Pakwheels-Case Study for Sales Managers PDF

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Pakwheels.com—A Period of Transition! Farrah Arif and Sarah Suneel Sarfraz

INTRODUCTION It was mid-July 2015 and with the monsoon rains in the background, Raza Saeed and Suneel Munj, the cofounders and managing partners of Pakwheels.com were thinking about the company’s growth strategy for 2016 for the upcoming investor meeting, on the way to their office in Gulberg. 1 Finally, after ten years of starting the business, in December 2014, they had secured a funding of $3.5 million from Frontier Digital Ventures, which was a Malaysian venture capital fund focused on online platform businesses in the developing markets. Moreover, just when they thought that they were ready to develop an aggressive growth strategy, they received unsettling news. Their legal counsel informed them about a possibility of a discriminating cybercrime prevention bill called Prevention of Electronic Crimes Act (PECA) which was in the approval process by the national assembly of Pakistan. Moreover, there was a speculation about their main 1 Gulberg

is the Central Business District of Lahore, Pakistan.

F. Arif (*) · S. S. Sarfraz Lahore University of Management Sciences, Lahore, Pakistan e-mail: [email protected] S. S. Sarfraz e-mail: [email protected] © The Author(s) 2019 A. Sikdar and V. Pereira (eds.), Business and Management Practices in South Asia, https://doi.org/10.1007/978-981-13-1399-8_7

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competitor, oLX2 that it would be launching a huge and expensive three-week long media campaign of about $0.5 million to introduce its used car section in the local market. Pakwheels.com was the market leader in the country’s growing online classified automobile market. The website had been growing at an ideal trajectory and with the foreign investment Saeed and Munj were all set to make PakWheels a billion-dollar start-up in the next few years—a goal that had kept them from accepting acquisition offers from foreign companies so far. However, the threat of the PECA and oLX was looming in the background, while the PakWheels team was putting together a strategy to move forward for the Malaysian investor. “There was no doubt in anybody’s mind that PakWheels success was based on the huge and diverse number of members and their freedom of speech at the discussion forums which generates immense consumer engagement and loyalty. They not only take pride in the website’s achievements but also regularly contribute to the forums. We even have a founding members group in which a group of loyal members who have been with us for more than ten years are included, and they voluntarily represent the website at various forums,” explained Saeed. Saeed feared that censoring, filtering, and controlling the forums could seriously hurt the community engagement at PakWheels. Apart from some splendid things like the good security controls, there were some ambiguous clauses in PECA 2015 that might adversely affect local technology businesses. If PECA 2015 was implemented in its strictest form, there was a strong possibility that the community rules would be made strict, and a certain percentage of loyal members would be lost. The bill’s threatening elements included provisions that would allow the government to censor online content, criminalize internet user activity based on extremely broad criteria susceptible to abusive interpretation, and permit government access to the data of internet users without being approved by any form of judicial review process. These elements if implemented might be detrimental to technology-based businesses. Similarly, oLX being a horizontal portal was not a direct competitor of PakWheels, but one of its sections was about buying and selling used automobiles, thus making it an indirect threat to the business. Munj explained, “Although we rely heavily on our loyal community members and their positive word of mouth, this will not be sustainable for long. For the first 2 A horizontal online classifieds marketplace for used goods such as furniture, musical instruments, sporting goods, cars, youngster and baby items, motorcycles, cameras, mobile phones, property etc.

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time in the history of Pakistan, we are seeing online brands deploying significant advertising budgets for mainstream media advertising. To compete with these deep-pocketed international giants, such as oLX, for a share of voice (SoV) was going to be a challenge for us”. Going forward, Saeed and Munj would have to decide the best way to scale up their business utilizing the investment fund in an efficient manner. However, before that might happen, they knew they needed to lay out a clear and compelling strategy which would create the most value for the business and its stakeholders by asking some tough questions. What should PakWheels team do to retain community engagement culture if PECA 2015 gets implemented in the countr y? Should they match oLX media budgets and respond with their ATL campaign? Alternatively, maybe just wait and strengthen their basic product and technology and see how the market changes in the future.

