taking part. Zoopla’s founder and chief exec Alex Chesterman, former Zoopla non-exec director Simon Murdoch and Adzuna founder Doug Monro were among the angel investors intrigued enough by the concept to get on board in the early days.

So, how have Hind and co-founders Alexandra Margolis and David Santoro, convinced consumers to trust in making such a significant purchase online?

‘I think the biggest thing was the way we designed the product, so we weren’t trying to hide who the dealers were and we weren’t asking anything of the consumer,’ Hind says. ‘We weren’t giving away their contact details, we weren’t asking them for any money and were very open about who the dealer was and where they were.’

James Hind (r) with co-founders Alexandra Margolis and David Santoro

Gaining a trusted reputation with a new site is incredibly valuable; when you’re selling something as pricey as a car, it’s a necessity. Hind said he wanted to be painstakingly clear as to what was included and what wasn’t. ‘There’s no hidden pricing or traps to fall into,’ he adds. The no-nonsense approach extends to the dealers too. While Hind says it’s a mutually beneficial relationship, ‘we are very strict on quality control’.

‘We remove about a third of all dealers who join and if we get one who’s a pain, we just remove them,’ he says simply. This means those who can’t commit to the level of discount and service expected – so taking too long to reply to customer messages or not honouring the Carwow offer won’t be tolerated. On the flip side, those that prove themselves invariably get more sales from the platform. ‘So it’s an incentive to do better and those dealerships get the most out of it,’ Hind adds.

It has been important to prove to consumers the site simplifies the car-buying process, and will be a reliable tool. To date, Audi, Mercedes and VW have been the biggest sellers and the average price a car is sold for is £27,0000.

‘It’s just such a massive purchase that people are more welded to the old-fashioned ways of doing it,’ Hind says. ‘When people started buying books and CDs online there were initially trust issues around that, but at worse you’d lose £10 or £20.’ Buying a car or house on the other hand has ‘so much that can go wrong and it’s such a rare purchase that it makes a lot of people feel you should do it the old-fashioned, traditional way,’ he adds.

As Carwow’s sales continue to pick up, it seems the tide could be turning, or at least be in the early stages of doing so. The business can't rest on its laurels though – car makers are investing in innovation too. A quick look at BMW's website and apps for example, shows that some car makers are not just aware of the move online but navigating it deftly.

Registrations of vehicles continue to rack up – motor industry trade body, SMMT, has just announced that 2.63m new cars were registered in the UK last year, an all-time record. So, the interest in owning cars isn’t waning (though car-sharing firms like Lyft and Zipcar may have something to say about that). But classified car advertiser AutoTrader reported that footfall in UK dealerships had dropped from 30m in 2010 to around 15m in 2015.

By 2018, that’s predicted to fall further still to 7m. If the appetite for new cars isn’t diminishing, it might just be the process of buying them that’s losing its appeal. With so many other products available online, a digital shift seems inevitable for the auto industry. As Hind puts it, ‘Why do you still have to haggle with a car salesman to buy a car when it’s such a massive purchase?’

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