Bikes roaring in the second-hand segment

The used car market has taken off in the past few years with many single-brand and multi-brand corporate players creating a large geographical footprint. Compared to that, the used bike market is quite nascent. But the main issue in this space is to build credibility, however, the possibilities could be equally exciting. Mumbai-based company CredR has taken technology to this market with a hope to be a trustworthy online transaction point in this evolving market. Co-founder Nikhil Jain talks about his focus and future plans with Pankaj Joshi. ➤How did the business idea come about?

The aegis of CredR as a business came from our own personal experiences while trying to buy a used bike. Our learning was that this market operates largely through mechanics, who are also dealers or brokers (in this case). The market is unstructured and there are no set delivery parameters from seller’s side. There is no reliability on the photographs shown nor on the price quoted. The need to scrutinise the bike’s condition and documentation are the challenges in this space. Overall, it boils down to a big issue on how a buyer could trust a seller.

That made us ask the questions – why are there no players (unlike large players in the used car market), is there a demand large and deep in itself, what are the challenges and what value proposition is needed. We estimate the ratio of demand for new and used bike sales at 1:1.5 in India. With new bikes being sold around 50,000 per day, the market today stands at 75,000 which is very deep.

The dependence on self-transport is much higher in tier II and onwards towns, allowing it to offer much more as a market. In this scenario, we think, it is going to sustain for a couple of decades.

In case of players, we found that used car segment players were not focussed on this segment, which is still evolving. For them the traction offered by the used car segment was more attractive. This led us to think that we could make some headway.

➤How did you conceptualise your business model?

Our approach was value-driven and not discount-driven. We aim to build an ecosystem, since India is always a challenge in terms of end-to-end solutions. Our model includes discovery, engagement, closure and delivery. Such a system needs scale to be viable.

Our clients are of three types – those who want to buy, those who want to sell and those who want to sell and replace with old or new product. We understand that conversion depends on the trust and transparency we built. Moreover, our target group tends to be costconscious because they tend to be in an income bracket of Rs 2-5 lakh per annum.

The next challenge was to understand the way technology can be used which will allow the customers to know more about the product. Today, CredR evaluates a bike on more than 120 parameters (we started from 80 and have evolved). The score reflects not only the vehicle scrutiny but also the track record of the sale source. Furthermore, we offer a warranty which means we stand behind our evaluation score. The entire process is transparent and minutely detailed online.

Here it may be noted that our seller points are only CredR partners and not individuals. The criteria of becoming a CredR partner are minimum 500 square feet real estate, an inventory investment of Rs 5-15 lakh and refurbishment team capability. We ensure that CredR gives the partner a flow of both supply and demand, and compulsorily controls the customer experience. That means the evaluation of the vehicle at the partner’s location would be done independently – both before and after the suggested refurbishment, which builds credibility. For the partner the aim is to have greater traffic from CredR as well as quick rotation of the invested capital.

➤In all this, what is the value offering for the customer?

Beyond the trust and transparency in sales, we are aggregating CredR authorised service centres. Today, we are in four cities (Mumbai, Pune, Bengaluru and Delhi) with 40-50 partners per city. Each city has 8-10 service centres with standardised parameters of servicing, where the warranty does get free analytics and charges only on actuals like components. The break-up of activity in the bill is again our aspiration to build trust. This is after all more of a referral-based business. Beyond the transaction, the customer gets a call and another one in the next 15-30 days just to make clear that we don’t see the sale as end of the transaction. Customer feedback numbers are not the usual toll free ones, we always aim to make the customer experience a one-to-one interaction. We have also created the doorstep servicing as part of the warranty experience, where the issue is either resolved or we take away the vehicle to the service centre.

➤What kind of traction have you achieved in terms of traffic and transactions?

In the last 24 months, we have aggregated around 85,000 transactions. Today, we are around 5,000 transactions per month at an average value of Rs 36,000. Our registered users would be in the range of 7-8 lakh.

One more traditional constraint the industry faces is that financing of used two-wheelers is not ready and friendly, despite the market size that we have outlined. We have partnered with some NBFC organisations and right now have seen success in our trial finance offerings to customers at our Pune and Bengaluru locations. We have created a structure to evaluate borrowers based on the vehicle rating and pricing, and our partners help assimilate the customer eligibility details, so that a pre-approval is generated.

Right now, enquiries have been plenty in the places of our offering and in the current structure, financial closure is no more than 810 per cent of the enquiries. We aim to ramp this up to 30 per cent and above in the next couple of years. Talking to banks for this is a challenge, because banks want credit history and our target group does not always have the same.

➤How do you see the market evolving?

It’s a question of where the industry lies on the curve. The used car market transaction ratio (new to used) was 1:1.2 in 2007 and today it is 1:3. Client awareness and acceptance were the key factors. For used bikes, the ratio now is 1:1.4 and we think it will get to 1:2 in the next 4-5 years. When you factor in the growth rate in new bikes segment, it means that today’s monthly used bike sales figure of 20 lakh will get to 40 lakh in that period.

Within this market, ten states will have something like 60-65 per cent of the business across 35-40 cities and that is where we want to be. If we have a 15-20 per cent market share for each location, we can have an all-India market share of around 2-3 per cent. Today, our team is around 80-100 members and we would see it expanding to 200 by 2020. Our current freelance relationships are around 50 and we see those growing commensurately. Our growth depends on educating the customers, our partners, their associates in their operations and lastly the financiers.