In detail: Cazoo founder lays out savage cuts to online used car dealer in investor call – Car Dealer Magazine (2022)

Cazoo founder Alex Chesterman has laid out the detail of his cost cutting plan as he attempts to ‘right size’ the dealer for a slowdown in used car buying.

In an investor call yesterday, the Cazoo founder explained the drastic action the firm is taking to cut costs in an attempt to save £200m this year.

During the 40-minute presentation – which concluded with a question and answer session with investors – Chesterman and the CFO Stephen Morana said the firm will be cutting back on its expansion in Europe to focus on the UK.


The pair confirmed that Cazoo will be running down its ‘cash intensive’ subscription model which it has splashed out tens of millions of pounds building since it launched from the end of this month.

Cazoo acquired new car subscription businesses Drover in the UK and Germany’s similar business Cluno for undisclosed sums, believed to be in the tens of millions.

It says it will now be focussing on its used car retail operation which Chesterman believes is still a ‘materially better experience for car buyers’ than existing car sales.

In what has been described as a ‘profit warning’ by motor trade analysts, Chesterman cut forecasts for sales and profit per unit for 2022.


During the presentation, Chesterman said: ‘Great businesses are often built in the toughest times and we believe that while the opportunity ahead remains unchanged the barriers to entry are now even higher.

‘I have no doubt our businesses will be stronger and leaner as a result of the actions we are taking now and will continue to grow at a very fast pace while focussing much more on profitability and that ultimately we will win in a market that is likely to see less direct competitors in the future.’

In detail: Cazoo founder lays out savage cuts to online used car dealer in investor call – Car Dealer Magazine (3)

Inside one of Cazoo’s customer handover sites

Chesterman believes the ‘size of the prize’ in the used car market in Europe ‘remains huge’ and said there was a £100bn annual market for used cars in the UK.

He said that the firm had expanded into France, Spain and Italy and that he believes there’s an additional £200bn used car market to take advantage of in Europe.

He said: ‘The addressable market is 26m used car transactions annually.

‘The size of the prize remains huge and we are addressing a massive market opportunity.

‘At the same time digital penetration in our market remains tiny, materially behind those seen in almost every other retail sector.

‘We strongly believe that irrespective of the economic climate over the next year or so, the used car market will remain huge and digital penetration will only continue to increase materially.

‘While the current market may be challenging we feel this economic shake up will serve to separate the winners from the rest of the pack.’

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Subscriptions shut down

On closing the subscription services it worked hard on acquiring, Chesterman said this would release cash tied up in stock back into the business.

He said: ‘We will no longer be offering our car subscription service to new customers in any markets from the end of June.

‘The subscription model has some strategic benefits that we will continue to enjoy in the near term, but the model is highly cash intensive and we have decided to focus exclusively on our core retail proposition to both simplify our operation and logistics and to conserve cash.

‘We currently have over £90m of cash tied up in subscription inventory that will reduce to zero over time as existing subscription cars come back to us and become retail vehicles, increasing our cash balance significantly.’

Site closures

Chesterman confirmed on the call that Cazoo will be shutting its customer centre in Leeds and reduce its support centres down to one single site in Southampton.

It will also close down two of its 10 vehicle preparation centres and, as revealed yesterday, slash 15 per cent of its workforce.

Chesterman said: ‘The plan involves us having to make some very tough but necessary decisions.

‘Sadly, approximately 15 per cent of our workforce, approximately 750 colleagues, across the company will be impacted by our rightsizing adjustments.

‘These actions will streamline our employee base across the UK and Europe.

‘In the UK we will see our employees per retail unit sold more than half between now and the end of 2023.

‘It’s a key focus that we will continue to have a market leading proposition and level of service.’

Marketing slashed

Chesterman said that there is now ‘80 per cent national awareness’ for his brand in the UK, but it will throttle back on its large sponsorship deals.

However, he added that ‘reducing overheads are a key part’ of the firm’s plan and this would involve focussing less on the large brand building advertising deals.

Cazoo will cut back on TV, radio and outdoor advertising too as it attempts to save money.

