Monthly Archives: March 2016

carsales Moves Further Into Latin America Through Chile



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carsales.com has acquired a controlling shareholding in Chileautos (www.chileautos.cl), the number one automotive classifieds website in Chile. Through this transaction, carsales acquired an 83% stake in Chileautos, with the existing owners retaining the remaining 17% stake.

As has been the case in our other international acquisitions, these things don’t happen overnight and has been the result of over 18 months of working through the process to get the right outcome. Our team at carsales has done a great job once again.

Why Chileautos? Chileautos is the clear number 1 online automotive website in Chile in all metrics and we believe is in a great position to benefit from carsales IP and technology to have a positive effect on our international portfolio.

Why Chile? Firstly, we can start to capitalise on the work we are doing in Mexico in rolling out our technology in Spanish to achieve economies of scale. Secondly, Chile has been the strongest country in South America by GDP per capita to offset its relative size to Brazil and Mexico.

I am excited at this development in our international portfolio and I am really looking forward to working with the Chileautos business. An added bonus is now having a base in Santiago in between São Paulo and Guadalajara….


I Love The Value Of Aggregated Data For Smart Business Decisions



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It is one thing to aggregate data. It is another to normalize, index, add depth and present in a way that save people and companies time and make money. Here’s an example of using aggregated data designed specifically to save its users time and make them money.

Some years ago I visited a car dealer to talk about our LiveMarket product. As we started to look at the product, he cut me off saying “all of this information is already available on carsales; every Monday morning I get my team together and we go through every one of our vehicles, see where it is positioned on carsales, adjust pricing if necessary, add comments, add photos and all that so we don’t need LiveMarket”.

I asked him how many people and how long this process takes him every Monday morning – “4-5 hours for 5 people” was the answer – No wonder they only do it once a week!
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By doing what they did each Monday morning, they had an obvious appreciation for competitive live market data so I showed him how LiveMarket can do exactly what they do every Monday (plus a whole lot more) in just 10 minutes, any day you want, any time you want for every one of your vehicles. He could see how each vehicle is positioned in the market using real time data and make real time changes to make selling easier and more profitable.

The penny dropped. Using LiveMarket to get an aggregated view of the competitive live market data has not only saved the dealer a lot of time, it has enabled them to sell better, increase velocity and be more profitable in the used car department.

I love the power and value of aggregated data for smart business decisions.


An Exit Strategy Isn’t Bad For A Start-Up


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Mark Cuban’s “12 Rules for Startups” has number 1 as “Don’t start a company unless it’s an obsession” and number 2 as “If you have an exit strategy, it’s not an obsession“.

I get his point but I think it is directly related to “cashing in” as opposed to protecting your interests, especially when you have partners involved.

I believe that when you start a company it invariably means at some point there will be an end; if it’s not the end of the company it may be the end of your involvement with the company which can take on a number of different possibilities and all necessitate an exit strategy to be considered from the start.

“We were building a technology company and had a choice to build (and own) the IP/technology ourselves with 100% of the business or license the technology…..”

In 1999 I was involved in my first start-up and quickly learnt about the importance of thinking ahead to all possibilities around an exit strategy. It was with a colleague from Reynolds at this time when we went to work on a plan to fill a niche not being filled in the market.

Being from a technical background I was all set to develop the required technology to get us going when a call out of the blue changed our direction and with time to market being defined as an important factor for us, we pivoted and went into partnership with a US company licensing their technology.

Herein started the lesson I learnt. We were building a technology company and had a choice to build (and own) the IP/technology ourselves with 100% of the business or license the technology along with giving up half the company. With a very large, multi million dollar deal at our fingertips, we chose the option that assured us the immediate contract by cutting our time to market and providing a comfort blanket to our prospective client.

“Fast forward two years and the business was traveling very well, growing, very profitable and serving some of Australia’s biggest media players…..”

Fast forward two years and the business was traveling very well, growing, very profitable and serving some of Australia’s biggest media players. We started to become an attractive acquisition target for a few companies in the midst of the dot-com boom but had one missing ingredient – our own IP driving the core of the business and this severely limited our options to be acquired. We did end up getting acquired at this time – by the US company who owned the IP and half of the company already.

