ScaleUp Stories with Eric Cheng, co-founder and CEO of Carsome
Updated: May 30, 2020
From left Arthur Chan (Managing Director, Endeavor Malaysia) and Eric Cheng (Co-Founder and CEO of Carsome).
In June, Endeavor Malaysia organized its fifth Scaleup Stories. In this edition, we spoke to Eric Cheng, co-founder & CEO of Carsome on how he started and scaled Carsome to become the #1 online used car auction platform in the region.
Like any entrepreneur, Eric had his fair share of wrong turns and missed opportunities before finding his path. He started his entrepreneurial journey in 2008 when he and a few college friends started a print magazine business. During his second year as an accounting student, he dropped out of school and joined an interactive online marketing company, Innity. There, he focused on digital advertising and online campaigns for major agencies including GroupM and IPG Mediabrands. To hone his energy on starting his own business, Eric left Innity in 2011 and started Clicks Communications, an advertising network and creative agency. Within the first year, Eric sold his ownership back to his co-founders, realizing he had left Innity too soon. After returning to the firm, Eric continued to lead its digital advertising team and focused on improving global branding campaigns for his clients. In 2015, he was again inspired to try his entrepreneurial hand and convinced his colleague Juin Ee to launch a business with him.
Why Carsome of all business models?
We wanted to create something very big that solves a real pain point. I experienced problems with selling and buying a car myself and realized that we could launch something different in this space. After receiving feedback from car dealers and customers, we realized this could be really big as this problem is not solved in a holistic manner.
You used to be a car buying platform, what changed?
We realized that it was common for potential customers to browse and view a certain listing multiple times across several months before actually making a purchase. This resulted in long sales cycles and low monetization capabilities. However, the same buyers were interested in selling their existing cars first before committing to a new purchase. We ran a survey and found that 70% of buyers wanted us to dispose of their cars - this gave us an opportunity to help consumers get rid of their existing cars as fast as within a day. For dealers, the problem was in ensuring that they received a reliable and consistent stream of inventory. We also needed to ensure that the bidding experience was smooth, quick and transparent.
How has Carsome and your challenges changed over the years?
During the early years, it was all about maximizing what we could do with our available resources - there were only 5 of us, and everyone had to multitask. If you had the time, you had to work on even the mundane such as uploading pictures on our website. We had to travel to individual car dealers to educate and onboard them. We had to drive traffic and transactions. Our first-year targets were to hit 1 million (GMV) sold on the platform and when we finally hit it we were so happy.
Every year since then, we had to do new things. With scale, the team has to continuously adapt. Now that we operate at scale, our team members are specialized and operate according to their own strengths. For me, managing people between different countries and levels is tricky and requires great attention. Just remember that as a leader, you always need to amplify you and your team’s strengths - identify the strengths of individuals and place them in the right positions to amplify their strengths.
My role as CEO is to ensure everyone has a clear vision to look forward to. Our goal for Carsome is to digitize and introduce innovation to the used-car industry, and we need to be #1 to achieve that goal. It’s very important to keep ourselves aligned as people work for the grand vision - they will question your decisions when something is wrong.
As a founder, what is your management style like?
I make decisions based on the available data - this keeps me objective and lets us strategize and execute based on facts and figures. From that point, it’s about measuring the effectiveness of each action item. Carsome is an outcome-driven company so everyone is very clear on their respective objectives. Ultimately, everyone is clear about KPIs and underperforming team members have to, unfortunately, leave based on their results. With each level of scale, it is important to be clear about the expectations for individuals as well.
Moving on to marketing, Carsome employs multiple marketing strategies and you even have your own jingle. What can you share about your marketing strategy?
I came from a marketing background so this was my strong suit. During the early days, we raised $250K which gave us a 6-9 month plan. We started out with a digital strategy because this was the most measurable form of advertising. Again, it is important to measure return on investment and results.
We only entered into other forms of marketing e.g. video, billboard, radio, when we reached a certain level of scale. We needed to occupy the mind share of each prospective customer that is looking to sell their car. For that to happen, we needed to create brand value & brand equity online and offline. Hence, we invested in offline ads as well, but we ensured that this was also measured. How does my ATL spend result in Carsome’s organic growth?
As Carsome grows, how are dealers impacted by the company and its products?
Carsome grows as our dealers grow. One of our 20 early dealers has seen their business grow and has since expanded from one car lot to three lots, and even been able to open new showrooms. Many dealers have experienced the same as they can now source inventory at a higher quality & faster speed. In Indonesia, it’s still early but we have seen home dealers (selling cars out of their houses) setting up proper businesses after using Carsome.
How did you manage to operate in each Southeast Asian market?
Southeast Asia is unique - you need to view it as 10 different markets rather than one single market. As many similarities we may have, there are plenty of different aspects. This isn’t like China or India - both the talent & product needs to be localized to each market. Just as an example, Malaysia dealers use laptops or desktops to access our auction platform but close to 100% of our Indonesian dealers access our platform through their mobile phones. We only found this out after we launched and had to adapt our whole platform into a mobile site to capture that market effectively.
Today, you are in Malaysia, Singapore, Indonesia & Thailand - what advice would you give to entrepreneurs when moving abroad?
You have to think carefully if your product makes sense across borders. In our case, selling cars was an issue globally. There are enough players globally and it was a matter of making this model work in Southeast Asia. We knew we wanted to be a regional company from the start - you need to plan early and not do it when you think it’s time.
On fundraising, how do you ensure an efficient process & how have you managed to raise from VCs that weren’t looking at Malaysia?
You have to show results with the available funds you have - prove to investors that with a small amount of money you can generate X amount of traction and that you are solving a big problem in a sizable market. In our case, we needed to be clear on how much to raise, who the prospective investors are and identify what they like within their portfolio. Investors in the early stages look purely at financial gains whereas investors at the growth stage identify business synergies between you and their portfolio companies.
How do you think entrepreneurs should spend their available funds and resources?
It ties back to what you want as an entrepreneur. Start from a goal and work backwards on what you need today to get to that point. All businesses are built to turn a profit - be clear on how much time and money is needed to expand and deliver results.
What if a competitor started tomorrow with the same level of funding - how would you compete?
We have managed to outperform competitors with more funds. It depends on a company’s ability to deliver growth. It goes back to how you can a product that better serves the needs of your target customers.
Having met different entrepreneurs in the region, what are your thoughts on entrepreneurship across different markets?
Based on my experience, solutions for Singapore might be too advanced for the other SEA countries given Singapore’s development. Entrepreneurs in Indonesia tend to be satisfied in Indonesia as it is a big market. Entrepreneurs in Malaysia & Singapore are eager to enter Indonesia and this makes Malaysia the perfect location to launch and manage a regional company.
If you were to do things all over again, what would you have done differently? What can we expect from Carsome moving forward?
Pivot faster than we thought we should - act based on data. As of today, we are looking to launch financing to both dealers and consumers, and building a dealer management system to ensure smoother operations.
Today, headquartered in Malaysia and with presence in Indonesia, Singapore and Thailand, Carsome is Southeast Asia’s fastest-growing online car-selling platform that connects customers to used car dealers nationwide. Stay tuned for the next ScaleUp event!
The content of the article is summarised from the ScaleUp Stories, a series of fireside chat events aimed to uncover how the best entrepreneurs started and scaled their respective businesses. Find out more about our upcoming events on our social media platforms or subscribe to our newsletter here.