If you try to go to autoquake.com from now on you will be redirected to www.carshop.co.uk
The Car Shop is a Car Supermarket chain who had a turnover of £115.5m in the year to December 2008 and must one of the “two serious bidders” for the Autoquake business as revealed by the administrators MCR. Whether Car Shop have just acquired the domain name or more of the assets remains to be seen but as the dust settles on the now defunct Autoquake venture and all eyes are diverted to the new Tesco Cars offering we wonder whether the valuable lessons for online car retailing have been learned.
Obviously those involved with Autoquake have had to learn the hard way but with ex-CEO Dermot Halpin shedding a slim slither of light on what went wrong in the end we wonder did they ever really stand a chance?
Speaking, somewhat ironically given the circumstances, at an exclusive Google conference back in March Mr Halpin, whose background is in ecommerce not cars, spoke about how expensive the cost of their online advertising had become and that, with hindsight, they should have diversified their advertising model to include “different pools of demand” such as TV and “off-line media” (presumably by this he means print). Reading between the lines it sounds as if they were burning through cash and their original customer acquisition costs of “around £90 a vehicle” had grown to become more in line with the £300 per vehicle of their competitors.
Mr Halpin even went on to blame the eventual demise of Autoquake on financiers who wouldn’t extend them a bridging loan because the “risk was too big” and the company went under because of a “financing issue”.
For Halpin to glibly refer to their ultimate demise being purely due to a “financing issue” is somewhat over simplifying things. After all when has the demise of any company not been down to a “financing issue” of one description or another?
“It was not the internet, it was not the model, it was the financing,” said Halpin, somehow missing the point. He said the main reasons the administrators were called in were firstly Autoquake had started to buy their own cars (rather than re-market other peoples stock) and gaining the stock it needed was expensive (which, of course is the same for everyone), secondly the company was simultaneously in talks with one company to buy and with another to merge and one of the deals had collapsed and thirdly its media strategy was not diverse enough, meaning it relied too much on online marketing which was, as alluded to before, becoming very expensive.
The fatal flaw in the whole operation, which Halpin makes no reference to and which is now obvious to everyone, was the stock itself. Autoquake simply didn’t have a wide enough choice of vehicles and the vehicles they did have were not acquired cheaply enough for Autoquake to be able to sell competitively and still make a big enough margin on.
What they also couldn’t do was find stock that was different enough from their competitors to make Autoquake a compelling alternative for car buyers to use rather than traditional routes where they can touch and feel and of course get a price for their trade-in. Trying to align themselves more and more with how traditional car dealers operate was kind of defeating the object of setting up Autoquake as an on-line used car buying site in the first place. Once they went down that particular road they were heading for an inevitable crash.
As one dealer said to us recently ; it’s ok having a great website and lots of great pictures and a massive on-line marketing budget but give anyone £20 million of venture capitalist (i.e. other peoples) money and over time they will probably make a better fist of selling used cars profitably than Autoquake ever managed.
Hindsight is, of course, a wonderful thing and the Autoquake proposition was an intoxicating one for many in the trade but looking back the writing was clearly on the wall. What makes the Tesco Cars proposition any better? The might of the Tesco brand? If what we are hearing is correct Tesco might be trying to deal with suppliers of decent used car stock in the same way they are purported to deal with dairy farmer’s i.e. telling them how much they are going to pay for the produce and not the other way around. Tesco’s venture into the world of used car retailing is certainly ruffling a few feathers and it seems that the ruffling is just the start.