AutosPlus2017: Meet Lukas Draginas of Otomoto
06 Aug 2017
When Lukas Draginas, general manager of Otomoto.pl, raised prices on the Polish automotive classified platform, the site’s customers were livid. “We had trailers blocking the roads around our office, dealers were burning our flags and massively leaving the platform,” Draginas said. But Otomoto held firm, and the result is a classifieds success story in Poland.
Draginas will be telling that story and others during his talk at AutosPlus2017, the AIM Group’s classifieds conference scheduled for October 9 and 10 in London.
In our second profile of key speakers to present at AutosPlus2017, we get to know Draginas, who is also the general manager of OLX Cars in Poland. Draginas previously ran Naspers’ car business in his native Lithuania.
We asked him:
Which unique challenges do you face in your market?
Draginas: Poland is a very import-driven market — we bring in one million cars a year — and there is a constant shortage of supply. Poles, in general, buy more used than new vehicles. Some of these used vehicles are imported, often after an accident, with the intent of fixing them up and re-exporting the car — usually to Ukraine, sometimes back to Germany — for a profit. We have quite a few of these non-professional, passive traders who buy and sell one to three cars a year.
We face three big challenges at Otomoto. First, we need to deliver a sufficient amount of leads to dealers. We’re quite advanced in this area, but there’s always room to grow. Second, we need to source enough cars to sell. And third, many of the dealers and traders we work with don’t want to invest in their own people to work on their classified listings. They want us to do it. To address that, we’re increasingly looking at replacing manual work with AI and machine learning.
What will you be speaking about in your presentation at AutosPlus2017?
Two years ago, we increased prices for dealers on Otomoto. We hadn’t had a price increase for five years and there was a big gap between the value delivered and the value charged. We came to the conclusion that we shouldn’t raise the price gradually in three to five steps, but that we should do it all at once. That caused quite a bit of turbulence in the market. We had dealers blocking the roads outside our office, police protecting our building, people burning our flags.
We eventually realized that the protests were not because of the price increase, but because of the way we communicated to our clients. We didn’t treat them as partners. There was a lack of transparency on our part. It was a very sudden, take-it-or-leave-it approach, and the market was not prepared. We lost quite a few clients. They eventually came back, but at the time it wasn’t looking so funny. It was a real wake-up call for us.
Our approach has since changed. We’ve learned that we need to build the business together. And we opened up to the market. We meet in-person with every dealer on a monthly basis now. We also started educating the market by conducting regular dealer workshops — not teaching them how to sell cars, but how to use our tools and our platform to sell cars faster; to increase productivity without necessarily increasing ad spend. Our customers are now true stakeholders in the decisions how we build our product.
By the way, we didn’t undo the price increase. In fact, since then we have increased prices twice – the last increase went live just a few months ago. This time, we received only two phone calls from complainers.
My talk at AutosPlus2017 will be titled: “From flag burning to hand shaking.” I will share how we managed to recover, change perceptions, build relationships and strengthen our market position – all at the same time.
We see a lot of changes in automotive classifieds. What are the most interesting developments worldwide you’ve seen so far?
While Otomoto only operates in Poland, as a part of Naspers, we are in a unique position to have internal insights from multiple markets around the world. That gives us a more realistic view.
We admire companies that go for something and make it happen. Take CarGurus in the U.S., for example. There’s no magic there — they did something that many companies have been planning to do for quite some time. The main thing is, that CarGurus stepped up to the plate and did it. In Poland, we’re not so lucky, because the Polish government is not that open with historical data. That’s also the case around most of Europe, where historical data is covered by privacy laws.
We don’t have any plans to sell cars directly to consumers, such as Carvana. We have a golden rule: we don’t challenge our dealers or compete with them, and their way of trading. There are a couple of local players selling cars direct to consumers, but they’re not significant yet.
How big a part of your business may artificial intelligence become?
In Poland, dealers don’t want to do the heavy lifting, and value it a lot if we do it for them. We want to build on that. One way is through chatbots — LetGo and OLX have them and chat is becoming a more and more vibrant communications platform. But, our dealers are not ready to answer chats. Quite a few are not even ready to answer emails!
In general, there is a three- to five-year lag between what happens in the U.S. and it catching on in Poland. And the cars business is a bit behind other businesses. Dealers are more conservative. They need significant proof that something is going to be worth it.
Personally, I find geo-fencing interesting. One of the things we could and should do is measure walk-ins, since they’re such a big part of the leads we generate.
In your opinion, what are the biggest challenges the automotive classified industry faces in the next three years?
The biggest challenge will be to bring yourself to “disrupting yourself”. That might mean adopting a different business model, which turns a smaller profit initially but shows a lot of promise in the long-term. It’s challenging to say “no” to certain revenue streams, and market share, but you need to be willing. We ask those questions honestly to ourselves; we investigate many young start-ups and ask ourselves: “How would it look if we applied that?”
The speed of change is also a challenge. Technology is advancing faster and faster, but not all classified platforms are advancing at the same rate.