INITIAL YEARS PakWheels was started on 18 July 2003 in Karachi, Pakistan by Hanif Bhatti, a businessman, and Jagdesh Pahuja, an IT professional. The reason for the start-up was to provide a platform to car enthusiasts to list their cars for sale and discuss about their shared interests in cars. A modest amount of money was spent on domain and hosting. However, as the founders were interested in helping the small community of PakWheels members and thus treated them as a family. Soon this made people to start joining in by the numbers. In 2003, there was no social media available to advertise the launching of a website, so the only thing through which the website could be advertised was its content. PakWheels grew organically with people logging into the website, asking questions, getting helpful answers, posting reviews and pictures, and commenting on others. Soon, with more people joining the community, PakWheels became Pakistan’s largest community of automotive enthusiasts. In the early years of PakWheels, the few users from outside Pakistan were mostly non-resident Pakistanis residing abroad but having deep ties to Pakistan’s auto scene. To develop bonding among the members of PakWheels, Bhatti and Pahuja organised PakWheels’ first get-together in Karachi, which was a huge success. Soon, members in other cities also started organizing “Pakwheel Meets” in their cities as well. Within five years of inception, Pakwheels.com had become one of the few leading brands in Pakistan’s internet economy based on good

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overall business performance driven by an increasing online community and soaring website traffic. Their business model was quite basic, it did not charge the visitors, but some fee was charged for banner advertisements on the website. They were so committed to developing the community that they kept on investing back into the website. Besides this, PakWheels also spent a small amount to distribute stickers among community members for promotion of the portal.

ACQUISITION Though Bhatti and Pahuja wanted PakWheels to grow but they did not have the requisite resources and time to devote, and felt the need for extra hands to manage the rapidly growing community. Fortunately for them, two young entrepreneurs in Lahore, both LUMS3 alumni, were looking for new ventures to invest in. They were Muhammad Raza Saeed, a technology entrepreneur, and his friend Suneel Sarfaraz Munj, a car enthusiast and a businessman. In US and Europe, businesses had started using paid vertical classifieds4 on internet, e.g., job sites and free horizontal classified5 sites like Craigslist,6 eBay7 etc. Although there was potential for similar opportunity in Pakistan, there was no Craigslist and eBay in Pakistan. Pakwheels.com, built on the same model as horizontal classifieds, seemed a perfect fit for Munj and Saeed, given their relevant

3 Lahore University of Management Sciences (LUMS) is a privately owned institute based in Lahore, Pakistan. It is one of the top ranked universities in Pakistan (source: www. lums.edu.pk). 4 A vertical classified market: vendors offer goods and services specific to an industry, trade, profession or a group of customers with specialized needs. 5 A horizontal classified market: vendors offer a wide range of goods and services to a large group of customers with a wide range of needs. 6 Craigslist is a horizontal classified advertisements website devoted to jobs, housing, personals for sale, items wanted, services, community, gigs, résumés, and discussion forums. It started from San Francisco bay area and then expanded to other U.S. cities in 2000, and now covers 70 countries. 7 eBay Inc. is an American multinational corporation and horizontal ecommerce company, providing consumer to consumer and business to consumer sales services via internet. It is headquartered in San Jose, California with operations localized in over thirty countries (source: www.ebay.com).

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backgrounds with cars and software development. After numerous interactions with Bhatti, the duo acquired Pakwheels.com in December 2008. The office was shifted from Karachi to Lahore. Led by Munj and Saeed, PakWheels grew to a 250 employee company in July 2015 with over 350,000 registered members, and the website receiving ever y month 20 million hits8 from two million visitors9 and 45,000 automobile listings. Thus, PakWheels had become the most credible website for buying and selling of automobiles, and related news.