Answering a question from investors, Chesterman said he believed the sports sponsorship it had done had all been ‘very good deals’.

In detail: Cazoo founder lays out savage cuts to online used car dealer in investor call – Car Dealer Magazine (5)

Cazoo has canned its Everton sponsorship deal

However, most were on three-year agreements with two-year break clauses which it can scale back from.

Cazoo has already cancelled its shirt sponsorship deal of Everton and will likely pull back from others to save cash.

Chesterman said Cazoo took advantage of Covid when brands were pulling back from marketing deals to snap them up for reduced rates.

He said: ‘Ignore what you read in the press about how much we paid. Generally we pay 50 per cent or less what previous sponsors were paying.’

Financials

What couldn’t be spun was the firm’s reduced sales forecasts.

Cazoo said that this year it will sell around 70,000-80,000 used cars to retail customers and generate revenues of around £1.4bn.

Previously, it said it would sell 100,000 cars and generate revenues of £2bn.

In the first quarter it made just £124 per used car sold and it hopes it increase this now to around £500-£600.

By the end of next year it wants to be making around £1,500 per used car sold – far closer to the performance of good, experienced car dealers.

£124
Profit per unit made by Cazoo in Q1 2022

To break even in 2023, finance chief Morana said, the firm needs to sell 12,000 cars a month with gross profit per unit of £1,500.

Cazoo sold 13.4k used cars in the first quarter of 2022 and has notched up 10.9k sales in April and May.

Gross profit per car sold has grown to £300 in those last two months, said Morana.

He also explained the firm would make the ‘vast majority’ of its revenues in the UK with ‘moderate EU numbers’ as Cazoo ‘pulls back some of our more ambitious EU growth targets to better preserve cash’.

Morana added: ‘Our European business will continue to be loss making for the near term but focus on cash preservation will mean the company spends wisely to position itself for the long term.’

Cazoo’s share price has plummeted 86 per cent since it listed on the NYSE last year.

In detail: Cazoo founder lays out savage cuts to online used car dealer in investor call – Car Dealer Magazine (6)

Downturn

Chesterman said Cazoo was ‘not immune’ from the economic downturn and laid the blame for its reduced forecasts on faltering demand.

He said: ‘The combination of rising inflation and interest rates with supply chain issues caused first by the pandemic and then exacerbated by the Ukraine conflict has driven up the cost of living and is hitting consumer confidence.

‘This perfect storm has made cash conservation top of mind for the company ahead of growth.

‘[Cazoo is] not immune to the rapid shift in deterioration of consumer confidence, volatility in the stock market and the possibility of recession in the coming months.

‘While we continue to grow over 80 per cent year-on-year, taking significant market share we cannot ignore the accelerated deterioration in the economic outlook and its potential impact on the consumer where we expect to see a further softening in consumer demand over the coming months.

‘Against this backdrop we are acting decisively to right size the business in the near term to ensure we are well positioned to ensure our long term targets.

‘We are prioritising sustainable growth and focussing on cash preservation above all else while still expecting to grow 100 per cent year-on-year in 2022.’

Asked by an analyst from JP Morgan about whether this slowdown had already been seen, Chesterman said he had and it was accelerating.

The Cazoo founder added: ‘It’s a combination of starting to see something that is accelerating in recent weeks with inflationary pressures and an impact on consumer confidence, a marginal shift in the types of cars people are looking for as cost of living starts to bite, so less expensive vehicles.

‘The guidance is really looking ahead and assuming that things don’t get any better and potentially get worse, which is why we are being cautious in our guidance.’

In detail: Cazoo founder lays out savage cuts to online used car dealer in investor call – Car Dealer Magazine (7)

Rival online car dealer Carzam has entered voluntary receivership

Carzam

Chesterman also referred to the recent failure of Carzam – its online rival which was placed in voluntary receivership last week – as proof the financial markets are toughening.

He said: ‘[There has been a] deterioration in the finance environment as evidenced in our sector in the UK we saw a private business [Carzam] go out of business for an inability to raise funding.

