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DTC Ecommerce Marketing

What does the decline of Cazoo and Purplebricks say about the future of DTC?

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By Matt Charlton, CEO

March 10, 2023 | 6 min read

As Purplebricks and Cazoo shave millions off their valuations, Matt Charlton, chief executive officer at Brothers and Sisters, asks what’s up in the world of DTC?

Online car dealer Cazoo sees its valuation plummet 95%

Online car dealer Cazoo sees its valuation plummet 95% / Cazoo

Lots up in the air in the world of D2C these days folks. Cazoo has had a 95% devaluation from $7bn to $100m. Purplebricks has gone from a $1bn valuation to trying to sell for $25m. And there are more rumblings not quite as drastic but serious with many other brands. So what is going on?

Overall, it is not complex, we are moving from a period of cheap money fueling massive over-valuations to one where investors care about profitability again. The need for agencies to help D2C brands balance investment for growth and priming new generations of customers into the top of the funnel with maintaining profitability is huge.

The fascinating challenge with many D2C brands like Cazoo or Purplebricks is they are tasked with changing real embedded consumer behavior which is often built up over decades. It isn’t an easy or cheap task.

When you look at Cazoo and Purplebricks they have both been successful in scooping up the lowest-hanging fruit in consumers who are leaning toward wanting to use online to buy and sell in different ways. The big challenge is how you unlock the next segments of audiences who are much more entrenched in doing what they usually do. They are not going to be easily shifted. This is what the investment community is worried about now, the ongoing cost of shifting these people via marketing is expensive and a longer-term commitment.

Cazoo sold 65,000 cars last year and is projected to sell between 40,000 and 50,000 in 2023. The real issue is: what is the cost of the next big wave of customers to persuade, the next 250,000 customers to back up the valuation?

But is it a fundamental flaw with DTC models or is it the fault of their marketing? Using Byron Sharp’s thinking, I can’t really remember anything they’ve shown me to give mental availability. There are no powerful simple and enjoyable memory structures. There is nothing that has leaped from marketing into the real populist culture.

All that money was invested and I’ve retained pretty much zilch. So there is no incremental benefit to their marketing investments. As one pound is spent on media the pound before it becomes invisible. It doesn’t solve everything but it really doesn’t help.

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There are valid concerns over whether the mass market consumers will ever want to buy their car on the internet or sell their house with an online agent. I just don’t buy that. Consumer behavior is really malleable to the right stimulation.

We gained incredible lessons in the pandemic on just how malleable we can be with our behavior. Most of the technology we adopted in mass from video calling to QR codes had been around for ages but not driven into the culture in the right way. They were write-offs in terms of mass adoption. People just won’t do that is the biggest mistake. People still smoke, vape, drink too much booze and eat junk food, despite knowing it’s not good for them. Why, because life is more about fun than just survival. People believe in religion, different gods, life after death, and maybe reincarnation. But they will never buy a car on the internet! It is not true.

The whole point of marketing, insights into the irrationality of people, real creativity, clever media, and brilliant product and experience is to allow brands to not have to wait around for consumers to organically adopt stuff. Anyone can do that, but to find ways of opening up awareness, desire, and validation to get people to change what they think they like and believe you have to make everything you can truly memorable.

If I don’t remember much then you have to hope I buy because I’ve got no other choices and that is not what most D2C is about.

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