INDUSTRY SNAPSHOT In 2015, there were approximately 3 million cars in Pakistan with 170,000 new cars added each year in addition to imported cars.10 Annually, more than 600,000 of these cars were traded, with about 20% of these trades being done online. Almost 75% of PakWheels’ listings were from Karachi, Lahore, and Islamabad, the three major cities of Pakistan. With the advent of 3G/4G ser vices, the current 30 million internet users in Pakistan are expected to grow to 100 million by 2020.11 Also by 2020, current per capita car ownership of thirteen cars per 1000 people is expected to grow from it’s to sixteen–seventeen cars per 1000 people, according to the World Bank analysts. So this growth in auto industr y and internet population could provide excellent growth opportunities for automotive portals of Pakistan.

CONVENTIONAL “USED” CAR TRADE Before the advent of online car portals in Pakistan, people traded their cars by relying on used car dealers, newspaper classified ads, and weekly used car markets. According to All Pakistan Motor Dealers Association 8 Hits: an individual landing on the website through online advertisement or any other online sources and then leaving. 9 Visitors: people who actually browse and spend time exploring various sections of the website. 10 http://www.pama.org.pk/statistical-information/historical-information/annual-sales-production/ and http://data.worldbank.org/indicator. 11 http://knoema.com/atlas/Pakistan/Internet-users-percent-of-population and http:// knoema.com/atlas/Pakistan/Internet-users-per-100-inhabitants.

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(APMDA), there were 4000 car dealers in Pakistan dealing in both new and used cars, as on January 2015. These car dealers mostly worked on three different business models: 1. Broker Model: The seller got his/her car listed at the dealer’s showroom. The dealer acts a broker and tries to find a buyer and when the sale is made, the dealer charges a commission. 2. Investor Model: The dealer buys the car from a seller and tries to sell it at a profit to a buyer, thus making money on the transaction. 3. Importer Model: This is similar to the investor model where the dealer imports used cars from different countries and sell at a profit to buyers. However, conventional car trade provided lot of challenges for the buyer and the seller. The buyer has to visit multiple dealer showrooms to find the desired car and pay a higher price than actual market value because of the dealer’s margin. Similarly, the seller has to leave the car with the dealer for an extended period of time till it found a buyer or sell the car to the dealer at a discount to the actual market value. Using newspaper classified meant that buyers had to sift through thousands of advertisements with no proper categorisation. As there was no detailed picture in the classifieds, often the buyers faced disappointment as actual inspection of the car did not meet what they wanted. For sellers, sometimes the advertisements were not noticed due to clutter and many unwanted calls were received to see more details, which were not possible to be included in the advertisement. Classified advertisements in newspaper (see Exhibit 1a) costs an average of Rs. 500 per twenty words and Rs. 25 per subsequent word, so often the price paid did not provide the value sought. Weekly car markets ran only on Sundays, which meant that buyers and sellers have to take a complete day off, without any guarantee whether it would lead to a fruitful deal. Also, these markets had no categorization of car make and model, so there is a chance of the same type of car being available in better condition and less price in another part of the market, making the buyers miss out on a good bargain. Further, as there was no rating or review system for dealers and individual sellers, there was lack of transparency and reliability. Some of the dealers also engaged in illegal and unethical behaviors by reversing the

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Exhibit 1 a Newspaper vehicle classified in 2008 (Source online DAWN news classifieds from archives). b Pakwheels.com screenshot from 2008 (Source Company data)

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car odometer reading to show that car has run less kilometres and thus fetch a better price. So buyers had no reliable way to evaluate the car’s quality other than relying on their own judgement.

