What went wrong for online car retailer Cazoo?
Online used car retailer Cazoo has fallen into administration, after cutting hundreds of jobs as part of a big restructuring.
Cazoo became popular during the Covid pandemic when restrictions forced car buyers to browse and make their purchases online.
But the loss-making company has been struggling to raise money from investors, and in March changed its model from being a dealer, where it bought and sold cars itself, to a marketplace where consumers can buy and sell cars.
That move has led to 728 redundancies, administrators Teneo said, after being appointed to try to find a buyer for the business.
Teneo said the firm's 208 remaining staff would be retained for the time being during the administration process.
It is a dramatic fall from grace for the business, which surged in popularity during the pandemic and subsequent lockdowns.
Back in 2021, if you hadn't used Cazoo, you probably would 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 like darts and snooker.
Cazoo was different to other more traditional car dealers - it was a tech business trying to shake up a well-established order.
The platform allowed shoppers to buy, part-exchange and finance vehicles entirely online. People could order while sitting on the sofa, and the vehicle would be delivered to their home in as little as 72 hours, with a seven-day returns policy.
Launched in late 2019, the pandemic massively boosted the firm's fortunes. As well as Covid restrictions meaning people could only buy second-hand cars online, a worldwide microchip shortage that disrupted new vehicle manufacturing also played into Cazoo's hands as used car prices soared.
The environment fuelled an astonishing increase in the company's value. When it listed on the New York Stock Exchange in September 2021, it was valued at a whopping $7bn (£5bn). Now, its valuation has dropped to just $30m.
In November 2021, Cazoo's founder Alex Chesterman - who also launched property website Zoopla and LoveFilm, a predecessor of Netflix - told the BBC that gaining just a small percentage of the market would create an "enormous business", arguing that Cazoo offered customers a simpler experience, greater choice and transparency on price.
The platform went on to launch in France, Germany, Spain and Portugal. At its peak, Cazoo employed 4,500 people in 2021.
But despite the mission to transform the car-selling industry, the feel-good factor surrounding Cazoo began to fade.
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 firm 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 naïve to just buy into the vision because I believed in it."
Mr Francos left Cazoo in October 2022, and admits he felt like the magic surrounding the company had gone, but adds: "I did also think they would turn it around."
'Cars are fundamentally different'
The business has never made a profit. While this is not unusual for a start-up - in fact, Mr Chesterman said he expected this to be the case for two or three years after going public - its losses grew.
In 2022 it posted a loss of £704m, up from £544m the year before, and in December last year it restructured debts of $630m.
According to Catherine Faiers, chief operating officer at car marketplace giant Auto Trader, while Covid saw a shift to online purchasing becoming the norm for many goods, "cars are just fundamentally different to other things you buy".
She says the majority of UK consumers prefer a blended approach of researching online, but then seeing the car and speaking to a dealer in person before handing over their cash.
"Buying a car is a bit like buying a house. It's the second-most valuable thing that most people buy. We name our cars. When you ask people why they own a car it reads a bit like the American constitution - 'I own a car because it gives me freedom, it gives me independence, it's empowering,'" Ms Faiers says.
Kevin Gaskell, former managing director of Porsche, Lamborghini and BMW, says Cazoo's problems were down to a "simple fact of trying to get a foothold in a very sophisticated, very established market".
"They believed that they could come in and become an online retail business and provide a full service but car dealers are already doing that. There's nothing new in the model that they 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 has got nowhere near where they expected it to be."
Changes at the top
Mr Chesterman stepped aside as chief executive in January 2023 and perhaps the writing was on the wall for Cazoo when he left the company altogether in December.
His replacement, Paul Whitehead, stepped down in March this year - the same time that Cazoo announced it had sold off its remaining stock and switched to an online marketplace model, allowing car dealers to list their own stock on its platform, and wound down its European business.
The company has said it explored "strategic alternatives" to insolvency, including selling off parts of its business, as it struggled to raise cash from investors, but no buyer came forward.
When contacted by the BBC for comment on Cazoo's downfall, Mr Chesterman said he had had no involvement with the company for more than 18 months and declined to comment further.
Philip Nothard, insight and strategy director at Cox Automotive, says Cazoo did force many of the established players to adapt, but as supply problems and microchip shortages have dissipated, it allowed others to catch up.
"They came in quick, they came in heavy, they came in with a concept that on the face of it worked in many ways," he adds
"[But] in time, established retailers could offer what Cazoo were offering. They could offer that digital omnichannel, e-commerce experience. And essentially they had a physical infrastructure already in place."
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May 22, 2024 at 04:49PM
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