image source, Getty Images
- Author, Michael Race
- Role, Business reporter, BBC News
-
Online used car retailer Cazoo has entered administration after cutting hundreds of jobs as part of a major restructuring.
Cazoo became popular during the Covid pandemic when restrictions forced car buyers to browse and shop online.
But the loss-making company is struggling to raise money from investors and in March changed its model from a dealership where it bought and sold cars itself to a marketplace where consumers can buy and sell cars.
The move led to 728 redundancies, Teneo administrators said after they were appointed to try to find a buyer for the business.
Teneo said the firm’s remaining 208 employees will be retained for the time being during the administrative process.
It’s a dramatic fall from grace for a business that soared in popularity during the pandemic and subsequent lockdowns.
If you weren’t using a Cazoo in 2021, you’d probably have seen or heard of it. Its branding was splashed everywhere, with the company sponsoring Premier League football teams Aston Villa and Everton, as well as a host of other major sporting events such as darts and snooker.
Cazoo was different from other more traditional car dealers – it was a technology business trying to shake up the established order.
The platform allowed shoppers to buy, trade-in and finance vehicles entirely online. People could order from the comfort of their sofa and the vehicle would be delivered to their home in just 72 hours with a seven-day return policy.
The pandemic, which started at the end of 2019, significantly increased the company’s fortunes. As well as the Covid restrictions which mean people can only buy used cars online, Cazoo has also played into the global microchip shortage, which has disrupted new vehicle production as used car prices have soared.
The environment has fostered an amazing increase in the value of the company. When it listed on the New York Stock Exchange in September 2021, it was valued at a whopping $7bn (£5bn). Now his valuation has dropped to just $30 million.
In November 2021, Cazoo founder Alex Chesterman – who also launched real estate site Zoopla and Netflix predecessor LoveFilm – told the BBC that capturing just a small percentage of the market would create a “huge business” and claimed that Cazoo offers customers a simpler experience, more choice and price transparency .
The platform was launched in France, Germany, Spain and Portugal. At its peak, Cazoo employed 4,500 people in 2021.
But despite its mission to transform the automotive industry, the feel-good factor around the Cazoo started to fade.
image source, Getty Images
One of the key people behind Cazoo’s strong marketing campaign was Andrew Francos, who joined the company shortly before it launched.
He says the early days were “really exciting times” but believes the business expanded too quickly.
“Looking back, I think Europe was a distraction,” he says. “I remember saying to someone, ‘Are we going too soon? I was probably naive to just buy into this vision because I believed in it.”
Mr Francos left Cazoo in October 2022 and admits it felt like he was leaving a sinking ship, but adds: “I also thought they were going to turn it around.”
“Cars are fundamentally different”
The business never made a profit. While that’s not unusual for a start-up — in fact, Mr. Chesterman said it would be two to three years after going public — its losses were mounting,
It posted a loss of £704m in 2022, up from £544m a year earlier, and restructured $630m of debt in December last year.
According to Catherine Faiers, chief operating officer of car market giant Auto Trader, while Covid has seen a shift to online shopping becoming the norm for many goods, “cars are fundamentally different to other things you buy”.
He says most UK consumers prefer a combined approach of researching online but then viewing the car and speaking to the seller in person before handing over the cash.
“Buying a car is a bit like buying a house. It’s the second most valuable thing most people buy. We name our cars. When you ask people why they own a car, it sounds a bit like the US Constitution – ‘I own a car because it gives me freedom , it gives me independence, it gives me strength,” says Ms. Faiers.
Kevin Gaskell, the former CEO of Porsche, Lamborghini and BMW, says the Cazoo’s problems were caused by “the simple fact of trying to gain a foothold in a very sophisticated, very established market”.
“They believed they could come in and be an online retailer and provide a full service, but car dealers are already doing that. There’s nothing new about the model they’ve developed,” he told the BBC’s Today programme.
“They’ve spent a huge amount of money developing the brand. In terms of their revenue, it’s nowhere near where they expected it to be.”
Changes above
Mr Chesterman stepped down as chief executive in January 2023 and the writing may have been on Cazoo’s wall when he left the company altogether in December.
His replacement, Paul Whitehead, stepped down in March this year – at the same time Cazoo announced it was selling off its remaining stock and moving to an online marketplace model, allowing car dealers to list their own stock on its platform and delist their stock. European business.
The company said it had explored “strategic alternatives” to insolvency, including selling parts of its business, as it sought to raise cash from investors, but no buyer had come forward.
When contacted by the BBC for comment on the fall of Cazoo, Mr Chesterman said he had had no involvement with the company for more than 18 months and declined to comment further.
Philip Nothard, director of insight and strategy at Cox Automotive, says Cazoo has forced many established players to adapt, but as supply issues and microchip shortages have dissipated, it has allowed others to catch up.
“They came fast, they came hard, they came with a concept that at first glance worked in many ways,” he adds.
“[But] over time, established retailers could offer what Cazoo did. They could offer that digital omnichannel, e-commerce experience. And they basically already had the physical infrastructure in place.”