PRODUCT DEVELOPMENT Since Pakwheels.com was designed in 2003, there have been few changes and features added to the website until 2008 (see Exhibit 1b), but the basic technology has not been updated from the obsolete ASP/ Windows, which was inflexible to new changes. Soon after acquisition in 2008, the technology was upgraded to modern web development. This dramatically changed the appearance of PakWheels making it more userfriendly and modern, without affecting the core features of vehicle listing remained unchanged (see Exhibit 2). over the years, based on user experience, PakWheels had completely redesigned the platform to create certain changes, as follows: 1. to enable easier access, launched mobile applications for all major platforms (iPhone, Android, and Windows); 2. to enable users to access the website from their smartphone, enabled the website for smartphone browsers; 3. to increase user conversion, simplified advertisement posting process; and 4. to ensure the highest quality listings only, improved the advertisement verification process through automated tools. Also, to enhance the user experience of searching for cars, multiple functionalities were added such as on-road price tool (calculates total cost of ownership including taxes and registration charges), car comparisons, expert reviews, car specs, and prices, etc. Currently, PakWheels had the most comprehensive automotive content available on the internet. These product features and technology upgrades have led Pakwheels.com to win many prestigious awards such as Local Brand of the Year Award 2013, IT National Excellence Award Teradata 2013 and Teradata 2014, and International Arabia 500 Fast Growth.

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Exhibit 2

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Pakwheels.com screenshot from 2015 (Source Company data)

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VALUE CREATION THROUGH CUSTOMER ENGAGEMENT “When we bought the website, people discouraged us because trading online, especially such a high involvement product like cars and bikes was unheard of locally. However, we believed that this problem could be overcome by social interaction. In Pakistan, especially, it is crucial to have trust in the people you are interacting with”, Saeed recalled.12 Therefore, to enhance customer engagement, PakWheels introduced social interaction through Facebook and Twitter, ability to see pictures and videos, and mobile apps to access from any Windows, ioS, or Android device. PakWheels team also considered that the quality of the content they created was critical for success. At the time of acquisition, advertisements were not reviewed so inaccurate information was getting uploaded. To safeguard the quality of the content, every single advertisement and pictures before it went live was reviewed and approved by a dedicated six-member team, created for this purpose. Also the authenticity of the user was verified before ever y listing went live. The website also had an option of reporting digital abuse (e.g., indecent comments, wrong information, etc.), which was a huge problem in the classified businesses. So it was not possible on PakWheels to post anything or provide a fake phone number, in contrast to other local horizontal classifieds (such as oLX, Dekho, Asani, etc.). Also, through Facebook Connect, PakWheels could indicate whether the buyer and seller have any common contacts. This created a trust in the system. To create trust amongst the customers, PakWheels also introduced a review and rating system for car dealers. The majority of Pakwheels.com traffic (i.e., visitors) came for classifieds. However, the user forums provided the differentiation and were pivotal in PakWheels’ growing. These user forums brought automobile enthusiasts a place to connect with each other and share their passion about cars and discuss problems related to their cars. PakWheels launched an auto blog that was managed through hired professional auto journalists and content editors. The blog posted car reviews, news, opinions, and other information that resulted in creating significant awareness about PakWheels brand. In different cities, PakWheels also organized multiple large scales auto shows annually and

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https://aurora.dawn.com/news/1140680.

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small meets fortnightly so that the users could know each other personally. PakWheels also started partnering with other auto-related events that saw large turnout of 30,000–40,000 people. All these activities reinforced PakWheels’ community development efforts. To increase listings on the PakWheels platform, it was decided to engage with the car dealers. The dealers in Pakistan controlled the largest inventory of used cars but most had ver y low awareness about internet and technology. PakWheels focused on educating dealers that by posting their used car inventory on PakWheels website they would get more customers as buyers would have a larger pool of cars to choose from. “As an individual you do not buy a car every day, you buy one, and then you come back after three years. So how do we retain you?” Munj stated and then reflected about their engagement strategy. The website allowed keeping the maintenance history that would then remind the consumer about maintenance requirements. This feature was built into the mobile apps (both Android and ioS), for the “marketplace” and for “forums and blog” (see Exhibit 3). Additionally to help people with buying decisions, PakWheels had developed blogs and plenty of content in their new car section. Saeed commented, “we believe that the more choices the customers have, the more it will become necessary to research and PakWheels is tr ying to cater to this at every phase: research, transaction, maintenance, and finally sales. In maintenance, we have launched a ‘road runner ser vice,’ new feature in tri...