What did we learn? You must always think of the exit strategy from the start. This includes IP, technology and a shareholders agreement. In this case it was the technology that drove the company. We had quickly built a business that was profitable and growing but was unattractive to an acquirer which limited our exit strategies. In retrospect we should have had the exit strategy defined in our agreements with the US company which would have removed all the angst about thinking we were getting done over; whether we were or weren’t was another matter.

Would we have made the same decision again? Most probably. Given the choice of time to market now with a near guaranteed contract immediately versus 6 months development before trying to secure business whilst having a second mortgage on my house and second child on the way with no money coming through the door……..


5 Service Differences Between Sao Paulo And Melbourne


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carsales.com‘s investment in Webmotors invariably means business visits to São Paulo. From a business perspective São Paulo is not cheap but vital to Brazil as the business hub.

One the first things we had to do with Webmotors was give the company its own identity outside of Banco Santander which included having its own office space. Location is always important in a big city to ensure you can attract the best talent and this was a big factor in being based in Vila Olimpia. What struck me about looking around Sao Paulo at suitable office space is the extra services that ultimately drive up the cost of setting up (and visiting) for business.

Here’s 5 examples that are a little different to what we’re used to in Australia:

1. Office Buildings – All office buildings I have visited have an electronic swipe system with security guards manning the entry/exit points. For visitors, you must present photo id (and in some cases a photo taken) before a temporary swipe card is issued for your visit so every building has staff ready to process you. The other noticeable difference is the presence of cleaners, etc throughout the day. These costs add up.

2. Hotels – There just seems to be people everywhere no matter what time it is. Security at the front door then more as you come in and that is before you even get to the reception area.

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Shell Service Station, Brazil

3. Service Stations – the good old days of the service station attendant is alive and well in Sao Paulo so you don’t have to leave your car to get your tank filled if you don’t want.

4. Valet Parking – Parking is tough in São Paulo so at most restaurants, bar precincts, shopping centers and hotels the best (or only) alternative is valet parking which just keeps adding to the expense.

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Shopping Vila Olimpia, São Paulo

5. Shopping Centres – Armed guards at the front doors and people directing traffic at the entrance just to name two.

These extra services are a result of the extra security measures required and the need to provide some form of employment to the broad class of people. They need to be employed. The result is that no matter what the cost is, all of these extra services add up and someone has to pay for them. I guess it’s the end user which makes Sao Paulo not the cheapest place to do business or live.


4 Important Milestones In Creating A Great Product


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Whilst I started as a developer I’ve never considered myself to be the traditional software developer. I’m not a tech head by any means and I don’t keep up to speed with the “latest and greatest”. By that I mean my focus has only been on the commercial outcome of a software product and sometimes that can upset those who want, what they consider, the perfect outcome.

A perfect example at carsales.com was the creation of the LiveMarket product and here are some important milestones in it’s creation:

Milestone 1. A product scope was developed with a lot depth and hundreds of features before development kicked off in earnest on what was thought to be a 7-9 month project.

Milestone 2. A little over 2 months into the development cycle the product was about 30% of the initial defined scope when it was put in front of the first car dealer who immediately saw the value and signed on the spot; not for a free trial, not even for a special discount price for being the first customer. The product had enough value even at 30% completion that it could command a premium price.

Milestone 3. Three months later, with now dozens of dealers signed up and still well short of the expected development time and feature set, the owner of a large franchised dealership sent the following message to the carsales CEO – “I have to let you know that livemarket.com.au is the smartest use of technology/information and market that I’ve ever seen (and I have been filling in as Used Car Mgr for two months). Brilliant. Well Done. Congrats.“. Now imagine if it was 100% finished!

Milestone 4. Fast forward some 6 plus years on and LiveMarket is a key component for hundreds and hundreds of Australian dealers buying and selling used cars yet the product scope for LiveMarket has still not been anywhere near 100% developed; not the original scope nor the expected scope creep and new ideas that inevitably come through. It never will be finished, can’t be.

So if the commercial owners had waited until 100% of the product scope was finished before releasing it to the market, theoretically it would still be in development and not an important part of the carsales’ dealer business.


6 Considerations Before Hitting The Road in São Paulo


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carsales.com.au entered the Brazilian market in July 2013 with the 30% acquisition of leading automotive portal Webmotors with the head office in São Paulo, Brazil’s biggest city. Cars are obviously an important part of our business and you cannot help but see some big differences to being on the road in Australia.

