UK Used Car Market Competitive Landscape

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How do the independent used car supermarkets, like Motorpoint or Big Motoring World, achieve a lower price for cars than the franchise dealers on the used side?

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Most car supermarkets are driven by Auto Trader. They want to be priced competitively at Auto Trader; some people want to be at 98%, and some people want to be at 101% at Auto Trader. Bear in mind that Auto Trader is the biggest marketplace, the biggest aggregator with something like 450,000 cars to sell. If you use their latest products, you can put a vehicle registration number in there and the mileage, and it will tell you where that car sits in the marketplace. You can decide whether you want to look at a national, regional, or local market. You can decide whether you want to include car supermarkets, independents, or franchise dealers, so the way you can cut and dice that information is really clever nowadays. It will tell you the optimal retail price for that car based on how many days you want to sell that car, how quickly you want to turn it, and what kind of profit you expect to achieve. You can set your parameter at 100% of the market.

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Motorpoint have two now as well?

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Yes, and that enables you to do all the refurbishment, whether it's paint, mechanical, or alloy wheel refurbishment, at a much, much lower cost than a traditional car retailer can do. In the game, that means that you can afford to be more competitive on your retail price because your recondition and build are much, much less. And we're talking significantly less. Generally, at a retailer, your average recon would be £600 to £700 on a used car; a supermarket would be looking to do it at around £400 or £500 maximum, as an average.

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It's interesting because Cazoo has come into the market and effectively blitzed the UK with advertising spend. It seems like they're trying to drive the traffic to their website and away from Auto Trader and just sell directly on Cazoo. Spend the advertising directly to customers rather than via Auto Trader. How do you see Cazoo changing the landscape?

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I think they’ve already changed it. They are advertising their cars on Auto Trader; I've seen some this week on Auto Trader, and I had firsthand experience. I sold a car through Auto Trader in October. They paid me significantly more money than any of the other online car buying services, including Webuyanycar. It was great, the process was fantastic, really slick, but it took them three months to prepare my car, and it didn't need much doing to it; it was only a three-year-old car. It took them three months to prepare it and get it for sale on the website, and then it took another three months for them to sell it.

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