XA Podcast 025 | Eric Cheng On Building A Leading E-Commerce Marketplace | Founder Series

They say the third time’s a charm. And it really was for Eric Cheng, whose third attempt at a start-up turned out to become a leading car e-commerce platform. Were the previous two ventures in vain? No. He took their lessons and applied them to perfect Carsome. He reveals all in this episode.

Discussion Topics: Eric Cheng on Building a Leading E-Commerce Marketplace | Founder Series

• Eric’s journey from being an employee to an entrepreneur
• Learnings that contributed to building Carsome
• Carsome’s stages of business growth
• Three things a CEO must do
• How to identify potential and quality employees
• Overcoming setbacks in business
• Southeast Asia’s car market amidst the current financial crisis.

Transcript: Eric Cheng on Building a Leading E-Commerce Marketplace | Founder Series

Belinda Ong: It is our honour to host Eric Cheng, as our guest speaker for this month’s XA Fireside chat. Eric co-founder of Carsome, in 2015 in Malaysia, and has since expanded the company’s presence to Malaysia, Indonesia, Thailand, and Singapore. Carsome prides itself as a one stop shop for all car sellers, providing a full stack selling solution from inspection to ownership transfer to deliver a seamless and hassle free experience to sellers. Carsome currently transact more than 30,000 cars annually, totalling more than $300 million in transacted value. We would also like to thank our interviewer, Agung Nugroho, for joining us today. Agung was formerly the CEO and co-founder of Kudo, a platform which bridged offline and online commerce through technology. Following the acquisition of Kudo by Grab in 2017, Agung served as Senior Director in Grab. Prior to starting Kudo Agung was a management consultant with the Boston Consulting Group for five years. Eric and Agung, thank you for joining us today to lead a discussion regarding Eric’s founder journey. Without further Agung, the floor is yours.

Agung Nugroho: Eric, maybe in the beginning, we would want to see and hear your journey first, as a founder journey. Can you share a bit on who you were before this and when you started your professional career do you think you are going to be an entrepreneur at a time or what shapes you in the beginning?

Eric Cheng: So thanks, Agung. Hi, everyone, again, good to see all of you here. I believe all of you mostly entrepreneur like me, but the truth is, at the very beginning of my career, I didn’t see myself so much as an entrepreneur, simply because unlike, most of you probably has a degree or a diploma, I actually dropped out from college and I only have like a high school certificate. So what happened was I enrolled into accounting, and I thought that would be good to become an accountant for my career. But one year in, I felt that I can’t see myself being an accountant at all. So I had to drop out. And eventually I didn’t go on to enrol to another course. So immediately, I jumped straight into finding a job, and I landed a job in a digital advertising firm. So I think what was interesting about that is, it was 2008, when I started the first job, and I was very fortunate to be at the forefront where digital advertising, was disrupting the entire market for things related to marketing. And I was at a firm that I find myself, not just having to educate clients about how digital advertising is so much more measurable compared to your traditional marketing on top of that, I find myself being very indulge with everything about technology, everything about disruption, I think that’s sort of from my mind part of my thinking, towards to do in my next 10 to 20 years, and so on. And very quickly within that first couple of years in the in the company, I built myself up to eventually manage most of the brand campaigns that you see in the past 10 years within the Southeast Asia, and it was really a good learning process for me.

And I think in between that period, also, I started to find myself being very receptive towards things that are disruptive starting to learn more about start-ups, starting to learn more about starting up a new venture that is delivering a new solution to the market. So Carsome was actually the company I started. I have created two before. One is a mobile gaming studio, which I thought I like playing games and I could turn that hobby into a venture on my own. But turns out playing game doesn’t mean that you can create games well, so at that I just stopped after the second game I developed and the other venture that went on to was a digital advertising network and set up a company so after nine months it. So it was actually a good journey as well, from that so and then Carsome was actually the setup. So what got me into this journey of being an entrepreneur apart from me thinking that this is what I really like to do is also my mentor who was my boss in the first firm that I work in, he once told me that, look, Eric, I can’t see you becoming a CEO or CEO of a Google or Facebook, I think you’re more suited to be on your own, and start up on a new journey, a new venture. So I think that kind of just sealed the deal for me to really pursue something that I feel I could eventually own up to. And I think that’s kind of why I always see myself as an entrepreneur, because of how my journey was, and also the people around me, encouraged me to actually do so.

