Cazoo is a name that has caught the attention of many since its launch in December 2019 as it became the fastest ever British “Unicorn” (start-ups with a notional value of over a billion dollars).
In late June Cazoo gained £25m in its latest round of funding, with new investor Draper Esprit joining existing investors including DMG Ventures and General Catalyst, taking the total raised by the online car retailer to over £200m. It has said that it has sold “thousands” of cars since launch late last year generating £20m of revenues in its first three months.
It currently has over 1,900 cars listed on its site, with an age range of 2013-2019 and values going from £6,500 to £51,000.
However, in its latest move, Cazoo has entered the world of “Bricks and Clicks” by acquiring independent used car dealer Imperial Car Supermarkets. Imperial was established in 2006 and has grown to 18 retail sites across the UK, offering over 2,500 nearly new and used cars for sale and supported by a number of service, preparation and support centres.
Alex Chesterman, CEO of Cazoo spoke to Motor Trader about the acquisition: “This deal is a core part of our strategy to develop a national network of storage, distribution, after sales and collection hubs to be closer to and better serve our customers.
“We are an online retailer selling a physical product, not a service. Anyone who sells products, like Amazon, needs infrastructure for storage and logistics to get that product into the customers hands. So, having a network of hubs around the country to handle those online sales is especially useful to us.
“We plan to fully integrate our businesses and will be transitioning these sites over time from showrooms to storage, distribution, after sales and collection hubs.
“Our recent acquisition provides a great balance by combining Cazoo’s digital capabilities and platform with Imperial’s automotive infrastructure and expertise and will enable us to deliver the UK’s best used car buying experience.”
The move also, Cazoo says, creates combined inventory of 5,000+ nearly new and used cars available for sale.
The acquisition has sparked interest from some notable figures in the industry, including Steve Young, managing director of ICDP. He believes that it shows that the traditional business model is not fatally broken.
“It certainly needs to be improved, and Imperial are a case in point in that they have invested heavily in digital and kept their physical footprint relatively modest – typically former dealer sites that get a light makeover in house style and can start trading within a month.
“The acid test will be whether under Cazoo ownership, the physical network continues to expand – demonstrating the need for an omni-channel offer – or goes entirely online. My money is on the former – there are still not enough customers who want a pure online experience to create a large scale used business, or even more so to meet the needs of an OEM for new car sales volumes.”
Mike Jones, chairman of ASE, added: “They are going to significantly disrupt the market and get a great foothold as a result.
“You can view the acquisition in two different ways; it is to move into having physical showrooms and going mainstream, or it’s more around the preparation and the infrastructure from a regional point of view. I think the later can fit in well within their business model and their business proposition.
“We are seeing a trend towards customers doing more and more online. And that has been accelerated as we have gone through the crisis. It will be interesting to see what Cazoo does with Imperial.”
Chesterman also spoke on Cazoo’s place in the UK market: “The car retail market has so far been one of the slowest to transition online. This is unsurprising given the average purchase value but there is now a decent proportion of consumers who are prepared to transact fully online, in much the same way as they buy any other product today. Consumers increasingly see the benefits of price transparency, efficiency and convenience that come with online car buying.
“Cazoo is pioneering this shift to online car buying. Our aim is to provide UK car buyers with the best selection, value, quality and convenience.”
In the past month, Cazoo has announced two major football sponsorship deals with Everton and Aston Villa. The former deal has been widely reported to be worth £29m over three years and is said to be the largest non-betting deal in the Premiership. It will take effect from the end of the current season.