Robbie Rankin and Adam Trouncer have launched a group buying site with a difference – rather than offering indulgent treats such as restaurant meals or massages they sell cars.
StartupSmart spoke to Rankin to see if his brainwave will stack up.
How did the idea for the business come about?
My mum was trying to buy a car and she was getting the run around from car dealers. To get the right price she had to go to lots of different dealers and I thought “why not group them together in one place?”
What has the planning process been like?
The idea came about 10 weeks ago. We got out a big whiteboard and wrote down that the driver for any business was to make things more convenient or cheaper for people – we think about those two things a lot.
We had contacts at a tech company and we gave away 33% of the business in order to build our site. If the idea works there are great opportunities for them. They developed the site while Adam and I worked on user experience.
A few sites during the dot com boom tried to sell cars and they failed miserably because people couldn’t test drive the cars. But we deliver that to customers.
What convinced you there is a demand for this? Isn’t group buying a bit of an impulse buy kind of sector for a big purchase like a car?
A friend’s dad has been doing this in Mumbai and made about six months’ worth of volume on an Audi on just one deal. We thought there was something there for us even though Australia is obviously a smaller market than India.
A car is pretty much the biggest purchase you’ll make other than your house. The Catch of the Day-style group buying sites are quick and dirty, giving you the cheapest deal, ours is more about personal service and building relationships.
This isn’t about driving sales and ditching customers. It’s a partnership with the dealers. We aren’t trying to convince people to buy cars, it’s about grouping together people who have already decided to buy a car.
People will want to know that it’s real and we will provide a test drive for that. People want to feel and smell the car, and I don’t want to take that away from them.
How did you fund the business?
We funded it through our own money. I’d say it has cost around $21,000.
How did you go when approaching car dealers?
My background is in investment banking so I was able to prepare pitch booklets to the dealers that showed them that this could produce them high volumes and allow them opportunities to upsell.
What dealers maker on cars is ridiculously low. They make money on extras such as financing and servicing and this will help them do that. And if the dealers hit sales targets they get a bonus from manufacturers.
It isn’t just about shifting stock. The concept won’t work if you’re giving customers stuff they don’t want.
We spoke t o a few dealers who weren’t interested but we struck agreements with Tynan Motors and West End Mazda in Sydney. They have exclusivity for six months and we’re already speaking to the big dealers for the period beyond that.
How have you decided which cars to offer?
We’ve taken the group buying mentality that Groupon had in the US, where they focused on women.
It sounds bad, but you sell a product to a woman and she’ll talk about it. It creates good word of mouth. So we focused on female-friendly and family cars – the first deal is for a Mazda which is $5,000 less than retail.
What kind of cut do you take?
Customers pay a $300 bond through the site which we subtract from the purchase price. We keep that.
They then get a unique certificate code that they take to the dealer and choose their colour and so on. Ten people are needed for each deal and there’s a $4,800 saving on each car.
What’s been the most challenging part of starting up?
It’s been getting people to believe in the concept. We really think this can improve the car industry and once people are in they can see that.
We’re doing quite a bit of work on social media – if you recommend CarJoy to someone via Facebook and Twitter and they sign up you get $150.
What are your ambitions for the business?
We want to get Sydney up and running within three months and then within six months we want to expand to San Diego in the US, London and India. We’ll get someone to manage the business in Sydney.