Agung Nugroho: Thank you. And you mentioned that you were establishing two ventures before Carsome, what did you learn, what was the good lesson learned that you took to establish then Carsome?

Eric Cheng: So I think those two ventures in some way one failed, one, I managed to exit and a lot of learnings I gotten from those two, before I started Carsome, which I actually apply very much is that how I think about the solutions that I’m offering is it going to be something that I can have clear value propositions to the audience or to the customers that I’m serving, that’s number one. And number two, how to actually be out of business, and being able to manage every single phase of it. And I find myself in the first and second ventures, I wasn’t as good when it comes to managing every aspect of the business. Being as a leader of the company, one thing you need to do well is to be able to look at the big picture, and then zoom into the details, and then zoom back out to really tie everything back to the objective of where your company is heading to. So I think coming to Carsome was actually a lot clearer in that direction to us how I should manage it. And I can define it pretty well in terms of how I think about the solutions of the business, the service, the target audience, even the market I’m addressing, I think that wasn’t really as clear when I was studying the first and second and it was actually quite a good learning experience for me.

Agung Nugroho: Very nice, very nice. I think that’s a good segue on Carsome. Why Carsome what makes you particularly interested in the car industry? Are there any specific pain points you face or do you see something that is very clear at that time on this opportunity?

Eric Cheng: So I started Carsome in 2015, so about seven years ago. So there was also a time where I was one year out from the second venture that I exited. And I find myself really wanted to restart again to pursue with my next venture and it was interesting because I was having a coffee chat with my co-founder. So we will escalate back then. So we’re talking about really starting a company together and we were exploring different sorts of ideas, I think one just got really sticky to us is that we were talking about experience that we had when it comes to buying and selling used cars in the market. My very first car is a used car that I bought. And that entire process of trying to find a car that I like, and then go on to negotiate and close the deal to financing applications and all the other processes, order to transfer it was a huge, huge hassle. I had gone through a couple of weeks of ding dong ding before I get to the point that I can drive that car. And turns out that car has a lot of issues. And I have to bring it back to the workshop because there’s no guarantee attached to it. So and I think I find that experience is not just limited to myself, my co-founder shares the same sentiment, the same experience when he was buying a car. And a lot of people around us also friends and family faced that issue. And then we see that this could be a really huge opportunity because when we think about starting Carsome the solutions that we can provide in terms of tackling that process that is lack of transparency, lack of trust, I think we could digitalize it as we’ve all process, we represent that’s number one. Number two is also we find that the market in used car is extremely huge, but yet is still very traditional. So it’s planning for disruption for us. And I think number three is also very crucial is that I think I found a really good co-founder, we share the same chemistry, the same mind-set, the same vision and then we started working towards that. So this three got a combined to, why we think that in the first place seven years ago, we want to really pursue this goal and then now we are getting closer to what we thought or probably even surpassed the visions that we had in the initial days.

Agung Nugroho: Very nice, and particularly on the journey if you look back seven years ago, until now, is there any different stages of the company? And can you share a bit more on each of those stages if any?

