Zoomo failure

Zoomo

P2P transactions of pre-owned cars

Description

Zoomo was a Bangalore-based company that started with the goal of building trust in the Indian used cars market. Unlike many car portals, Zoomo did not open up their marketplace to other car dealers. Instead, it decided to only list cars after thoroughly inspecting them.The card would then be sold through peer-to-peer transactions. Zoomo’s aim was to offer a reliable and trustworthy platform where customers would be assured of the quality of the cars and that they would be given a fair, standardized price. The startup caught the attention of some savvy investors and was able to raise over $7 million through venture capital.

Stats

Category
Transportation
Country
India
Started
In 2014
Closed
By 2016
Number of Founders
Two
Name of Founders
Arnav Kumar, Himangshu Hazarika
Number of Employees
Between 11 And 50
Number of Funding Rounds
2
Total Funding Amount
$6M
Number of Investors
2
Precise Cause of Failure
Bad Business Model
Business Outcome
Shut Down

Cause of Failure

What killed Zoomo wasn’t lack of funding. In fact, the three Indian founders decided to close shop and return the money to investors when they still had half of the raised capital in the bank. They also seemed to have a great team of talented and committed people.

The problem the venture had was more related to the Indian market itself. The buy-and-sell automobiles market was relatively young in India and many of the people that would come to Zoomo’s site would often be first time buyers or sellers who had close to no experience in the car transaction market. Customers, in particular, would often like a certain model but when they checked the price for a similar model on other marketplaces they would discover that it would often be lower, not realizing that there might have been hidden reasons for the slashed price tags. They weren’t able to assign standardized prices to cars based on their conditions, model and features and the haggling was deeply rooted in the Indian culture. So, their estimation was that for every 100 cars they inspectioned they sold only 20, which would not have been sustainable. They changed their strategy and decided to have a base price for the car and have inspections performed as an added service for an additional cost. The modification allowed to sell slightly more cars but not enough.

Zoomo’s team concluded that the Indian market was not ready and that they needed a more mature environment to be able to pull off a similar model and make it scalable. After considering a merger or an acquisition for a brief period, they decided to cut their journey short and return the rest of the remaining capital.

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