The platform economy is taking shape around the globe — it has wheels, you might say. To that end, Cazoo, the U.K.-based online platform focused on buying and selling cars, went public at the end of last week on the NYSE, having completed its business combination with special purpose acquisition company Ajax I.
At a recent $9.34, the shares are trading below the $10 level seen last year.
But beyond the vagaries of stock trading, the trends underpinning the shift for car buying, to digital channels, remain in place.
And drilling into the merger prospectus that was filed with the Securities and Exchange Commission earlier this year, the company detailed sizable market opportunities and significant traction in getting consumers on board with getting their wheels online.
The company’s goal, according to the SEC filing, is to make buying a vehicle similar to “ordering any other product today … where consumers can simply & seamlessly purchase, finance or subscribe to a car entirely online for delivery or collection in as little as 72 hours.”
Against that backdrop, the company maintains that the market, valued at about 500 billion GBP (about $689 billion USD) across the EU and the U.K. is ripe for digital disruption. The company’s revenue run rate, according to the filing, is 550 million GBP (about $689 million). Data as of May 2021, with a run rate since launch at December 2019, show that the company has sold more than 35,000 vehicles (as detailed in September), has about 3,000 vehicles available and has more than 6,500 subscribers.
Digital represents only about 2 percent of transactions in the space, versus 15 percent in other sectors. The offline experience, said Cazoo, does not satisfy customers — as 31 percent of consumers do not trust car dealers, and 49 percent are concerned that dealers have more information than they do.
As to the marketplace itself, the filing contends that the U.K. and Europe have inherent advantages over the U.S., with deeper digital penetration, with 22 percent eCommerce penetration, twice that the rate seen in the states; the average “life” of a car ownership period is 3.5 years versus 5 years in the states, indicating, of course, more rapid turnover. The subscription model is available on newer vehicles, too. Under that model, subscribers log onto the site, choose a length of subscription term, schedule home delivery of the vehicle, and have a 7-day money-back guarantee in place.
Data, of course, is critical to the success of any platform model, and Cazoo, which has been acquisitive through its history, said on Thursday (Sept. 2) that it has bought Cazana, an automotive data insights platform, which has among its holdings data tied to 500 million historic vehicle prices across 40 countries, for roughly $34 million cash.
Now, Cazoo’s focus in Europe and the U.K. sets it apart from companies like Carvana, CarMax, AutoNation and Vroom, with decidedly different regional/geographic focal points. But they are all variations on a theme. Demand for vehicles, particularly used ones, continues as we endure the uncertainty of the pandemic and want to do as much shopping online as we can.
Consumers are relatively flush with cash, of course, with government stimulus in hand. And it stands to reason that several players with online platforms can jockey for pole position in the used car market that is transitioning from brick and mortar high touch models.
As has been noted in this space, the most recent earnings reports from companies like Vroom have shown triple digit growth rates, Carvana too.
Some of the manufacturers themselves have been getting into, or are pushing farther into, the online channel. As The Wall Street Journal reported last month, Ford wants to glean a greater percentage of its sales online, in a build-to-order feature, where consumers pick up their vehicles at the dealership. Porsche has been busy expanding its eCommerce ops to include new inventory across its U.S. dealerships.
It’s among the biggest of big-ticket items — buying a car, that is — but consumers are increasingly comfortable with the platforms that meet them where they want to be met to kick the (digital) tires.