Eric Cheng: I think many of you would also experience the same, like, the way I best define it to and especially the people in the team in Carsome is I see, the start-up journey is just like how you were in school back then, where grade one, grade two, grade three, grade four, you studied different syllabus, and you graduate, and then you move on to the next year and study new textbook, new syllabus, again, but the goal remains the same, you want to graduate, you want to get to what’s the end goal, while you’re going through all this process. And I think in the start-up phase is also very similar. When I started out Carsome, in the very beginning, the first day in office, we only have four people in a team. So two of us founders and two-part time, and one eventually became a full time and it’s still within the company, our very first employee. And then we see that in the first year was a lot of finding the product market, building up the market capability, our platform, our solutions, and then second year, then I went on to really prove that into multiple markets, and then third year, then we go on to really skilling and start building up those capabilities that we envision the platform to have. And to where we are today, we have a team of 4,000 odd people spread across multiple countries within Southeast Asia, we even have an engineering hub in Beijing. And I think those things that we are doing from the beginning of the first year to second to third year is almost like how you’re graduating from the first year and then you move on to the second year. And the way you challenge yourself to hit that new goal that you set for the year is slightly different, or can be entirely different from the year before. So I think that was something that I would say the phases that we experienced in the very beginning was to really do everything by ourselves as much as possible, to the point that now there’s a lot more things that we are trying to build is the more structural approach, much more organized and you empower a lot of different leaders within the company to continue to work towards the same goal.

Agung Nugroho: What’s the most challenging, which stage is the most challenging?

Eric Cheng: Most challenging to me is really about, I think, probably where we are today, like a lot of people management, a lot of stakeholder management, you know, in the early days, of course, you’re finding product market awesome, which means you’re very focused on building the right product for the customer. So when you see yourself having meetings, that is more towards fine tuning your solutions, to now that you have a very sound solution, you’re bringing it to the next level and there’s a lot more people involved in those projects to try to get there, and then your job become more of also not just doing that, but at the same time having the external support the market, and everything else, including partnership, to realize that goal. So I think the most challenging part to me is always that management in terms of people to the stakeholders, not something that I enjoy the most to be honest, I enjoy building products. But it’s something that I must do.

Agung Nugroho: Then it’s a very good segue to the next part of the session is about leadership and people. Just wondering how is your day to day like, from your maybe starting like, whatever hour until the end of the day.

Eric Cheng: So my day to day now is very different from the beginning, of course, so I can wake up in the morning and plan out my day right immediately, rather than now my whole week is already planned out with a calendar as throughout different meetings and different catch ups. So I think is a lot more organized now. A lot more formatted in a sense where there are certain things that I need to do on a daily to weekly basis, including the cadence of like reporting to the cadence of catching up with the team members. So that day to day now is I’m trying to organize it more towards in an efficient manner that I could have less meeting, but more catch up in person because sometimes I feel the most engaging conversations happens when you meet a person in a meeting room rather than in zoom or Hangout. So and I think, that’s something that I’m trying to also free up more in terms of the time that I can have also for the business, where I could have like, 20 30% of my time that to think of what’s the next step, rather than in a sitting in a meeting and listening to the reports, I think that is something that as a leader, all this should continue to have that spare time to think about how do we bring this business to the next level.

Agung Nugroho: Then, if you want to summarize maybe the top three most important thing of your role right now, in the Carsome stage, what would that be?

Eric Cheng: Top three things that I must do?

Agung Nugroho: Yeah, as the CEO, in your stage right now.

Eric Cheng: So I think first thing first, is being able to engage with the people from and minus which is your senior leadership team to the people on the ground, so that gives you the understanding from top to bottom, everything that is happening within the business, and see where you can be helpful. That’s number one. And number two, is having that time to think about what is the next strategic move that you can help improve the business or innovate the business and which relates back to the free time that you could come up to think about the next move, or the next big commercial move or big bets event. And I think number three is also having that visibility, which is through the meetings, through the email updates, through the reports that you read, I think having that visibility within the business, keeps you aware of what’s going on and how do you relate that to the solutions that you can implement as a CEO, be it internally with your people or with your partners and investors.

Agung Nugroho: Noted. Thank you. And you mentioned a lot about people, and as you have seen many Carsome employees just wondering, I’m curious, how would you differentiate or describe a high quality employee versus just a mediocre one.

