Limited potential for online-only motor sales was the top reason for the recent collapse of Cazoo, say dealers.
Research from July’s Startline Used Car Tracker shows half of dealers surveyed said this was a problem, followed by 37% who said investors overestimated efficiencies that could be accessed through technology, and 35% that they failed to recognise that existing dealers were already good at selling online.
Also, 34% said the timing of the launch of the business was poor because of the pandemic, 23% of respondents felt that existing retailers raised their game in reaction to Cazoo and other online-only market entrants, and 23% that Cazoo underestimated the strength of existing dealers.
Cazoo was launched in 2018 and has sold 160,000 cars but that figure would have been higher except for the extended effect of the Covid Pandemic which curtailed stocks of new cars from factories which struggled with parts supplies even after quarantine ended and then leasehold costs rose after it sold off its 10 premises and leased them back. It trimmed its workforce but was unable to offset the 44% drop in revenue it sustained amid slowly but steadily rising costs and a step up in competition from other on-line sellers and a reactive motor trade.
Paul Burgess, CEO at Startline Motor Finance, said, “The trajectory of Cazoo has been watched very carefully by almost everyone working in car retail as probably the most ambitious and certainly the best-funded of the new online-only dealers. It’s therefore interesting to look at what others in the sector think lies behind the failure of the business.
“The picture suggested by our research suggests there was a mixture of circumstances and a general misreading of the market by investors. Dealers believe that while the impact of Covid could not be foreseen, the market for online-only retail and the potential for new technology were overestimated, and the strengths of existing dealers were underestimated.
“Perhaps the most interesting single response is that almost a quarter of dealers say the arrival of Cazoo caused others in the market to improve their online proposition. So, while the business may ultimately have been a failure, it has been arguably good for the sector.”