8:59 am, January 17, 2024
Leading car dealer Neil Smith says that online disruptors Cazoo and Cinch have achieved ‘phenomenal’ things over recent years, despite both firms haemorrhaging money.
Car Dealer reported last week that Cinch had posted a whopping £181m loss in 2023, even though it turned over more than £1bn.
That followed the news last month that Cazoo bosses have admitted that the company faces going under if it cannot find a solution to its own cash crisis.
However, despite the setbacks, Smith believes both firms can be proud of their achievements over recent years.
Appearing on the latest issue of the Car Dealer Podcast, sponsored by JATO, the Motorvait CEO said the companies have proved there is a market for selling cars purely online.
Smith was previously operations director at Imperial Cars when the outfit was bought by Cazoo and briefly worked as the outfit’s retail operations director after the takeover.
Speaking to podcast hosts James Baggott and Jon Reay, he said: ‘Since exiting Cazoo, I’ve probably made some comments around the fact that actually the the model employed by both Cazoo and Cinch is a model that a percentage of consumers like.
‘If we go back and talk a little bit about Auto Trader and the analysis they’ve done on car buyers, probably three or four years ago they came up with categories of car buyers.
‘They were “proactive showroom visitors”, “reluctant showroom visitors” and “digital adopters”.
‘The proactive showroom visitors are those visitors who like the experience of going into the showroom.
‘They might find the car on Auto Trader and not even contact the dealer but just turn up and have a look at it because they want to do everything and they want to touch and feel.
‘Probably older generations still are happy doing that because they’re confident in that.
‘You’ve then got the reluctant showroom visitors who will do a lot more online.
‘They might get their finance application approved, they might want to get a guaranteed part-exchange valuation via a remote assessment tool, but ultimately, they still want to go to the dealership.
‘They still want to test-drive the car, they want to touch and feel and understand a little bit about the dealership to make sure they’re confident to buy from there.
‘Then you’ve got digital adopters and they are very confident. They don’t want to be wasting time going round to the showrooms.
‘They want to be able to sit at home, do everything in a couple of hours on online and have the car delivered to them because for them that’s how they do things.’
He added: ‘Over these years, we see the the proactive showroom visitors move more into reluctant showroom visitors and some of those reluctant showroom visitors move more into digital adopters, primarily because of what the likes of Cinch and Cazoo did in the first couple of years by putting so much money into the trust piece and the confidence piece.
‘That 14-day money-back money guarantee – whether you like it or not – is nothing to do with the quality of the car.
‘They also spent tens of hundreds of millions on marketing, hence what Cinch has said in its statement that it is continuing to invest in marketing, because people are now confident buying cars that way.
‘I haven’t looked at accounts but I’m anticipating Cazoo will probably have done 60 or 70,000 units last year and Cinch maybe a few more.
‘So for 150,000 people to buy a car online from two relatively new entrants into the market – we’re talking three to four years – that’s phenomenal growth.
‘There has been been no dealer group that’s grown at that rate.’
On the podcast Reay, Baggott and Smith discussed the motor trade’s biggest headlines in the year so far.
Other topics up for discussion included the ZEV mandate, dangerous ramps at JLR and the ongoing situation at Lookers.
You can listen to all episodes of the Car Dealer Podcast on Spotify.
