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05 October 2021
Cazoo: think like a consumer, watch like a consumer
Category disruptionE-commerce & mobile retailAutomotive industry (general)
Cazoo, the British used car e-commerce business, is a fascinating case study on the opportunities and risks of entering a massive market mostly untouched by digital disruption, and finding growth by thinking from the perspective of a customer.
Why it matters
Built on the model of the US’s Carvana, which is not yet profitable, Cazoo – founded 2018 – is aiming to turn profitable by 2024. Its plan involves growing brand awareness of its de-stressed service in an e-commerce-friendly, population-dense country.
‘I’m the customer’
Speaking to the Telegraph, founder Alex Chesterman – whose earlier lives saw him start the DVD rentals service Love Film, and the property listings site Zoopla – explained the opportunity as he saw it:
“The single biggest retail market out there, bar none, is used cars, which is worth £100bn in the UK, and €700bn (£600bn) across Europe. And the single biggest sector had the lowest digital penetration.”
Ultimately, his idea boiled down to fixing what was broken with the experience of buying a second-hand car: haggling with salesmen, driving around the outskirts of your city all day, the stress of having to make a high value purchase when there’s a total asymmetry of information.
So Cazoo details imperfections, performs essential checks, and offers a money-back guarantee to buyers. Importantly, it also delivers to your door.
“If you think like a consumer, and if you think that there’s a way to improve that market, then it’s likely that most consumers feel the same way,” Chesterman told the FT back in April.
Building the brand
Early investors were keen, but losses at an early stage are essential to fund expensive above-the-line marketing – hence a New York listing where losses are part of the scaling game and investors are more willing to be patient.
Cazoo is now at the stage where marketing costs have trebled in the last year. Even aside from marketing this is an operationally heavy business, with losses widening even as sales in H1 climbed more than 500%. It has made strategic acquisitions of reconditioning businesses to get the cars up to standard, though it expects fixed costs in this department will help even out the balance sheet in the near future.
But eye-catching presence is increasingly important to the company in TV and sport.
Cazoo is just one of the many online native brands that are boosting TV spend, with Nielsen and Thinkbox research finding that used-car services like Cazoo, and competitors Cinch and Webuyanycar (both subsidiaries of the same parent) growing 2020 spend by 235% compared to the same period in 2019.
This largely reflects two fundamentals of marketing: showing you have the money to advertise on a highly regulated medium like TV shows you’re a serious business; secondly, with no physical presence, it is crucial to build mental availability elsewhere. Need proof? Just look at the Meerkats and opera singers.
Sourced from the Telegraph, FT, WRU, Marketing Week