News that cash-strapped used car retailer Cazoo is abandoning its signature home-delivery service to set up as a classified site to rival Autotrader was met with derision in an industry it once claimed to disrupt and now wishes to court.

As former Cazoo employees rushed to LinkedIn to switch their profiles to the green-ringed ‘open to work’ setting, others in the industry took to the opportunity to gloat at the downfall of a company that was once worth billions but had never turned a profit.

“No boss in our trade would accept ‘don’t worry – the company is worth £6 billion’ as an excuse for such losses, dire management decisions and total lack of basic motor trade business application,” wrote Philip Wade, franchise and development director at Stoneacre Motor Group.

Another poster pointed out that founder Alex Chesterman had burnt bridges with his mission statement to make car purchasing “simple and convenient whilst adding transparency and quality to an industry which suffers from a lack of consumer trust”.

Jim Reid of Jim Reid Vehicle Sales, Inverurie, wrote:  “This statement and many more are the reasons why no used car dealership with any values or morals will advertise their stock on a Cazoo classified website.” 

Cazoo was founded in 2018 by Chesterman with the aim of revolutionising car buying in the way he’d done with movie rental (LoveFilm) and estate agents (Zoopla). The simple idea was to “make buying and selling a car as simple and seamless as ordering any other product online today”.

But in tackling the famously unforgiving world of used car sales, Chesterman had bitten off more than he could chew. “The business was always doomed to fail,” Steve Young, managing director of dealer analyst firm ICDP, told Autocar.

Chesterman’s plan ahead of the December 2019 launch was to assemble a huge financial war chest and become the face of online used car retailing. In the first half of 2022 the company spent a whopping £45 million on marketing. Vast sums were spent in the sporting world, sponsoring football body the EFL, the Epsom Derby, Everton and Aston Villa football clubs, cricket tournament The Hundred, the Professional Darts Corporation competition and the World Snooker Championship. In continental Europe, Cazoo sponsored the Marseille, Valencia and Real Sociedad football teams.

The smart new Cazoo website targeted mobile users who were able to inspect cars in close detail as they rotated on a turntable. Cars were promised in 72 hours with a seven-day money-back guarantees for those who weren’t happy.

The concept of online used car sales wasn’t new. Chesterman openly admitted he was copying the successful launch of Carvana in the US. In Germany, Auto1 launched Autohero, while in the UK, car retail giant Constellation Auto Group pitched in with Cinch.

But what really drove Chesterman was the idea that in a world of digital dominators like Amazon, the used car industry remained fragmented, with no one player controlling more than 3% of the market in the UK. With its targeted 5%, Cazoo would theoretically be king of the hill.

With this credible pitch ringing in investors’ ears, Cazoo rode the mania for automotive disruptors and in 2021 launched itself on the New York Stock Exchange via the quick-list SPAC (special purpose acquisition company) method. Suddenly, the company was worth a staggering $7bn (£5.5bn).

Armed with fresh cash, company went on an unprecedented spending spree. After paying £24m for Imperial Car Supermarkets in 2020, largely for its car preparation business, it bought reconditioning businesses SMH Fleet Solutions and Smart Fleet Solutions for a combined £115m, vehicle data cruncher Cazana (£24m), online van retailer Vans 365 for £7.9m and Italian online car retail Brumbrum (€80m).

Cazoo also spent big buying companies to fuel its car subscription ambition, including Cluno in Germany for £60m, Drover in the UK for £65m and Swipcar in Spain for £24m. Cazoo claimed 10,000 subscribers. “We view subscriptions as part of the future of the car market,” the company said in its 2022 annual report, published that May.

Cazoo was being talked of excitedly as the 'ASOS of cars', referring to the online clothing giant.

By June 2022, however, the wheels were coming off. As interest rates rose, investors choked off finance for pre-profit cash-destroying businesses like Cazoo. “We’ve seen a significant deterioration in financing climate for businesses like ours,” Chesterman told analyst. “We’re going to assume none of this is going to get better.” The $7bn company was now worth less than $1bn.

By the end 2022, Cazoo announced it was getting out of subscriptions and cancelled its expansion into continental Europe. But Cazoo’s attempts to preserve cash were for nought and in March this year it announced it was stopping online car sales to “transition to a marketplace business model” competing against the likes of Autotrader.

It also said it would probably have to delist from the New York Stock Exchange.

From its inception to the end of June last year, Cazoo had lost an astonishing £1.4bn selling 130,000 vehicles. 

The list of mistakes Cazoo made on its trajectory back to earth is long, according to Steve Young of ICDP. Among them was the idea that there were synergies to be had in used cars, that a subscription model would work, that you could source enough volume of cars, that you could “somehow achieve” a 15% margin. “The fundamental thinking behind Cazoo was wrong,” he said. “They also grossly overpaid on acquisitions and wasted vast amounts of investors’ capital on B2C [business to customer] brand-building, which is now totally wasted.”

The death of a disruptor, or at least their business model, will always inspire schadenfreude among those who were meant to be disrupted. But even those who believed in Cazoo aren’t that convinced by its attempt to leverage its still sizeable brand power and digital acumen to move into the online classifieds business.

“With this pivot, the original Cazoo magic has disappeared,” Andy Francos, the company’s head of organic performance from 2019 to 2022, wrote on LinkedIn. “It was never meant to end like this. I was there. I could see how easy it was for customers to purchase a car online.”

The company’s next phase will be doubly hard, predicts digital entrepreneur Alastair Campbell, who tried to disrupt the Autotrader business model with Carsnip before hitting a wall in 2018. “They have upset a lot of dealers with their commentary about the industry,” he told Autocar. “Very few dealers will go with them.”

Then there’s the battle with Autotrader, which has proven a formidable foe if it thinks a rival has achieved too much traction. “Autotrader won't react today but they will at some point if Cazoo survives,” Campbell predicted.

Cazoo now seems destined for the grave of used car market disruptors, where it has at least earned its place next to the biggest headstone of Tesco (2010-2012, RIP). “What they thought they could give customers [that] the existing dealers couldn’t, I still don’t know,” wrote Philip Wade at Stoneacre. “What I do know is that our trade is not for the faint-hearted.”