Dermot Halpin, Autoquake, CarShop, Tesco Cars and ruffled feathers

If you try to go to from now on you will be redirected to

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.

Subscribe to Motor Trade Insider by Email


10 Responses to Dermot Halpin, Autoquake, CarShop, Tesco Cars and ruffled feathers

  1. Steve Boucher April 29, 2011 at 3:09 pm #

    I think that the advantage Tesco has over Autoquake, et al, is a huge databse – there are over 15 million clubcard members! Tesco wil have a wealth of information on these people (Tesco Loans and Tesco Insurance) to market these people accurately and more importantly, cost effectively.

  2. Bernard McGranaghan April 30, 2011 at 9:02 am #

    The last five lines of this post are a key point to any business wishing to supply Tesco in this venture.

    Traditionally Tesco set the pricing and the returns policy in order to stock products that will sell themselves. They have no qualms about driving their suppliers out of business in order to achieve customer sales and one computer manufacturer has cited Tesco’s returns policy as a key issue in their bankruptcy.

  3. Peter April 30, 2011 at 9:55 am #

    If you want to see feathers not only ruffled but totally blown off then wait and see the reaction from dealers when Tesco start buying 100’s and 100’s of entry model cars direct from the factories on terms far greater than the networkcan obtain.

    Manufacturers,especially the Japanese will have no hesitation in supplying directly if it means shifting thousands of unsold units from the docks.

    Some manufacturers will remain loyal to their network but others who have already supplied the likes of Autobytel et all at 30/40% discount(inc incentives) will see Tesco’s as a dumping ground for cheap cars.

    Advice to any dealer about to invest in another round of corporate carnage……check your manufacturers supply policy ’cause there is nothing as frustrating as demonstrating a car in a multi million pound gin palace only to find that the customer has already secured a deal via the net.

  4. Dave Simons April 30, 2011 at 11:49 am #

    Peter the difference is that Autobytel is owned by Inchcape and the deals they offer are sourced by their franchised delers, it is just a way of competing for busines where customers are happy to travel for the best deal and always search on line for price comparisons first. If oem’s decid to piss off their whole franchsed network for the sake of supplying tesco cars at massive discounts and therefore destroying their residuals then they must be mad!!

  5. dermot halpin May 7, 2011 at 9:13 pm #

    Hi there, this is a pretty thoughtful article on what happened to us at Autoquake so I would like to contribute to the thread:

    I understand what you’re getting at when you say “when has the demise of any company not been down to a “financing issue” of one description or another”.
    But it is a bit like saying that not breathing is the cause of all deaths! To understand the cause-effect you need to dig a little deeper and I probably didn’t give enough detail at the Google event for you to do so. So here is more colour:

    The reason I focused on financing was because we were in the middle of trying to combine the AQ business with another business when a cash bridge unexpectedly wasn’t funded. So it was more that the precipitous nature of the “financing issue” left us with few options and no time to create any other.

    AQ is no longer in existence so it won’t harm anyone to give you more information on customer acquisition cost (CAC). I can confirm that the trailing 12 months cost was circa £90 but it did rise (we consciously spent more to support higher prices) to around £120 per sold unit at the time of administration.

    Focusing only on CAC is a bit of a red herring (and maybe I over-emphasised it at that talk), it’s more interesting to look at profit, as you point out.
    We decided that Autoquake was way too aggressive on price so in November ’10 we began to spend a bit more to support much higher prices than we had previously charged (we put in a £600 across the board price increase in November). In the last weeks of trading our unit margin was around £800, which was closing in on the circa £1,000 industry average.
    I am not sure whether we would have hit the £300 CAC but we would have been completely indifferent if it had meant we made more money. But the key takeaway here is that the problem wasn’t unit margin.

    Buying: We were buying cars at auction with experienced industry buyers, and there is no indication we were paying a higher %CAP than anyone else, we measured this very closely.

    Selection of stock: this is a good point and is really important for consumers, but we built inventory all through ’10 and for most of the last quarter we had a similar mix and number of units to Carcraft, cargiant, the car shop etc. So that wasn’t such a critical element of our demise.

    There is one interesting final observation: we came to the conclusion that the online-centric model was too restrictive for consumers and actually starting to look like a “traditional” dealer was better for them and consequently for us. The deal we were trying to do was heading us in that direction.

    As for your dealer friend, there will always be those who will say “I told you so” and sit speculating about what they could have done had they had access to cash, it must be one of the easier pub conversations. The reality is that the opportunity has existed for dealers to put the consumer first (and for them to better use technology to do so) for decades and few have chosen to do so. In my opinion the best in the industry is The Car People in Wakefield who combine an excellent consumer proposition (transparency) with a solid and evolving use of technology.

    You may all have nodded off at this point so I’ll stop here. Although I think your diagnosis was a bit wide of the mark, my impression is that you were seeking to understand what happened so I hope that helps you to do so.

    Thank you,

    Dermot Halpin.

  6. Patricia Danns May 8, 2011 at 5:56 pm #

    Fair play to you Demot for ‘fronting up’. Now you have been through the AQ experience and had prevoius successes in your other businesses what would be the one thing you would do differently if you had the chance to do it all again?

  7. dermot halpin May 11, 2011 at 9:22 pm #

    I would not go into administration :-)

    • patricia danns May 12, 2011 at 5:28 pm #

      GOOD ANSWER!!!!!

  8. Mark R May 13, 2011 at 9:07 am #

    Hmmm interesting, E Commerce Background, Food Retailing Giants, City Consortium’s etc: sorry but you are not car dealers and you never will be no matter how deep your backers pockets may be. It takes years and years of experience and not a little knowledge to succeed in what is one of the most competitive and money draining business’s there are.

    I only have this to say, ask the CEO’s of any company jumping on the “used car bandwagon bonanza” to go out in the real world of car retailing, use their own money, and try to establish themselves as creditable profitable motor dealers, never going to happen is it? Very Very easy though to spend money that isn’t yours no matter what the business.

    Personally, and only my opinion of course, even with the financial might and huge customer base that Tesco have at their disposal, i think the model they have right now will either fail miserably or change beyond all recognition in the coming years, and that’s if they stay the course in used car retailing, which i very much doubt………….

  9. cameronrb May 31, 2011 at 12:18 am #

    Autoquake made a such a huge noise about how they were doing things differently ‘cutting out the middle man’ was their inital claim. I still remember ‘marketing genius’ Fred Skantz and his comedy shears. I think to many of us who are familiar with the levels of control needed to run these monster operations, at the time just said ‘yeah yeah yeah’ to their claims that they would ‘shake up’ the motor trade-heard it all before.

    And so the story goes, same old thing, got big, lost control, started losing money, closed down. Selling used cars is a tough and dirty business there are so many variables as we get reminded every bloody day. Graduates, hot shot financiers, venture capitalists all believe it looks so easy, completely blinded by turnover. Time and time again they dip in, try and fix whats not really broken, repackage the job and claim they’re doing it so differently and pull the plug when its starts to get a bit choppy.

    Goliath that Tesco is I can’t help but think that even they will be shaken with low margins that used cars offer in relation to turnover, couple that with the ‘bring back if you don’t like it’ retail policy they offer on cucumbers, I give them 5 years max and collectively over that period they won’t make a penny.

Powered by WordPress. Designed by WooThemes