Why is a classifieds site for cars in India valued at $300m?

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With US$8.3 billion worth of used, idle goods floating around India, there’s a chance that the future might look like a post-apocalyptic junkyard of things we don’t want anymore. If everyone always wants something new, what do we do with the old?

“Sell it off,” says the president of Cardekho, Umang Kumar. Cardekho is a classifieds site for new and used cars. For Umang, those who buy used cars are a demographic of their own that need to be uniquely targeted. “If you actually look at the used car market, it’s growing at a rate of 25 percent,” he says.

Cardekho also hosts an active forum, sells car accessories, and provides access to the latest automobile news. It was launched by GirnarSoft which is also the parent company of price comparison site PriceDekho. GirnarSoft raised a total of US$65 million in two rounds from investors like Sequoia Capital and Chinese investment fund Hillhouse Capital. After its latest round of funding, Cardekho is now reported to be valued at a massive US$300 million.

Before this, Umang founded Gaadi, an auto classifieds site that was first sold to Naspers and then acquired by Cardekho last September. “The original idea started when I was working in the media industry,” he reminisces. “At that time, I noticed that digitization was severely disrupting the advertisement space. Within this, the biggest things getting disrupted were real estate, education, and automobiles. I decided to tackle the automobile market.”

What’s the big difference?

So, let’s say you want to sell your car. Which classifieds site do you choose? Naspers’ OLX is a classifieds marketplace with its presence in over 106 countries. In India, it’s considered one of the country’s largest used goods classifieds sites and has a category specifically for automobiles.

Cartrade, another used automobile classifieds site, is backed by investors like Warburg Pincus and Tiger Global Management who have pumped in US$30.2 million of funding in a single round.

It recently acquired its rival Carwale. Recent entrant Droom is a mobile-first automobile marketplace that’s backed by Lightbox Ventures and Japanese internet firm Beenos. It promises to make buying cars as easy as possible and includes features like a refundable commitment fee of 2 percent so sellers aren’t affected if someone backs out of a deal.

As with all sites that depend on their community, however – Facebook’s original mad rush of users and ensuing success being an important example – the size and enduring loyalty of its original users can mean the difference between success and failure.

In order to gain this loyalty, Umang explains Cardekho has used a very specific strategy. “We’ve done a lot to capture our customers,” explains Umang. “We like to break it down to three aspects: trust, convenience, and price.” The past few years have seen Cardekho use these aspects to pivot from an advertising revenue model to indulging in everything from ecommerce to warranties.

Cardekho’s acquisition trail is long and strategically planned to help achieve this trifecta. It acquired auto portal Zigwheels in September and “intelligent shopping site” BuyingIq – essentially, a vamped up price comparison site that also aggregates reviews and recommendations – in April.

Along with its acquisitions, Cardekho has launched several features to help achieve its goals. The Cardekho “Trustmark” is a stamp of verification for cars that the company has inspected. With the use of a thorough 120-point checklist – including checkups of engines, steering systems, and transmission – cars are either rejected or certified. While the verification process only works in 14 cities across India, those that pass are listed as “Cardekho verified.” Cardekho also recently tied up with insurance portal Coverfox.

Waiting for a homogenous market