‘The market leader in the States [Carvana] is struggling to raise financing and is having to raise debt at a very high rate. So the financing environment for businesses like ours are also deteriorating.

‘We are assuming that none of this gets better. Hence the reasons for the actions we have been taking.’

Chesterman said the cost cutting plan was designed to take the action needed now to help secure the firm’s growth in the future.

He added: ‘In times like these businesses like ours need to be laser focussed on what is most important – our number one priority is to reach cash flow break even in the UK and our realignment plan de-risks this significantly and we expect to deliver on this before the end of 2023.

‘We continue to see a huge opportunity in Europe, but we will temper our growth aspirations in the near term to increase our unit economics.

‘We accept that we cannot do everything, hence the decision to end the subscription business to focus our efforts entirely on our retail proposition.’

  • Have online used car disruptors had their day?
  • What is Cazoo?
  • Comment: Why does Cazoo wind up the motor trade so much?

Struggling model

Analysts believe Carzam’s closure and Cazoo’s cost cutting plan is proof that online-only car dealerships are going to struggle.

UHY Hacker Young partner Ian McMahon said: ‘Following hot on the heels of Carzam’s administration last week, today’s job cuts show online-only car dealerships are really struggling.

‘It’s really disheartening to see jobs being put at risk or being cut after the huge transition the motor retail industry has been through in the last few years.

‘The online-only model is based on having lower costs than a bricks-and-mortar dealership would.

‘However a lot of them have spent so much on customer acquisition and advertising that their costs are, per unit, comparable to those of a traditional used car dealership.

In detail: Cazoo founder lays out savage cuts to online used car dealer in investor call – Car Dealer Magazine (8)

‘There’s no sign that they are going to be able to acquire customers at a low enough cost in the near future.’

In detail: Cazoo founder lays out savage cuts to online used car dealer in investor call – Car Dealer Magazine (9)

Alex Chesterman, above, laid bare Cazoo’s cuts in an investor call

Former TrustFord chairman Stuart Foulds, who retired last year, said he thought Cazoo was ‘an unmitigated disaster from day one’.


Writing on a Car Dealer post on LinkedIn, he said: ‘Their arrogance is unbelievable. To think they can enter an age old industry and take them on.

‘All savvy dealers have simply been nimble enough to align themselves but keep the best bits. The overwhelming fact is that customers want some physicality within the transaction borne out by umpteen dealers’ research.

‘Were I an investor (which thankfully I would never consider) I would be extremely unhappy at the tens of millions of money wasted on advertising and sponsorship which has borne no fruit.’

Zeus Capital analyst Mike Allen told Car Dealer yesterday that the announcement was fundamentally a ‘profit warning’.

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He said: ‘Investor appetite is next to non-existent for these types of businesses now. The funding markets are incredibly tough, so they need to preserve what cash they have got for longer.

‘Clearly, the trading environment is not what it was last year and looks like it will get tougher.

‘Raising money is going to be harder for them, so they need to make moves like this to protect the money they have got.’

FAQs

Are Cazoo in trouble? ›

Blaming the 'economic climate' for its troubles, the business says it will also cut its marketing spend. It is planning to cut its vehicle preparation centres from 10 to eight, has reduced its revenue forecast for 2022 by £500m and said it will now make less on each car it sells than it previously planned.

How much money has Cazoo lost? ›

Online car retailer Cazoo is battling to reduce its cost base as it announced a £243 million loss from the first half of 2022, more than double its losses in H1 2021.

Who is the money behind Cazoo? ›

Alexander Edward Chesterman OBE (born 9 January 1970) is a British internet entrepreneur, co-founder of ScreenSelect, which would later become part of online film distributor LoveFilm, and is the founder and CEO of online used car platform Cazoo.

Has Cazoo made any money? ›

Online used car 'disruptor' Cazoo has posted its half-year results for 2022, showing it more than doubled its losses versus the same period last year.

Are Cazoo going bust? ›

TROUBLED online car retailer Cazoo has closed its car subscription service to new customers. The closing of its subscription offering is part of a wider “business realignment plan” aimed at “cash conservation” rather than growing the business, according to CEO Alex Chesterton (main picture).

