Trade Me’s $30 Billion classified businesses

Over at Fairfax columnist and mate Mod O’Donnell* writes that last year there were 782,000 changes of registration for cars, and that 58% were private to private sales.

If you are going to buy a car privately these days, there is really only one place to shop: Trade Me Motors. (Please let me know if I am wrong and there is another sizeable viable market.)

Let’s be conservative, and say that Trade Me is part of the sale of not 58%, but 40% of all private to private car sales in New Zealand. There really is, to be fair, no other viable venue for selling cars aside from to friends and family, so I think this is too small.

There are currently 12,000 cars listed under $6,500; and another 14,000 between there and about $11,000, and over 32,000 cars listed over that number. Nobody really knows what the final prices are, so I’m going to estimate an average sale price of $12,000, assuming that the cheaper priced cars are more likely to sell.

So we can now estimate that Trade Me Motors is responsible for:

782,000 NZ sales x 40% of the market x $12,000 average price
=$3,753,600,000 worth of private to private car sales.  

I feel that the estimates of both average sale price (ASP) and the share of the market that Trade Me touches (40%) are low. If we nudge the ASP up to $15,000 and the market share to 50%, then the result is $5.865 billion.

However essentially every motor vehicle dealer worth their salt is also advertising on Trade Me, and dealer to private sales represent 24% of the total market. Their average sale price will be higher than the $12,000 assumption, say $15,000, and let’s take 60% of dealer sales and ascribe them to Trade Me.

782,000 NZ sales x 24% of the market x 60% of sales advertised on Trade Me x $15,000 average price
= $1,689,120,000 worth of dealer to private vehicle sales.**

Add the two together and round and we get a range of $5 to $7.5  billion worth of car sales that Trade Me is responsible for – let’s choose $6 billion as our estimate. The entire New Zealand GDP is about $210 billion, so that’s a substantial part of our economy.

Mod, the writer of the article, was originally brought into Trade Me to build the Motors business. I think we can say he succeeded.

We can also say though that Trade Me has removed vast amounts of inefficiency from the car sales market, and that means lower prices, easier and faster sales and a fairer market for all. There is still plenty of room to go, however, and Mod writes about dealers being incredibly unresponsive when contacted about cars across at Stuff.

And for those who like big numbers, Trade Me also has over 52,000 houses listed for sale, the average house sale price over the last 12 months was $380,000***  and over $35 billion of houses were sold in the last year. Trade Me Property and RealEstate.co.nz have divided the market for a while, but it’s fair to Say Trade Me has eased ahead. I would assume that almost all properties sold these days are listed on at least Trade Me, and most often RealEstate.co.nz as well. So let’s grant Trade Me 60-70% of the total, which is a range of $21.5 to $28.6 billion. Let’s choose $24 billion as the overall estimate, add it to the $6 billion for cars, and we get a nice round $30 billion in sales that Trade Me is responsible for. Compare that to our GDP of $210 billion again.

Trade Me also do jobs, but let’s not start that.

Real estate agents also exhibit many of the characteristics of used car salesmen – they are often slow to return emails, rarely qualify you when you do so and they add a tremendous cost to the process – commissions. Selling privately works for some, if you have the time and penchant for negotiations, but I do recommend, of course, that you try 200Square.co.nz****

 

* He writes so superbly well, far better than I did when I tried my hand at Fairfax Business columns.

**We are also missing from the equation the influence that Trade Me has on new car sales, and the lessor effect on dealer to dealer sales.

*** REINZ market facts

**** I’m a shareholder and director.

About Lance Wiggs

@lancewiggs
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One Response to Trade Me’s $30 Billion classified businesses

  1. Hi Lance,

    I used 200 Square recently to sell my mother’s home in earthquake affected Christchurch. As a family we were delighted with the result.

    Wayne Campbell
    Accounts Online Ltd

    Like

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