Generation Start-up: Carzaty rides on technology to disrupt the GCC's auto industry

The GCC’s automobile retail industry is definitely ripe for disruption. One player who's pioneering a technology-driven change is Carzaty, an online car retail platform founded in Muscat, Oman, in 2017.

The platform, which launched functions in the UAE during summer this season, specialises in car or truck sales but with a twist. It uses proprietary data and market intelligence to get specific cars, which are popular, but scarce and likely to sell out fast.

The automotive retailer also rigorously checks and reconditions the cars before selling them to end-users.

The automotive retailer, which happens to be in Seed A stage of fund raising, has bagged about $5.5 million in equity funding from several strategic and high-profile investors, like the government of Oman’s sovereign wealth fund’s capital raising arm - IDO Investments. Other strategic shareholders in Carzaty include family offices of automotive conglomerates in Oman and Bahrain, as well as DriveArabia, a regional automotive consumer portal.

“For instance, the majority of cars on our website today are in the affordable category such as for example Toyota, Nissan, Honda and Kia. We also have a few premium car brands such as for example Volkswagen, Infiniti and Mazda listed on our website,” says Marwan Chaar, managing director, Carzaty.

“As the marketplace evolves, there will be a shift in used car preferences aswell. We will then add premium brands such as for example Mercedes, BMW and Audi, etc. Our in-house data analytics tell us what cars to get. That’s a major shift from traditional car or truck retailers,” adds Mr Chaar, who earlier worked for a start-up called GlassPoint Solar that focused on doing solar projects for the oil and gas industry.

Hassan Jaffar, managing director and board chairman of Carzaty, says the platform collects nearly 30,000 car data points each day. The info is then cleaned and classified to determine a car’s fair market value, says Mr Jaffar who previously worked for global consultancy McKinsey and a hedge fund in New York, before relocating to the spot in 2011.

Carzaty also operates digital showrooms in both Muscat and Dubai. They are physical spaces, where "CarMatchers" or salespersons, show customers their entire digital inventory and can then request test drives.

The company has the ability to keep a lid on costs by disconnecting inventory from its digital showrooms. This can help reduce major overhead costs that include owning a traditional showroom. “Which allows us to scale the business without increasing costs,” says Mr Chaar.

The platform has adopted an omni-channel sales approach, where customers can view cars online through 30 high-res images along with specifications and features. They are able to then narrow their choice and try specific cars if they visit Carzaty’s digital showroom. End-users may also browse more cars on digital screens in the showroom.

“You want to give consumers a dependable, trusted source of high-quality used cars. Over the GCC, the options for a customer to get a reliable used car are incredibly few,” says Mr Chaar.

“Most resort to classified sites where they typically buy directly from other individuals, even though cost-effective, it brings with it a slew of issues, mostly the quality of the car and the lack of any recourse if something goes wrong, as well as the inconvenience of finding the car, searching/speaking to many individuals, the difficulty to have the car financed, and so on.”

Carzaty supplies the full selection of services to customers. It can help with the trade-in of a customer’s existing car and in addition facilitates financial services to invest in their new purchase.

The retailer uses various channels to get used cars. Included in these are direct obtain consumers or from fleets and leasing companies.

“Creating a brand around high quality cars is challenging as you need to convince customers to pay slightly greater than market price despite the fact that they are certain to save over time due to lower maintenance and repair costs on the automobile. Not forgetting the added value of having a car that’s reliable,” Mr Jaffar tells The National.

The owners say Carzaty’s competitive good thing about quality cars, fair prices and customer support, can help provide customers over the GCC with a more substantial selection of cars.

“We could have car hubs atlanta divorce attorneys city that people operate in as we scale across the GCC. Our immediate short-term focus is on the UAE and Oman. We see huge potential for growth in these markets. Beyond that, we try to expand over the GCC, including Saudi Arabia,” adds Mr Chaar.

Carzaty is also one of Nissan Middle East’s official sub-dealers for new cars. It has similar relationships with other dealers and brands. The “new cars that we sell are priced drastically less than the agencies”, Mr Chaar says.

The start-up aims to grow in existing markets by expanding its inventory selection. It has additionally expanded its capital allocation for inventory purchases.

“In conditions of revenue, we have consistently been doubling total annual earnings since we started. Now with the launch of our Dubai operations, we expect continued growth,” Mr Chaar said.

However the landscape changed with Covid-19. Although stay-at-home measures necessitated by Covid-19 were hard on Carzaty initially, the business turned a page with heighted health issues and persons pivoting to online shopping.

“We were closed for approximately three months and it had been financially challenging for our entire team. However, upon restarting operations, we were amazed by the demand for used cars,” says Mr Chaar.

He adds that three major trends have been supporting Carzaty’s business following pandemic. Firstly, customers are more ready to shop online, even when it comes to buying cars. “If you buy from a person on a classified website, they'll not have this degree of professionalism or focus on detail. However, if you buy from a trusted retailer, you can buy with a guarantee of quality. We have even sold cars to customers without them arriving at our showroom at all,” says Carzaty’s managing director.

Another trend supporting car sales is people's reluctance to use public transportation in the wake of Covid-19.

Used car sales also have picked up because of their cost effectiveness. The median value of a used car sold in the UAE is 30 to 35 % less than that of new cars, which attracts an increasing number of clients, especially younger buyers who are often not able to afford new cars, according to a report by consultancy Frost & Sullivan. Due to this fact, used car sales in the UAE are set to see double-digit growth rates in the next five years.

“The GCC will dsicover a significant conversion in buying from not used to used cars in the coming years. If you are trying to save profit a hardcore economy, you are most likely to buy a car or truck,” Mr Chaar concludes.

Q&A with Marwan Chaar and Hassan Jaffar, managing directors of Carzaty

Who was simply your first investor?

Hassan: The first investor to invest in our seed round was Sansar Capital, a fresh York-based fund centered on emerging markets.

What already successful start-up do you wish you had started?

Marwan: LittleBits. It’s a phenomenal success story. In the GCC and wider Middle East, you will find a large amount of exaggeration of what success is. LittleBits may be the story of a Lebanese woman who started this business after identifying a distinct segment, raised the right type of funding, grew her business slowly and steadily and sold it to a larger company. This is exactly what we need to desire to as entrepreneurs in the centre East. Younger entrepreneurs ought to be inspired by businesses that produce fundamental economic sense.

What is your next big dream to make happen?

Marwan: I wish to go back to the energy industry and work in the global transition to a low-carbon future.

Hassan: Spend money on technology start-ups with an impact angle.

What new skills have you learnt along the way of launching your start-up?

Hassan: Ahead of Carzaty, I always caused people who originated from an identical background as mine. Learning how exactly to work with persons from very different backgrounds was the largest skill I gained.

Marwan: Learning the dynamics of an extremely unique industry, which is employed cars.

In the event that you could start yet again, what would you do differently?

Marwan: I'd avoid the worst global crisis in recent history.

Who is your role model?

Hassan: Bill Gates as co-chair of the Bill & Melinda Gates Foundation.

Marwan: Salman Khan, founder of Khan Academy.

Where do you see yourself after a decade?

Marwan: Focusing on another venture on a beach in Ras Al Khaimah.

Hassan: Investing and supporting entrepreneurs embarking on journeys to solve real problems.