Why Car Dealers Hate Cazoo
Why do car dealers seem to have a problem with online motor trader, Cazoo? Is it because of founder’s Alex Chesterman disparaging remarks about the status quo of the motor trade industry?
Is it because they are making billions doing (pretty much) the same thing that the rest of the industry is doing?
Is it that they’ve grown exponentially over the last three years, hoovering up established brands and tech start-ups alike?
Truthfully, it’s probably all three and then some. And if Cazoo does get your goat then you can hardly escape the brand due to their ceaseless high profile sponsorships and vast advertising budget.
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What makes Cazoo special?
Typically, disruptors are called that because they do something utterly unique to the market. An easy example is the way Uber offered a different service to the traditional minicab driver when they emerged. Cazoo, on the other hand, is doing almost exactly what every other car dealer/trader does – only bigger.
In fact, Car Dealer magazine believes the true singular reason that Cazoo has ‘riled up dealers’ is that they know the website isn’t doing anything that different to anyone else. Their main unique selling points was a 7-Day Money Back Guarantee with a full refund. This has since been replicated and the timeframe even extended by other traders. They also use of a purpose built van rather than a trailer to deliver the vehicle so it doesn’t risk and getting wet and dirty on route. A nice perk but hardly ground breaking.
Essentially, they are selling used cars online, delivering them to people’s houses and handing others over to a car dealership (which became theirs after they bought Imperial Car Supermarkets).
Traditional car dealers might look at Cazoo and think, ‘what do they really do that’s different to me?’. Nothing, except that Cazoo has raised billions, which has given them the power to scale quickly and acquired smaller businesses that have allowed them to expand their offering.
Cazoo’s Eye Watering Valuation
Cazoo’s incredible $7 billion valuation when it went public in 2021 has probably also helped foster an element of the perceived industry resentment. Many motor trader rivals at the time pointed out that it felt over-hyped and deep down probably wished they could generate the same rampant appetite from the money men for their own share holdings. Cazoo’s shares subsequently crashed to less than half of their initial price just five months after listing on the New York Stock Exchange.
David Foreman, Managing Director at Praetura Ventures commented on LinkedIn that, “Cazoo makes just £100 gross profit per car sold. That’s 0.5% margin.” In the first quarter of 2022 it sold 19,713 cars with revenue £295m and gross profit of £2m. With circa 3,500 employees, Foreman pointed out that “£2m gross profit doesn’t go very far. Back when it was (over)valued at £7bn; management talked of 13% margins being achievable.”
A history of Cazoo’s acquisitions:
In July 2020, Cazoo buys Imperial Car Supermarkets.December 2020, Cazoo buys Drover car subscription service. Cazoo’s eventually launched their service subscription in June 2021.In February 2021, they acquired Smart Fleet Solution, a reconditioning and storage business.In September 2021, they bought automotive data insights platform Cazana for 25m and SMH Fleet Solutions.October 2021, they buy Vans365.November 2021, they took over Spanish car subscription marketplace Swipcar.January 2022, Cazoo Claim to be buying Italian car retailer brumbrum.
Can Cazoo replicate that ‘personal touch’?
At the time of launching Cazoo Founder took shots at traditional used car dealers. He said: ‘|The British market is flawed on every level…the process is inconvenient. Buyers must travel miles to showrooms, which typically have only a couple of dozen cars to view.’
Buying a second-hand car isn’t stereotypically associated with the most outstanding customer service. That being said, the numerous complaints of bad service and accusations of disreputable behaviour by a host of tech giants make the greasy-haired used-car salesman look like Mother Teresa.
Cazoo gained some negative press recently in the form of a bad review in The Times. Coverage like this certainly generates further resentment from the used car community, many of whom consider a personal customer experience an essential part of their duty.
The complaint in The Times reads like the nightmare of everyone who orders something online and prays for it to arrive as described, on time and in one piece.
“Cazoo said that the driver would call 15 minutes before arrival and I could tell him about the driveway then. The driver never called and the first I knew of his arrival was seeing him stuck against the wall of my driveway, having reversed his delivery vehicle into it. He said he would log the damage and I would be compensated. To make things worse the car had lots of undocumented scratches and in the end Cazoo sent an expert out who agreed. I then found out that the car had not been serviced as promised…Incredibly, five weeks after the damage to my garden wall, I still haven’t been contacted by Cazoo’s insurers, despite chasing daily and I have lost my perfectly good BMW X1. The staff at Cazoo have tried to help, but the business appears to be woefully let down by whoever inspects the vehicles and a lack of process when things go wrong.”
Is this the exception or the rule of companies like Cazoo?
This could be one adverse experience out of potentially thousands of successful deliveries. Modern tech companies take everyday transactions and scale them up at speed. This makes the number of transactions higher, but the margin for error higher too. Most car traders would probably read this cringeworthy account of Cazoo’s customer service and rub their hands with glee.
However, when confronted by the Times Journalist, Cazoo pointed out that it has sold more than 60,000 cars online in the past two years, with 95 per cent of its customers rating its service as either ‘Excellent’ or ‘Great’ on Trustpilot. They also paid £1,000 to the customer in compensation. All the above issues were eventually solved too.
