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Haggle-free, hassle-free: the rise and rise of online used car sales

For the last few months, much of the news coming from the UK auto sector has been pretty sobering. The sector has been reeling from the one, two, three of Brexit, the pandemic and, most recently, the shortage of semiconductors. The impact of the latter is likely, according to our calculations, to lead to a $110bn shortfall across the global auto industry. All in all it looks rather gloomy.

However, there is one part of the sector that is experiencing hitherto unseen growth; online second hand car sales. As the Evening Standard reports, Cinch’s recent fundraising of more than £1bn gives it a valuation of £5bn, making it the latest success story in a sector that barely existed a few years ago. The sky-high valuations are particularly surprising when you consider that online car sales only account for around 1% of the market, and Cazoo and Cinch – two of the larger players in the UK market – list fewer than 7,000 vehicles between them.

So, what’s driving this trend? Consumer behaviour has shifted dramatically as a result of the pandemic. Our recent ‘Changing Consumer Priorities’ research shows that health and financial anxiety are major factors in consumer thinking and both are likely to be contributing to the increasing use of online car sales. Similarly, according to our global Disruption Index, senior leaders from across the UK auto sector cite increased regulation as having a major impact on the industry. In all likelihood, this is a combination of Brexit-based uncertainty around rules of origin and other post-exit hurdles and the Government’s acceleration of electric vehicle-related legislation. It may also be preying on consumer minds, many of whom may be unwilling to commit to a new car purchase until there’s more choice, better value and improved infrastructure for electric vehicles. Finally, with simplicity and self-centricism manifest across most consumer experiences, car buyers are much happier for the internet to do the haggling for them and simply pay what’s asked without lengthy negotiation to 'get a deal’.

Add to that a frictionless customer experience, straightforward buying process and to-the-door delivery, this sector will only grow and competition is likely to be fierce. While haggling for a bargain on the forecourts may soon be a thing of the past, investors are likely to be looking for a good deal as the value of this sector rises.

Critics including traditional UK car dealers are concerned the online-only businesses will struggle to make a profit, given the hundreds of millions of pounds and euros they are likely to have to spend on marketing to acquire customers. However, the likes of Cazoo counter that they have more efficient operations in cheap, remote locations like Amazon, and can operate with far fewer staff because they do not have to support networks of dealerships.

Tags

retail, technology, auto, consumer priorities, digital

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