Here’s 5 considerations for Australians before you hit the road in Sao Paulo:

1. Traffic is bad. They say morning meetings never start on time. Why? There is always someone (usually more than one) delayed by traffic. The amount of cars on the road is incredible and traffic jams are a given, São Paulo people just accept it. Every time I visit Sao Paulo the traffic never ceases to amaze me. Think of Punt Rd at peak hour on a regular basis.

2. Merging is a state of mind. You either merge seamlessly in Sao Paulo or you get no where as allowing people to merge is just part of being on the roads. It shouldn’t amaze but it does probably because we are so bad at it in Australia. No one gets upset at merging in Sao Paulo yet you try to “push in” on Punt Rd and it’s nearly on for “young and old”. I call merging a skill because it is one thing that I have found I have needed to teach my two boys who have been learner drivers in recent years. Most probably though it is a state of mind because if everybody knows that merging is an imperative to the flow of the roads then it should just happen.

3. Safety requirements. I’m not talking air bags here. Sao Paulo can be a dangerous place (even though I am yet to feel in any danger). For luxury cars bullet proof windows, even a bullet proof body is a must in Sao Paulo and must be considered as an aftermarket imperative or go cheaper. As is tinted windows, especially for solo female drivers. Having the windows down is a luxury especially in a lot of traffic where you can be susceptible to a bike pulling up beside the car to say hello. Stopping at traffic lights in the early hours with no one around is not advised either. One positive is road rage is limited compared to Australia – probably because a gun will most likely be pulled!

4. Small cars are nearly a must. It is no coincidence that most of the cars on the road in Sao Paulo are small cars as they are easier to maneuver in the traffic but the main reasons are price and parking. Generally smaller cars are cheaper by nature; cheaper to purchase and cheaper to run. Parking in Sao Paulo is a premium and very tight. The parking spaces are very small with cars packed together. I am a 4 wheel driver, I love having a big 7 seater up high on the road but I think even I would be converted to a smaller car if I lived in Sao Paulo.

5. Motor Bikes. There are more motor bikes in SE Asia but with the amount of traffic on the road in Sao Paulo, the way the motor bikes get around amazes (and scares me) every time. They constantly beep their horn to indicate they are coming and no gap is too small to weave their way through traffic, usually as fast as they can go. How I haven’t seen one come off I just don’t know.

6. Forget line of sight as a guide. You may able to see where you want to go but you cannot use that as guide to work out how far or how long it will take. Traffic is one consideration but the other is the maze of turns and lane crossings required (hence merging skills). This is especially so crossing the Marginal highway which has up to 8 lines both ways on either side of the “river” and run by where Webmotors and our partner Santander are located (in separate buildings) in Vila Olimpia.

It just seems to work, sort of. With all the traffic, motor bikes, constant merging, safety issues and the like, I am yet to see any accidents or road rage which is amazing given all the mitigating factors. In some ways driving in Australia is actually more dangerous.

São Paulo on its own represents a great opportunity of growth for Webmotors and carsales as cars will be around in this city for a good while yet.


6 Things We’ve Learnt About Our Business in Brazil


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carsales.com.au entered the Brazilian market a little over 2 1/2 years after it’s acquisition of 30% of Webmotors.com.au. It’s fair to say that in that time we have learnt a hell of a lot about ourselves and doing business in Brazil. As a strategic investor we have been very hands on with the Webmotors team as well as being active at a Board level.

So here’s 6 things that we’ve discovered about our business in Brazil:

1. It’s expensive. For a start it is a long way to Brazil and not conducive to a couple of days trip so it gets expensive to travel there regularly. Starting a business entity is difficult and expensive. A range of taxes including a ~40% tax on expenses paid in foreign currency is something to learn about quickly. Then there’s little things like office rents which get inflated with all the extra services required/expected in Brazil such as extra electronic security, security personnel, full time cleaners, etc.

2. Regions are important. This one has been an important learning in regards to our strategy. It is not uncommon for online brands to have varying degrees of popularity in different geographical areas but we were not used to coming up against so many smaller, regional online plays that had a great following from not only consumers but also from the dealers. This has led us to two acquisitions so far of these regional plays in Meucarango.com.br and Compreauto.com.br. This is a big difference to the Australian market.

