The Dynamic Growth of Used Car Superstores

Used car “superstores” are taking a meaningful share of the UK’s market. In a concept pioneered by CarMax in the US, the top 11 superstores shown below could approach 5% of the entire UK used car market by 2022 and 20% of the market for <5-year cars.

While superstores demonstrate terrific growth, there’s still plenty of room for expansion. The largest 7 franchised dealer groups (including behemoth Arnold Clark) offer about twice the used-car volume of these 11 superstores and the top 200 dealer groups account for only about 30% of total used-car sales.

Offsetting the notoriously negative used car dealer stereotype, superstores enhance the customers’ on-line and on-forecourt buying experience in presenting:

  • a large selection of “in-demand” cars

  • in reliably “retail” condition

  • at clear and attractive pricing with available finance.

Of course, the “big” news in superstores has been the introduction of on-line only “virtual” Cinch, Cazoo and Carzam. Their huge investments in systems, stock, infrastructure, and promotion demonstrates an appetite for taking significant market share and, Cazoo’s prospective £5 billion valuation has captured investors’ imagination.

As virtual and terrestrial superstores continuously optimize their customers’ buying experience, there seems to be some convergence among operating models. Cazoo, who notably came to market relying on 3rd party service providers, shifted strategy somewhat in acquiring the Imperial car superstore and Specialist Fleet Services businesses (not to mention the Drover and Cluno car subscription businesses). In contrast, terrestrial superstore Motorpoint reports having executed more than half of their sales “on-line”, during the Covid-stricken 2020 (outpacing Cazoo’s total sales).

While industry veterans are often heard to bemoan a price depressing impact of superstores (citing the "pile 'em high and sell 'em cheap" strategy), it can also be said that their sheer scale help stabilise:

  • Market pricing and

  • Physical condition.

With the exception of market leading Motorpoint, which went public in 2016, each of the independent superstore groups remains privately owned by their original founders. Acknowledging the importance of used-car sales in a increasingly uncertain new-car market, Synter and Pendragon have acquired or developed their CarShop and Car Store superstore models and most franchised dealer groups continue to invest in their own used-car sales operations.

Going forward, superstore models should continue to expand their share of the UK’s £100 billion used car market. Terrestrial and “virtual” superstores should continue to see an operating model converge and increasing number of franchised dealer groups will likely establish their own superstore concepts.