What is going on with Cazoo? ›

The online car retailer Cazoo has revealed it wants to cut costs by £200 million by the end of 2023, which will include around 750 job cuts. Having grown rapidly through acquisitions since its launch, Cazoo said it will downscale the business to a more sustainable size and aim for profitable growth.

Who owns Cazoo? ›

Alex Chesterman OBE, Founder & CEO

Alex founded Cazoo in 2018 to make buying and selling a car as simple and seamless as ordering any other product online today.

Will Cazoo survive? ›

Cazoo has confirmed that it will retreat from mainland Europe to focus on the UK used car market as part of cost-saving measures expected to deliver net savings of over £100m by end of 2023.

How many cars have Cazoo sold? ›

Cazoo revealed in its trading statement today that it had sold 49,500 units last year (230% up on 2020), including 34,700 retail units.

Are cinch and Cazoo owned by the same company? ›

Was this article useful? Constellation Automotive Group has switched the focus of its Corby used car preparation centre from Cazoo to its own cinch online retail offering – delivering a potential 30,000 cars per year.

Is Cazoo Russian? ›

Cazoo is a British online car retailer based in London, England which was founded in 2018 by Alex Chesterman.

Where do Cazoo buy their cars from? ›

Is it reputable? We rate Cazoo highly. Rather than listing used cars owned by franchised dealers, the site essentially buys up its own stock of about 1500 cars (give or take) and sells them on through its website. It's a little bit like Amazon for cars.

Do Cazoo sell written off cars? ›

We don't buy cars that:

have major accident damage. haven't got tyres which are road legal. have been categorised as insurance category A, B, S (formerly C) or N (formerly D) have been written off.

Do Cazoo own the cars they sell? ›

At Cazoo, you can get your next used car from the comfort of your sofa. We own all our cars, so we can guarantee the quality.

Is it possible to haggle with Cazoo? ›

There's no need. We offer a transparent and haggle-free experience. The prices listed for each car are our best prices and are as competitive as possible.

Can Cazoo ask for money back? ›

If You have, we have discretion whether to allow the 7-Day Money Back Guarantee or not and Cazoo may reject Your Vehicle return. If You have paid for the Vehicle by entering into a third-party finance agreement You will also need to tell the finance provider that You wish to withdraw from Your finance agreement.

Is Cinch going bust? ›

The company bought just under 40,000 vehicles in 2021. It sold 49,853 vehicles in 2021. As reported on Monday, Cinch and Cazoo rival business, Carzam, confirmed it has now gone bust, partly due to an inability to get enough funding, which it blamed on Cazoo.

Is Cazoo owned by BCA? ›

Used car platform Cazoo has signed up BCA to provide vehicle logistics, refurbishment and disposal requirements ahead of the firm's launch later this year.

Are car sales dropping? ›

The seasonally adjusted annual rate (SAAR) of U.S. light vehicle sales tracked 13.51 million in July 2022, marking a 9% decline year-over-year.

Can you test drive a car from Cazoo? ›

You can't test drive our cars, but our 7-Day Money Back Guarantee is more comprehensive than a typical test drive. We give you up to a week to get to know your car and to make sure it's right for you.

Who are the investors in Cazoo? ›

The Transaction is led by new investor Viking Global Investors, alongside participation from several existing shareholders including Mubadala Investment Company, D1 Capital and Willoughby Capital as well as other new and existing investors.

Why are second hand cars so expensive right now? ›

Yes. When Covid hit in 2020, car manufacturers shut down but demand was high, especially as people didn't want to use public transport. That drove used car prices up.

Do Cazoo cars come with a warranty? ›

Protection from unexpected expenses

Cazoo cars come with a free 90-day warranty. Want to stay covered for longer? CazooCover protects you from unexpected costs for up to 4 years, after your car warranty has ended.

How easy is it to return a car to Cazoo? ›

You can't test drive our cars, but with our 7-Day Money Back Guarantee, you can return your Cazoo car within 7 days of your delivery or collection date. If you change your mind for any reason, just let us know and we'll pick it up and give you a full refund.