Eric Cheng: So we have six core values, so it’s seven now, and Sergio is championing it for us. So number one is customer first, yesterday versus today, baseline, your problem is my problem, stay grounded and also think that you can start small and the seventh one is be an owner. So if you ask me what is a high performing one versus a mediocre, you can have a lot of good track record and you keep hitting your KPIs objective and whatnot, I think the most important thing that we find that work in our company is people who share the same chemistry, the same vision, and that helps in really driving together as a team towards the direction that you want the company to be right. So I think that’s the most important thing, because when you share the same chemistry the pathway, when you sit in in the discussion, you can have very meaningful discussions rather than trying to object into different opinions and whatnot, and that is something that I always look for, from people within the organization, that you can turn into a really high performing one so long that you share that some chemistry, and number two is executing that goal.

Agung Nugroho: Just wondering until which stage, are you still interviewing your employees? Or is it right now still, you’re interviewing your employees?

Eric Cheng: So senior leadership, yes. Senior leadership role, most of the time, we would go to multiple interviews, the input, not just myself, but also other x Corp or C levels. And not to the extent to everyone else within beyond the city leadership team. But there’s something that we’re trying to work towards and having the more proper understanding to it how do we interview and qualify talents because I feel hiring the right talent is very key. And sometimes hiring talents that holds the same value and same chemistry is even harder if you’re doing it alone. So I think there’s something that always like, if you experience some people who work in Carsome you find them next we spoke to one or two or three people even before joining that’s something how we think about finding the right leader and recruiting them in the company.

Agung Nugroho: Maybe I will shift a bit on this. Can you think of one of the hardest moment when you are in Carsome and hardest or pivotal moment what was that and how did you come over that one and what did you do, what was the decision that that you take at that time to ensure things are becoming okay again.

Eric Cheng: So I think everyone would agree right? Probably to name one is just to later in a start-up journey, this is so full of so many big challenges. I can name you, two, in this right call. So I think the first one was, during the first year, after about six months in the business Carsome started off wasn’t like, at the very beginning, we weren’t offering the kind of service that you see today. So today, if you look at Carsome, you can buy a car from us, you can sell call through us, you can even get a car finance. So there’s a lot more things you can do with Carsome. Whereas in the very beginning, when we live the platform, the website only contains information about different car specification, and we link to up to the new car dealerships within your local vicinity, and we offer you the offers right from the dealership, and that model works out well, at the beginning, posing a lot of traffic, a lot of users. But I didn’t get to a point that we nailed the manifestation to the service that we’re trying to provide. And I think we were struggling for about three to six months during that period, and we started to find that we needed to pivot the business model. And eventually, I think we found that through those data that we analyse, where we were offering that service, that 70% of the people who was trying to look for a car to buy, they’re also looking to sell their car. And they asked us that exact question is that can you helped me sell my car? I think that’s when we figured out that there’s an opportunity for us to create a solution to help deliver a hassle free process to sell a car. So that’s how we started the business and eventually pivoted, and it scaled up very nicely. So that’s one of the very pivotal moment that without that I probably you don’t see Carsome today.

I think the second pivotal moment is about two years ago, when we were entering pandemic, that if you think about the first lockdown that happens in Southeast Asia, pretty much the entire car industry was in shutdown mode, no cars being traded, everyone’s locked at home. And our revenue from doing sky high growing well, every month dropped to zero. And it was a very huge shock to it’s not just our business, but to is how we handle it eventually. And I think we were having like daily stand up like 8am in the morning trying to figure out like what we should do next and all. And I think we decided not just to really upskill the people that we have, which they have nothing to do at the moment, but we use that period to upskill them to Google classes. And the other thing that we have done is also using that downtime, to regain our ideas in terms of how do we bring the business to the next step. And that’s when we launched our Carsome certified, which is our retail business, and that business was born out from the pandemic. And six months later, when we were out and we were building up the business nicely, we recover within 45 days to 100%, pre COVID and started growing from there. And we launched the business of Carsome certify that people can buy cars from us now. And two years in now that business is contributing revenue to about 30% of the group total. So there’s a lot of things that we see, during crisis it could be a bad thing to the business, but turns out, you know, if you manage it, well, it can be a real opportunity to find a breakthrough.

