Business organization model and value cosmos

CarGurus is an online automotive marketplace that connects buyers and sellers of new and used cars [ane]. The company provides the largest machine listing marketplace in the United States and also operates in Canada, Britain, Germany, Italian republic and Spain.

CarGurus creates value for both the buyers and sellers of cars. For the erstwhile, CarGurus offers a sophisticated search engine that shows how competitive automobile'south price is in comparison to similar vehicles. The platform calculates an Instant Market place Value (IVM), which reflects the marketplace value of a vehicle. The IVM is calculated through a information-driven arroyo that considers multiple dimensions such as make, model, mileage, and customers reviews [1]. This market place helps solve the lemon problem: the fact that owners of used vehicles have an data advantage over potential buyers in relation to the quality of the cars, making it hard for buyers to select and purchase great cars [2].

For dealers, the platform provides an efficient channel to sell their vehicles through the Bones Listing, Enhanced List, and Featured Listing products. The Basic Listing product allows dealers to publish and market place their cars in the website without cost. The Enhanced Listing product provides dealers with a higher volume and quality of connections also as the contact information of potential buyers. In addition to the benefits of the Enhanced Listing, the Featured List product ensures the dealer's cars are promoted at the top of the search engine [3]. CarGurus captures value through the dealer'south subscription (89% of full revenues) and through motorcar companies' advertising on their website (11% of total revenues) [1].

Cess of CarGurus' scalability and sustainability, and next steps

Since the company does not accuse a fee for car-ownership customers and offers a free entry-level product for dealers, it has been like shooting fish in a barrel to calibration the company. Its main challenge it to sustain that growth over time in a assisting way.

In its annual report, CarGurus highlights the cantankerous-side network effects driven past scale. The more customers who utilise the platform, the more dealers subscribe to the marketplace and pay for premium products [3]. At the same fourth dimension, having a large number of dealers attracts more customers who are interested in ownership cars. Figure ane. shows that the company significantly scaled the platform between 2016 and 2018. To illustrate, in 2016-2018 the number of paying dealers increased by 22%, while the average annual revenue per subscribed dealer increased past 16% [i].

In relation to the sustainability of its business organisation model, CarGurus participates in a very competitive marketplace including other vehicle marketplaces (east.chiliad Cars.com) and other automotive websites (e.g. Carfax.com) [one]. Although the visitor has no hazard of disintermediation, since CarGurus only charge revenues for the subscription and no a percentage of the transaction, the company is at risk of dealers migrating from a paid service to the freemium version. To face this trouble, CarGurus should strengthen the value suggestion of Enhanced and Featured List products. The company should enhance its current tools (such as the Dealer Dashboard, which includes tools to price inventory past existent-time market conditions) and create new tools to increase boilerplate revenue per dealer.

In addition, since car buyers search for cars in their areas, there is network clustering, which makes easy for other competitors to reach a critical mass in a local marketplace and take off through a differentiated offer [4]. In a competitive marketplace, both the car buyers and sellers tin do multi-homing.

In the instance of buyers, since in full general automotive platforms does not accept a cost for them, the cost of adopting an additional platform is low. For that reason, it is disquisitional to strengthen the value proposition by improving its search tools and the customer experience. In relation to the sellers, the freemium users also do multihoming, while the premium users have a higher barrier to practise multihoming. Currently, the subscription understanding of the dealers tin be terminated with xxx days of detect. Deepening medium and long-term relationship with established dealers can increment the marketplace's stickiness and better the sustainability of the platform.

As explained above, going forward the company should focus on strengthening the value proposition for both dealers and buyers [v]. In the year 2020, the company has implemented new initiatives to improve customer experience. For case, CarGurus decided to improve the customer feel past reducing the advertising load [6]. Continue implementing initiatives that ameliorate customer experience and establish long-term relationships with dealers is the only way to thrive in this competitive market.

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References

[i] CarGurus website. "Almanac Report 2018". https://investors.cargurus.com/static-files/b42f6e54-959c-44ea-a003-9ffd79710f09. Accessed on February 2020.
[ii] Emons W. and Sheldon Thousand (2009) "The Marker For Used Cars: New Evidence of the Lemons Phenomenon". Applied Economics 41(22):2867-2885.
[iii] CarGurus website. "Annual Report 2017". https://investors.cargurus.com/static-files/b42f6e54-959c-44ea-a003-9ffd79710f09. Accessed on February 2020.
[4] Zhu F., Iansiti M. "Why some platforms thrive and others not." Harvard Business Review R1901J (2019).
[5] Zhu F., Furr Northward. "Products to Platforms: Making the Bound." Harvard Business Review R1604E (2016).
[6] Seeking Blastoff. "Buy fear in CarGurus." https://seekingalpha.com/article/4326918-buy-fear-in-cargurus. Accessed on Feb 2020.