Cazoo, a London-based online used car marketplace, announced on Tuesday that it will layoff 15 per cent of its workforce as it plans to realign business to de-risk its path to profitability and extend its cash runway.
The British company will layoff 750 employees across the UK, France, Portugal, and Germany. At present, the company employs 3,500 people.
The company is also halting new hires, delaying investment projects, and lowering marketing spending due to the possibility of a UK recession.
Cazoo is focusing on implementing a business realignment plan to right-size the business and conserve cash in the short term by focusing on delivering improved and sustainable profit margins.
Alex Chesterman, OBE, founder & CEO of Cazoo, says, “The combination of rising inflation and interest rates with supply chain issues caused by the pandemic and war has driven up the cost of living and hit consumer confidence. This perfect storm has placed cash conservation top of mind for the company, ahead of growth. We have proven that we can buy and sell cars at scale and deliver a market-leading customer experience, but in the current climate, we are focused on improving our unit economics which involves making some tough but necessary decisions around our priorities.”
Cancels subscription service
As a part of its realignment plan, Cazoo also said it will not offer its subscription service to new subscribers from the end of June given the highly cash-consumptive nature of this business model.
“The plan prioritises gross margin and retail GPU growth, with a focus on cash preservation, delivering strong growth in retail unit sales of over 100% in 2022,” says the company.
Cazoo sold over 10,900 vehicles during the period April 1, 2022, to May 31, 2022, up over 80 per cent YoY, despite a very tough macroeconomic backdrop. As per the company, it has a cash equivalent of over £400M as of May 31, 2022, in addition to the self-financed inventory of over £200M.
In 2022, the company expects to sell over 100,000 retail units and generate revenues in excess of £2B, representing year-on-year growth of approx 200 per cent.
The announcement comes a month after its US competitor, Carvana, announced a massive layoff of 2,500 employees or 12 per cent of its workforce.
In February, Cazoo raised $630M (approx €553M) by selling a stake in the company to a group of investors, nearly six months after the firm was listed on the New York Stock Exchange (NYSE).
Cazoo: All you need to know
Cazoo is the brainchild of Alex Chesterman. It aims to become the “Uber” of the “used car marketplace.” Cazoo claims that it wants its customers’ car buying experience to be seamless, transparent, and convenient – just like purchasing any other product online.
The company lists thousands of cars in stock at any time, all stored centrally in the Midlands. They are available either for home delivery anywhere in the UK or for collection from one of Cazoo Customer Centres within 72 hours. Every Cazoo car comes with a full 7-day money-back guarantee and a comprehensive 90-day warranty.