What model of car has sold the most? ›

Car shoppers purchased more than one million Toyota Corolla models, making it the world's most popular car in 2021. Since its introduction in 1966, Toyota has sold more than 47 million Corolla vehicles.

What is the most bought car ever? ›

Volkswagen has claimed its Beetle is the best-selling car in history, as it did not substantially change throughout its production run. By contrast, Toyota has applied the Corolla nameplate to 12 generations since 1966, which have sold over 50 million through 2021.

Who has the biggest car collection ever? ›

The car collection of the 29th Sultan of Brunei is the largest private car collection in the world, consisting of approximately 7,000 cars, which have an estimated combined value over US$5 billion.

Do Cinch sell written off cars? ›

Rest assured, we'll never sell a car that's been officially categorised as a write off – i.e. CAT N D. Every car is thoroughly checked before it goes up for sale.

How many sites do Cazoo have? ›

Cazoo has grown its Customer Centre used car handover network to 21 sites with the opening of its latest new facility in Newcastle.

Are Cazoo cars HPI checked? ›

Yes, that is something else entirely. Cazoo will send you the full service history report according to their website. This article is focusing on vehicle history i.e. HPI® checks.

What company owns cinch? ›

cinch is part of the Constellation Automotive Group, along with WeBuyAnyCar.com and BCA. The group operates a market-leading business across the UK and Europe.

Who does Cazoo sponsor? ›

Cazoo is proud to sponsor the World Grand Prix, Players Championship and the Tour Championship for the World Snooker 2021-22 season. This trio of events will be known as the Cazoo Series, and will host exciting live coverage from ITV and a range of broadcasters across the globe.

Where do cinch cars come from? ›

Based upon that business model, Cinch Cars put their customers at the forefront of every aspect of their operations. They stock thousands of cars from all over the UK, all of which are less than seven years old and have fewer than 70,000 miles on the clock.

What do Cazoo do with cars they buy? ›

That means when Cazoo buys a car, it goes through one of its own 'reconditioning centres' to do the inspections, checks and prep it ready for photos. By most accounts, the SFS operation is very professional; set out like a factory line to ensure everything runs smoothly.

Does Cazoo charge admin fee? ›

7.5 You agree to reimburse us in full and on request for any costs we incur in processing or disputing any Fines relating to the period before Pickup or Drop Off. We may charge you an administration fee of £20 for each Fine we process relating to the period before Pickup or Drop Off (as applicable).

Why has Cazoo share price dropped? ›

Its stock was probably overvalued and is now maybe underpriced. Chesterman himself told The Times recently investors dumping stock were reacting to an “irrational fear”. Time and future customers will ultimately judge whether Cazoo is the new normal for used car buying.

Why do Cazoo need my bank details? ›

Where you are selling us your car, we require you to provide details of your bank account via TrueLayer so that we can pay you directly via bank transfer. Your bank details will be kept securely by TrueLayer and will only be used to pay you for your car and to keep a record of that transaction.

Is insurance included with Cazoo? ›

Every Cazoo car subscription includes fully comprehensive insurance cover, servicing, maintenance, road tax and 24/7 roadside assistance and comes with a 1,000 miles monthly allowance and a 7-day money back guarantee. The subscriber just needs to add fuel or charge the battery.

Do Cazoo buy cars without MOT? ›

Can I sell my car without an MOT? We only buy cars that have at least two weeks of a valid MOT left from the date of your car handover. This means that if your handover is on 1 August, your car's MOT needs to be valid until at least 14 August.

What is the best way to haggle? ›

These are our top tips on how to haggle and get a discount:
  1. Research the price in advance. ...
  2. Be friendly with the sales assistant. ...
  3. Haggle with the right person. ...
  4. Don't reveal how much you're willing to pay. ...
  5. Ask for a freebie and buy in bulk. ...
  6. Become a regular customer. ...
  7. Use the right language and tone.
21 Jul 2022

How much should you haggle down? ›

Based on your pricing homework, you should have a good idea of how much you're willing to pay. Begin by making an offer that is realistic but 15 to 25 percent lower than this figure. Name your offer and wait until the person you're negotiating with responds.

