The Bundesliga is starting again – and an orange logo will catch the eye of many. Cazoo is the new jersey sponsor of SC Freiburg. The advertising deal is part of a large-scale awareness campaign in sports. Because Cazoo is also increasingly present in foreign leagues. Everton FC, Aston Villa, Olympique Marseille, FC Bologna and Real Sociedad are also sponsored by the newcomer. But what is this Cazoo anyway?
A British online used car dealer, founded in 2018, with a simple business model: Customers can choose between around 30 brands online from their sofa. Cazoo currently has around 2,000 cars in its portfolio in Germany, for example. The website provides information on the models, price, mileage, year of manufacture and more.
Founder is the successful entrepreneur Alex Chesterman. The Briton, who is considered to be eccentric, had previously set up the online film distributor Lovefilm, which was taken over by Amazon in 2014 for 250 million euros. His second big deal was the real estate company ZPG, which he sold for around two billion euros. He openly admits to copying American success stories: “I identify successful companies from overseas and translate them to the European market,” says the founder.
He is now trying to do the same with Cazoo. Chesterman wanted to build on his successes and decided to shake up the used car market and went looking for investors. Companies such as the British newspaper “Daily Mail” quickly invested tens of millions of pounds in the young company. After just 18 months, Cazoo was valued at one billion euros. No start-up achieved unicorn status in the UK faster.
Geographical and economic expansion followed. Cazoo bought British competitors Imperial Car and Van365, later brumbrum and Swipcar. In 2021, the market leader made the leap to mainland Europe: Cazoo launched in Germany and France, and a year later the company ventured into Spain and Italy. The company now employs more than 4,000 people across Europe.
Cazoo wants to score with user-friendliness. There is a 360 degree view of all the cars on the website. All defects can be seen there – so you have an all-round view without seeing the car live. The used cars all belong to Cazoo. Before the sale, a not uncontroversial 300-point check should ensure that the vehicle is in good condition.
However, research by the BBC revealed the vulnerability of the test. Even faulty brakes are said to have gone unnoticed. After all, there is a 7-day money-back guarantee after the purchase and a one-year breakdown service.
The purchase takes place online without inspection or test drive. In Germany, unlike in Great Britain, you cannot yet sell your car directly via the website. After a purchase, Cazoo delivers the car to your front door within a few days. Customers love it, as the largely positive customer reviews show.
At the peak of its valuation of ten billion euros, Cazoo went public on the New York Stock Exchange in early September 2021. Since then, however, the company’s price has developed catastrophically and fell by almost 94 percent in eleven months.
Despite having sold more than 70,000 cars, rapid growth and heavy investment, Cazoo posted a loss of £550m in 2021. The company also laid off 750 employees earlier in the year and in June announced a realignment with reduced labor and operating costs.
Some investors are critical of the “Amazon for cars” because of the dubious management. However, founder Alex Chesterman counters with a number: The used car trade market in Western Europe is worth 300 billion euros. The Cazoo boss wants to secure five percent of this. However, this is not a sure-fire success, especially since the Cazoo model is by no means new and entry into the German market is associated with risks.
Auto1 has dominated the market in Germany for years with the same concept of simple direct purchase and sale of used cars on the Internet. This is done via the Autohero and wirkaufendeinauto.de platforms. The European market leader has more experience here and has around three times as many cars in its portfolio. However, the provider has also not made a profit for years and the share price, like that of the American market leader Carvana, has collapsed by around 80 percent in the past year.
Cazoo’s situation seems difficult: the share price is falling, the business is making losses and the competition is fierce. Nevertheless, Cazoo is undeterred in investing and expanding and wants to attack the car subscription market with the recent purchase of the car flat rate companies Cluno and Drover. Here, a car is rented for a few months, usually for a trip, and then exchanged or returned.
An important building block of the company’s success is sponsoring in sports. Apart from top European football clubs, Cazoo is a sponsor in basketball, darts and golf, among others. Whether that can save the business is at least questionable.
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