Car maintenance is a promising market niche in Russia. However, this segment is far from high-tech, with 53% of the market accounted for by drivers who repair their own cars or mechanics who provide private services from their garages. Car repair shop owners rarely aim for expansion, development and scaling, and are not motivated to introduce new technologies. Sherzod and Barno Tursunov, the founders of the Wilgood smart car repair shop chain, are among the few market players who rely on innovation in this business. What difficulties do repair shop owners face?
Making a U-turn
The Tursunovs both hold degrees from the physics department of Tashkent State University. They believe it is their engineering background that gives them an edge over their competitors. Where Barno and Sherzod estimate risks mathematically, other car repair shops act blindly and often miscalculate.
In Uzbekistan, the couple was quite well-to-do – Sherzod ran a successful business that sold furniture and cars. But he wanted to try his luck in big business. The local market did not allow for a significant expansion, so they made a life-changing decision and moved to Moscow.
At first, the Tursunovs sold wallpaper on the construction market in Mytishchi. Two years later, they set up Eurodesign, a wholesale company selling finishing materials. But the arrival of home improvement giants such as Leroy Merlin on the Russian construction market quickly put smaller companies out of business, so Sherzod decided to transition to a completely new sphere. At the end of 2011, the family sold 35% of their building materials business and used the money to acquire an old car maintenance center in southern Moscow.
The Tursunovs approached the choice of their new niche with great care – they wanted a large market, with high resistance to crises and a limited number of large competitors. This is how Sherzod hit on the car repair business.
“This niche is mainly taken by independent car maintenance services with outdated business models. This not only prevents them from making profit but often creates losses,” Sherzod recalls. “I studied the western market and found that their car services are actually profitable. So why are they cost-effective there but not in this country?”
The couple concluded that if they approach the industry with a different philosophy, they could stand out among the abundance of inefficient competitors with their efficiency. In general, the Tursunovs identified four main criteria for picking a business, regardless of the industry:
- no major monopolistic companies. It will be extremely hard to expand your business if there are dominant competitors in the market;
- independence from currency exchange rates and the current state of the economy;
- no dependence on corporate clients. The more clients consolidate, the more pressure they put on your business to get a better deal, which reduces profit;
- opportunity to expand and grow in the future.
Buying their first operating car service (with equipment, employees, customer and supplier database) cost RUR 18 mio ($282K). The seller advertised the service as a profit-making business but, after studying the specifics, the couple quickly realized that it had been bringing no money.
“We were surprised by how inefficient businesses are in this industry. The customer database included only phone numbers and car models. It was very difficult to calculate employees’ performance and workload. Nobody monitored the quality of customer service or counted returning customers. In those conditions there was no chance of high profits,” Barno says.
The Tursunovs spent eight months turning the situation around. They started looking for a solution in IT. To fix existing problems they needed a system that could control all operations, from calls from potential clients to completion of the works.
However, it soon became obvious that there was no solution on the market that would satisfy the needs of the company. The Tursunovs then hired IT experts who developed a business process accounting and monitoring system from scratch.
“It looked impractical at the time. We invested in an expensive IT solution while having a single repair shop. But we wanted to grow, and we needed technology to do it,” Barno says.
Fines and bonuses
The new IT solution was named Wilgood IS. This is a system that automates all processes in the company, preventing employee theft and improving the quality of customer service. All activities of all employees were digitalized and turned into algorithms, which every employee was required to follow. Thus, the system showed the load, productivity and functions of each of the employees and the deadlines they were supposed to meet. So, each employee received an opportunity to improve their Wilgood IS performance by 15%. If, when dealing with a standard task, the employee’s performance exceeded 15% or dropped by over 15%, they did not receive their bonuses. The company’s website also had a live video stream from the repair shop, which allowed both the boss and the clients to watch the workers. After the IT system was introduced, the company’s monthly turnover reached RUR 7 mio ($110K), while the payroll reduced by 50%.
In addition to Wilgood IS, the company launched an incentive system: workers had a certain amount of points which they had to use to purchase work from the employers. If the client was happy, the points returned to the worker tenfold. If not, the worker was fined. With such motivation model, employees were interested in providing quality service just as customers were in receiving it. Also, every worker got an opportunity for increasing his indicators in Wilgood IS by 15%. This resulted in personnel receiving pay that is 30% higher that the market average.
In addition, the Tursunovs took efforts to ensure that the process of working with clients could be divided into stages and integrated into the IT system. During each stage of order execution, each employee is responsible for its results; the whole process works as a chain, where, say, a consultant chooses the most competent mechanic for performing a certain task and hands the order operations over to him. In case a worker forgets to tag a certain activity in the smart system, it blocks further rendering of services. This helps discipline workers and reduces probability of error.
Yet, not all employees promptly embraced the innovation. The IT controller has made their work activities transparent, which prevents them from working under a ‘shady scheme.’ About 70% of workers are eliminated during the initial stage – yet, those who stay prove committed to their work, improve their skills, increase efficiency, and see they pay growing.
“Our employees receive salaries solely for their work results. Each worker has a list of 15-20 KPIs he has to achieve,” Tursunova emphasizes.
Only after accomplishing these steps, the spouses started expanding their business and setting up their own franchise. The company’s turnover reached RUR 1.8 bln ($28.3 mio) during as little as 7 years. Normally, new auto repair shops break even in 2-4 months, and fully pay off investments in 1.5 years. Today, Wilgood has over 100 shops in four countries, but the company founders are not complacent: the Tursunovs have an ambitious goal of launching as many as 1,000 auto repair shops by 2023.
By Ksenia Zaikova