Swansway Director Criticises Cazoo's Failed Business Model

Scathing Review of Cazoo by Swansway's Peter Smyth

Peter Smyth, director at Swansway, provided a critical analysis of Cazoo and its founder Alex Chesterman during a recent Car Dealer Podcast episode. Smyth labelled Cazoo’s business model as fundamentally flawed, describing the company’s initial plans as unrealistic and fictional.

In a candid discussion on the Car Dealer Podcast, sponsored by JATO, Swansway director Peter Smyth gave a harsh critique of Cazoo, the once-promising used car dealer now in administration, and its founder, Alex Chesterman. Smyth, who previously featured in a 2022 special film on Cazoo, highlighted several issues with Cazoo's business model and Chesterman's approach, attributing their downfall to these flaws.

Cazoo's Unrealistic Ambitions

Smyth began by dismissing Cazoo's initial prospectus as "a work of complete fiction," likening it to a fantasy novel by JK Rowling. He criticised Chesterman's bold claims, including the ambition to sell more cars than established industry giant Arnold Clark within four years and to employ personnel without prior industry knowledge. This approach, according to Smyth, was doomed from the start and alienated many within the motor trade.

Chesterman’s Disruptive Approach

Chesterman's disruptive approach, which included derogatory remarks about the motor trade, only served to "get everyone’s hackles up," Smyth noted. He accused Chesterman of arrogance, pointing out that traditional dealers like Eddie Hawthorne's team at Arnold Clark possess hundreds of years of collective experience, which Chesterman underestimated. This lack of respect for industry veterans, combined with an unsustainable business model, contributed significantly to Cazoo's failure.

Extravagant Spending and Lack of Profit

One of the most critical points Smyth raised was Cazoo's excessive spending on sponsorships, including deals with Everton, Aston Villa, and various international teams and events. Smyth argued that such extravagant spending was unsustainable given the fine margins in the used car market. He underscored that making a profit in this industry is challenging, and Cazoo's financial strategy was flawed from the beginning.

Potential for Survival with a Different Approach

Despite his criticism, Smyth acknowledged that Cazoo had the potential to succeed had they adopted a different approach. He credited Chesterman with pushing the industry towards digitalisation, which has become a crucial aspect of selling used cars. However, Smyth emphasised the importance of a hybrid "bricks and clicks" model, combining physical and online sales channels, as the most effective strategy in the car retail industry.

Lessons from Cazoo’s Digitalisation Push

Smyth noted that Cazoo's push towards digitalisation has prompted traditional dealers to enhance their online presence. At Swansway, for instance, the focus has shifted from merely showcasing cars on the forecourt to ensuring a strong digital presence on platforms like Auto Trader, Motors, and CarGurus. This shift reflects the changing landscape of car sales, where online research and initial contacts are critical, but the final purchase often still requires a physical interaction.

Cazoo's Marketplace Approach

Smyth also mentioned that Cazoo had approached him to use their online marketplace, an offer he declined. He suggested a trial period of 12 months for free, which Cazoo did not accept. This interaction underscores the challenges Cazoo faced in gaining trust and cooperation from established dealers.

Conclusion: The Need for a Balanced Model

In concluding his remarks, Smyth reiterated the importance of combining online and offline sales channels. He believes that while digital platforms play a significant role, the final decision to purchase a car often happens when the customer physically inspects and test-drives the vehicle. This insight highlights the necessity of a balanced approach in the motor trade industry.

The Car Dealer Podcast, featuring industry experts and covering the latest motor trade news, continues to be a valuable resource for professionals. You can listen to all episodes on Spotify or your preferred podcast platform.

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source https://autoengage.co.uk/home-page-6165/b/swansway-director-criticises-cazoos-failed-business-model