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CCC: Extending to a Two-Sided Marketplace

AUTHORS:

Dave Yuan

Founder and Partner, Tidemark

Githesh Ramamurthy

Chief Executive Officer, CCC

Marc Fredman

Chief Strategy Officer, CCC

In Part 1 of this case study, CCC CEO Githesh Ramamurthy and Chief Strategy Officer Marc Fredman discussed how CCC built a franchise selling claims management software to auto insurers and extended to their suppliers, auto body repair shops.  

In Part 2, we talk about how CCC extended from the repair shop to build a two-sided parts marketplace. If you are looking for Part 1, you can find it here. Read on for Part 2! 

This interview took place on January 12, 2022 and has been edited for brevity and clarity.

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Dave:  OK, in Part 1, we covered how, as you build a successful auto body repair operating system, what happens gets really interesting: you build a two-sided marketplace. Tell us more.

Marc:  We see this in all the products that we build – it starts with a big customer insight. We found on the parts side that the worst hour of the shop manager's day is reconciling the invoice to the parts that they ordered. We enabled them to not just be able to click to order the part – which is great, and we have thousands of near real-time parts suppliers so we can get inventory checks and those types of things – but, because we have the integration into the supply chain management systems at the supplier, we can also get that invoice to come back in so they don't have to manually do the reconciliation.

With reconciliation, we think about adding payments. We process over $100 billion of commerce every year on the CCC Cloud – that’s insurers, repair facilities, parts suppliers, and more. We started introducing payments to eliminate the pain points that happened for insurers and repairers, but regardless of where you look across the insurance economy, everybody has the same core problems. They’ve got people handling payment information or making approvals through systems that are tedious, complex, and prone to error. They have a lot of paper, a lot of checks flying around, and there's tons of phone calls. We’ve already helped repair facilities digitize payments with consumers and automate reconciliation, and we can take that to many other flows as well.

Dave: You've talked about the classic workflow value proposition around reconciliation and payment order flows, but with parts you’ve created a proper two-sided marketplace and ecommerce experience – an Amazon for repair parts. Not many software companies have been able to create marketplaces. How did this happen? What do you think you guys got right, and what are you still working on?

Githesh: Well, we failed twice before succeeding. This time has been different. This time, in addition to individual parts dealers, we were focused on having OEMs (Original Equipment Manufacturers – car companies) involved. Car companies, aftermarket suppliers, and recycle suppliers: we wanted to be agnostic in terms of which parts we were offering. We have to offer the widest range of suppliers, because when a shop is repairing a vehicle, they're going to need all types of parts.

This third time, we also started hyperlocal. The first two times, we thought about markets in terms of large geographies. Fortunately, the third time, we had the data to look for hyperlocal markets where we had density. For example, we started out in the Pacific Northwest where there were some unique dynamics in terms of the concentration of wholesale dealers. We sent a team there to understand the conditions on the ground and try to create concentrations. We would actually move this team from market to market to build these concentrations.

The main test was after our people left a market, would customers keep coming back and using the electronic procurement tools? If they did, we realized we were onto something – buyers were finding value and that usage was going to be sticky. The main thing in the early years was to really make sure that we created something sustainable, as opposed to what I call a “sugar high,” where you spend a lot of time and energy to get people using it, and then when you go away, they stop using it. That was extremely important.

Dave: The repeat re-engagements are the best sign that you have something, in both a product and business. You mentioned that a lot goes on over the phone, which is the classic offline relationship-based sale, historically. What do you think were the big step function changes you were able to achieve to start moving more of that behavior online?

Githesh: I think we had to start with a buyer. When you're dealing with the average car, average collision repair needs about $1,700-$1,800 worth of parts. You're not talking about small dollars. We found that the parts sellers – the wholesalers and the dealers – were happy to get the orders any way they could. What we wanted to do was make it smooth and easy for the buyer.

For the buyer, the ease of using a platform they were already using with an estimate they were already writing, makes the shopping cart an integral part of that process. They could literally go in, make decisions, check availability of a part, and order. Because shops have cycle times they have to deliver to, if they don't deliver on a decent cycle time then the customer or the insurer is going to be unhappy. By making that process easier, better, and smoother, we started to see more adoption with the repair facilities, and then we started getting more feedback and understood more and more of the pain points.

On the supplier side, there were some interesting developments. The single biggest benefit for the supplier was that the traditional buying was done over the phone, which is open to error.  Electronic parts ordering, on the other hand, is placed directly from an estimate, with an actual part code that means you are selling the right part for the job. That minimizes returns and wasted time and expense.

The high level of specificity of parts is also why it took us such effort early on, geography by geography, to start building enough supplier concentration. As the OEMs tried our product, they saw that this was a great tool for their parts dealers. Automobile companies have anywhere from 400 to 2,500 parts dealers, so they saw tremendous value as an organization and brought significant supply concentration to our market. Our recyclers saw tremendous value, and our aftermarket suppliers saw tremendous value. As they embraced us, it started to build more scale and efficiency.

As more buyers started to come on, we started getting more suppliers, and once you got a critical mass of suppliers you end up with a larger critical mass of repair facilities. It's really been building both sides up.

Dave: This is incredible. We're not talking about one business, but basically three separate businesses that are all interconnected. You addressed three levels of this industry, and we haven't even talked about the casualty side or the other constituents that you've engaged with. In each case, I think it sounds like the organizing force is, how do we make the consumer experience better and how do we improve the world for all stakeholders?

I think of you guys as being part of the fabric of the industry itself, and you’ve also become a steward for the industry. How do you want to change the industry, if you think about it over a longer period of time?

Githesh: I think a huge piece of what we've tried to do has really come from that mindset of creating win-wins for all the participants. That's been very fundamental and it works really well over the long term. It’s put us in a position where we are bringing banks, medical providers, OEMs, parts and diagnostic providers, salvage yards, etc., online. We're bringing many, many constituents together in this network and, as Marc was describing, that's why we call it the insurance economy. We think of ourselves as a platform for the industry where we're really improving the lives of all the participants, including the consumer. That's a very fundamental part of who we are and it's worked out really well. And, as you know, we continue to invest very heavily in talent, very heavily in technology and staying state of the art. A good example is our application of artificial intelligence. These are the world's first innovations to automate and streamline workflows across the entire insurance economy, including the consumer. There are really hard AI problems we’re solving that have never been solved before.

I know we're coming up to our time, but thank you so much Dave. We’ve loved having you as part of this journey with us, and the ideas and thoughts you bring to us.

Dave: Well, I've learned a lot and I'm super proud to be just a small part. Thanks for sharing this story, this is great.

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We love the idea of bringing together a community to explore the boundaries of Vertical SaaS and are excited by what we can learn from each other. If you are looking for further analysis of topics discussed in these case studies,  we encourage you to check out our essays on extending, being inherently multi-product, and supplier networks.  Are there other companies you’d like to see a case study on? Email us at knowledge@tidemarkcap.com. If you would like to keep updated as we publish these essays, sign up below. 

The information presented in this post is for illustrative purposes only and is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by Tidemark or any of the securities of any company discussed. Companies discussed in these posts may include current Tidemark portfolio companies and/or prior investments made by Tidemark employees while at other investment firms. These companies identified above are not necessarily representative of all Tidemark investments, and no assumption should be made that the investments identified were or will be profitable. The information in this post is not presented with a view to providing investment advice with respect to any security, or making any claim as to the past, current or future performance thereof.

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CCC: Extending to a Two-Sided Marketplace
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