3. Dealers are dealers. Car dealers in Brazil have pretty much the same challenges, objectives, profit margins, profit drivers, structure, etc as car dealers in Australia. There are always going to be little differences but overall the great initiatives and products carsales has brought to the Australian market are applicable to the Brazilian market. This is great to have confidence in the strategic direction we are bringing to Webmotors.

4. Consumers are consumers. Like dealers we have found that consumers have the same needs and wants in Brazil as Australia. Like carsales, consumers come to Webmotors to find, sell or learn about cars, nothing else. It was great to learn that many thousands of consumers want to contact dealers via email form, as well as by phone, and the ratios are very similar to what we have with carsales. Private sellers are willing to pay for a premium service that works even though there are general classifieds giants offering a “freemium” service. Again, this gives us further confidence in the carsales strategic direction in Brazil.

5. User Interface. One of the first things the Webmotors team was keen to do when we had the capability was to replicate the carsales website. We added the Ryvuss search engine, structured the user interface around carsales and our users of the web site immediately gave us feedback. Feedback is always good to receive even if it is not so good as it provides the chance to change for the better and this is what we did. The changes we had to make weren’t significant but they did provide an insight into what our users expect on Webmotors which is a little different to carsales.

6. Culture is good. It has been a great experience working with the Webmotors team of ~200 people. They are not afraid to put the hours in when it is required and the passion is the most obvious characteristic which is not unlike carsales. The people have been the best and easiest part of carsales strategic position in Webmotors. Language has not been a barrier as all of the senior people are fluent in English from usually US education. Brazilians and Australians are not unlike apart from some obvious differences, this has been the best part.

I’m sure all businesses and industries are different in attempting to do business in Brazil. These are just 6 things that have had an impact in our decision making and direction.


Barriers to exit


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In retrospect, I learnt things very early in my professional career that I only now realise (and appreciate) what they are and the significance of each. Here is one example that I have been involved in that turned a compelling product into something a whole lot more – a barrier to exit.

In 1994 the Reynolds & Reynolds’ ERA product was compelling as it provided dealers with integration and features that other providers didn’t have and more importantly, made them money. It had been in the market for some 6 years at this point and was quickly making Reynolds the clear number 1 DMS provider in Australia. This was no time to be complacent though as a competitor could very easily come in with something that was also compelling and compete hard. The answer was not only to provide more compelling reasons for the ERA system but to start creating barriers to exit; that is to provide features that were intrinsic to the way clients did business.

Around this time a system called Priority Orders was created in ERA where a stock order for parts could be created ad hoc by the front counter team directly out of the invoicing product. This was another compelling feature for ERA as it made a seamless link between selling and ordering parts, another first for dealers.

The next step though was the concept of dealers linked together to facilitate real time parts locating, ordering and picking. The idea was for the ordering of ad hoc parts between the two businesses to be seamless and semi-automated. With the push of a button a dealer could theoretically (and practically) check dozens of dealers for available stock and with another push initiate the order at both ends. The first a distributing dealer would know about an order from another dealer was a picking slip printing for their pickets to pick. This had the potential of taking Priority Orders past compelling to being a barrier to exit if we could get it right.

Being 1994 and pre-Internet in Australia made this cutting edge stuff. All that was needed was the communication infrastructure to make this happen. To start with we used 2400/3600/4800 baud modems where a call would be made between the systems each time some data was required between two dealers. It was clunky. We needed a more seamless approach, we needed semi permanent lines with TCP/IP for real time access. After much work the DealerLink network was born where dealers could be linked together via Reynolds in a “hub and spoke” model.

The new parts product that ran over the DealerLink network was called CLERA (Completely Linked ERA). Before long, not only was CLERA a barrier to exit for the ERA product, it also became a selling tool for Reynolds. Dealers who were distributor dealers would offer dealers who bought off them better pricing if they order through CLERA as it cut double handling, picking up phones, etc. For a dealer to order through CLERA they first of all had to have the ERA DMS and second of all had to be connected to the DealerLink network; a brilliant model and barrier to exit.

DealerLink and CLERA were both ahead of their time and another great example of leadership from Reynolds that set it apart from the rest.

All great software products that can stand the test of time are compelling to their users and have features that create barriers to exit by becoming an intrinsic way in which their clients do business.