How do I haggle for a better deal? ›

How to Haggle in 10 Easy Steps
  1. Always tell the truth. Keep your character intact, people. ...
  2. Time it right. The end of the day is a great time to get your haggle on. ...
  3. Ask for a discount. ...
  4. Use the power of cash. ...
  5. Use your walk-away power. ...
  6. Know when to be quiet. ...
  7. Say, “That's not good enough.” ...
  8. Let them know your budget.
26 Aug 2021

Will Cazoo survive? ›

Cazoo has confirmed that it will retreat from mainland Europe to focus on the UK used car market as part of cost-saving measures expected to deliver net savings of over £100m by end of 2023.

Why has Cazoo share price dropped? ›

Its stock was probably overvalued and is now maybe underpriced. Chesterman himself told The Times recently investors dumping stock were reacting to an “irrational fear”. Time and future customers will ultimately judge whether Cazoo is the new normal for used car buying.

Are Cazoo shares a good buy? ›

USD 0.48 0.03 5.88% Given the investment horizon of 90 days and your above-average risk tolerance, our recommendation regarding Cazoo Group is 'Strong Sell'.

Is Cinch going bust? ›

The company bought just under 40,000 vehicles in 2021. It sold 49,853 vehicles in 2021. As reported on Monday, Cinch and Cazoo rival business, Carzam, confirmed it has now gone bust, partly due to an inability to get enough funding, which it blamed on Cazoo.

Are Cazoo and cinch the same company? ›

Constellation Automotive Group has switched the focus of its Corby used car preparation centre from Cazoo to its own cinch online retail offering – delivering a potential 30,000 cars per year.

Where do Cazoo get their cars? ›

We rate Cazoo highly. Rather than listing used cars owned by franchised dealers, the site essentially buys up its own stock of about 1500 cars (give or take) and sells them on through its website.

Do Cazoo sell write offs? ›

Cazoo and Cargiant have been found to be selling undeclared written-off used cars to unsuspecting buyers.

Is Cazoo Russian owned? ›

Cazoo is a British online car retailer based in London, England which was founded in 2018 by Alex Chesterman.

Can Cazoo ask for money back? ›

If You have, we have discretion whether to allow the 7-Day Money Back Guarantee or not and Cazoo may reject Your Vehicle return. If You have paid for the Vehicle by entering into a third-party finance agreement You will also need to tell the finance provider that You wish to withdraw from Your finance agreement.

Is Cazoo owned by BCA? ›

Used car platform Cazoo has signed up BCA to provide vehicle logistics, refurbishment and disposal requirements ahead of the firm's launch later this year.

How many cars have Cazoo sold? ›

Cazoo revealed in its trading statement today that it had sold 49,500 units last year (230% up on 2020), including 34,700 retail units.

Who are the investors in Cazoo? ›

The Transaction is led by new investor Viking Global Investors, alongside participation from several existing shareholders including Mubadala Investment Company, D1 Capital and Willoughby Capital as well as other new and existing investors.

Do Cazoo fix imperfections? ›

If an imperfection can be seen from two metres away, we repair it or tag it in our imperfection gallery in line with our standards. If it isn't visible from two metres, it's considered general wear and tear and won't be repaired or tagged.

Do cinch sell written off cars? ›

Rest assured, we'll never sell a car that's been officially categorised as a write off – i.e. CAT N D. Every car is thoroughly checked before it goes up for sale.

Are cinch prices negotiable? ›

Online used car supermarkets like Cazoo, Carzam and Cinch could be gaining ground thanks to a no-haggle policy. Fixed pricing is becoming increasingly popular with car buyers as they look to avoid awkward haggling situations, says car buying site BuyaCar.

Do cinch own we buy any car? ›

cinch is part of the Constellation Automotive Group, along with WeBuyAnyCar.com and BCA. The group operates a market-leading business across the UK and Europe.

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