Agung Nugroho: Very cool. That Carsome Certified is very interesting concept, by the way. And moving to your perspective about the industry and the market as well. Currently financial crisis is quite imminent how do you see because car is not a small ticket sized item how do you see the purchasing power of Southeast Asia market towards car in general, in this current financial crisis situation?

Eric Cheng: Without a doubt car in Southeast Asia is probably the second biggest purchase in everyone’s life. And we have done like a study before also is about two times the GDP of every country, returns on capital. So naturally, it means that is something where people when they want to own it, they aspire to have a car, which we find that very similar in countries that we are live like Indonesia, Thailand or Malaysia. It’s also not easy or not accessible for everyone due to loan limitations or due to the credit profile, or due to the lack of data or even lack of cars in the market. So when we see where the slow market is happening across the board, globally, I think to certain extent, we see it happening in Southeast Asia too. But in our opinion, and especially how we have looked at the last seven years, this is not the first time that it has happened in the car industry, so there’s multiple different sort of crisis that happens that sort of also bring down the demand or even supply at some point in the last seven years. And the way we navigate it is when we look at the market share that we own in the industry today is still at a good, high single digit, but it’s not towards like 20, or 30, or 40%, of the entire US car market in Southeast Asia. So what it means is during a market slowdown, yes, generally the sentiment the interest would be lower than during good times. But it also means that if you’re able to do well and execute well and work on optimizing your conversion and work on optimizing your business, which is within your control, the kind of gap that you create in the industry, as you increase your market share, where everyone is standing still is going to be very significant. And I think that’s something that we have learned throughout the last seven years that it has happened to us before. And this is another crisis that happened probably bigger. But it is something that we know how to anticipate and how to get over it. And by the end of it, we will be emerged on a position of strength. So that’s something that we see.

Agung Nugroho: Very interesting perspective, basically, what you’re saying is that the pie can get slightly smaller, but because you can execute well, you can eat up the other portions, so that basically you can grow if you can execute well, very nice concept. And in the perspective of global macro right now, what are you seeing like, what is the parameters that you see most important right now?

Eric Cheng: In terms of?

Agung Nugroho: Of the macro parameters, for example, or what market data that you see, as an indicator of your business and how much often are you seeing that?

Eric Cheng: So I think the key indicator for us on the market movement definitely is how many cars is being sold in the market. That’s number one. Number two is, in terms of the financing attachment rate, the approval rate, you know, because a lot of car purchase within the region, in most cases would requires financing. So that’s the other thing that we looked at, also, how do we get that understanding when it comes to financing, to the car industry, in general. So some of these things are things that we always have to observe very closely. And I think the last thing that is more closer to us is the car pricing movement. So we see our platform, as much as we have the infrastructure, we have the technology stack in the business, the most valuable thing is actually the data ownership. So for example, today if you want to buy or sell a car, so pretty much there’s no database in the market, that you can refer the car pricing. So but in the West US, for example, your Kelley Blue Book, so you can check just by typing your car profile, and it gives you a market price indication. So we have this data within the platform that could tell us what is the price for the past three months and how are we predicting for the next three to six months, because the algorithm that we created for the pricing engine helps to be able to get those things and as we see the price move between the different supply and demand factors in the market that helps us to also navigate to see how we can improve to its appetites in the market and just towards our own pricing. So I think there’s something that we see right now in the market is on a level that is slightly declining. But it’s picking up again in the later of the month, which we see that towards the end of the year usually there will be a spike in terms of where people are repurchasing cars again.

Our Guest: Eric Cheng

Eric Cheng is the co-founder of Carsome, the largest car e-commerce platform in Southeast Asia. The company has digitized the used car industry and caters to a wide market in Malaysia, Thailand and Singapore.

Eric has significant experience across the realms of digital strategy, technology, mobile advertising, and search advertising.