CarMax
From Wikipedia, the free encyclopedia
| CarMax, Inc. | |
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| Type | Public (NYSE: KMX) |
|---|---|
| Founded | 1993 |
| Headquarters | Richmond, Virginia, USA |
| Key people | Thomas J. Folliard CEO , Richard L. Sharp, Chairman, Keith Browning, CFO |
| Industry | New and used car retailer |
| Revenue | $5.26 billion USD |
| Employees | ~12,000 (2005) |
| Slogan | The Way Car Buying Should Be |
| Website | carmax.com |
CarMax is the United States' largest used-car retailer. CarMax is a Fortune 500 company and has been named "America's Most Admired Company in Automotive Retailing" by Fortune magazine, as well as having been placed on Fortune's "100 Best Companies to Work For" list in 2005 and 2006.[1] During the 12-month period ending August 31, 2006, the company retailed 311,241 used cars, which is 94% of the total 330,296 vehicles retailed by the firm in the US during that time.[2] CarMax trails Fort Lauderdale, Florida-based competitor AutoNation Inc. in total car retail sales, but CarMax holds a larger used-car operation.[3]
The concept for CarMax was developed by Circuit City executives under then-CEO Richard L. Sharp for nearly a year in 1991 using the code name "Project X".[4] The special project was developed when Circuit City began searching for business opportunities beyond the scope of their consumer electronics locations.[5] The first CarMax used car auto superstore was opened in September 1993, 1.7 miles from Circuit City's corporate offices in Richmond, Virginia. On October 1, 2002 CarMax completed its official separation from Circuit City, becoming a separate, publicly traded company.[6]
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[edit] Locations
As of February 14, 2007, CarMax operated 75 used car superstores and seven new car franchises, all of which are integrated or co-located with its used car superstores.[7]
The typical CarMax store is approximately 59,000 square feet,[3] carries an inventory of 300–400 vehicles, and turns its inventory over eight to ten times a year.[5] On average, a CarMax location employs 40 sales associates.[3] According to the CarMax fiscal year 2007 expectations released on September 20, 2006, the company plans to open two standard locations as well as four satellite superstores in the remainder of the 2007 fiscal year.[8] New locations are set to include:
- Burbank, Los Angeles County, California
- Fredericksburg, Virginia
- Charlottesville, Virginia
- Fresno, California
- New Haven, Connecticut
- Austin, Texas
The largest CarMax location is in Laurel, Maryland with approximately 1,000 cars in inventory. In terms of inventory acquisition, the number one CarMax location is in Dulles, Virginia which incidentally has the second largest inventory at about 700 cars.
CarMax is currently experimenting with a handful of locations that do not sell any vehicles but are optimized to purchase used vehicles from the public.
[edit] General Features and Characteristics of Purchasing at CarMax
There are a few characteristics about purchasing from CarMax that customers may find different from the majority of automobile dealerships. Although not unique to CarMax, these features are still interesting.
[edit] No Price Negotiation
Used as a market differentiator, CarMax does not negotiate on the price of a vehicle. This follows the trend of automobile dealerships that offer fixed prices with the goal of removing a somewhat stressful phase of the purchasing process.
[edit] No Trade-In Price Negotiation
Automobile dealerships generally treat the trade-in price of a vehicle as part of the same negotiation and therefore an opportunity to possibly increase the profit of the transaction. CarMax delinks the trade-in process with the sale process. A customer can either purchase a vehicle from CarMax only or sell their car to CarMax only or sell their car while buying a vehicle from CarMax. The price offer made on the customer's vehicle is not conditional of a purchase from CarMax and is fixed. Neither will the sticker price of the purchase vehicle be affected by the offer of a trade-in.
[edit] Inventory Characteristics
The average CarMax location is larger than the vast majority of automobile dealerships within a market area. Occasionally, it may be the largest within the market area. This is due to the superstore approach to selling used vehicles stressing volume and selection. Combined with the ability to transfer requested vehicles between stores, a customer may have access to the entire inventory nationwide. Due to the volume of sales and brand neutrality, the availability of a given make or model of vehicle on any given day can vary greatly. As a result, CarMax should definitely be a consideration for those that wish to examine a large variety of used vehicles from different manufacturers.
[edit] Business
More than half of the inventory is purchased directly from private owners, many as trade-ins, while the remainder comes from public auctions. CarMax maintains a company-wide database of pricing information which gives the company’s 600 car buyers very specific guidelines on how much to pay for any make or model. They know what the resale price is likely to be and how long it will take to sell, which allows CarMax to manage its inventory turnover rate.[5]
CarMax will not resell cars that have frame damage or have been burned or flooded.[9] They do sell cars that have been in accidents, but only accidents that do not result in damage to the structural integrity of the vehicle. Every car goes through a 125-point inspection[3] and averages over 12 hours of reconditioning before being moved to the lot. Each car gets a 30-day warranty and a five-day free return policy.[9]
Each car is fitted with an RFID tag to track test-drives or any other time a vehicle enters or exits CarMax property. Showroom computers give customers access to CarMax's nationwide catalog of 20,000 cars, allowing customers to have a car from a different location transferred to them for a fee.[4]
CarMax operates the CarMax Foundation, which the company established in 2003. Through the CarMax Foundation, the company donates to charities and causes in communities near locations through donations, grants, service projects, and matching gifts. In the company's fiscal year 2006, over $1 million was donated to various charitable causes. CarMax also uses its Grand Opening events to host charitable causes. Each Grand Opening includes at least one charitable event, such as a CarMax Road Rally where local celebrities compete for donations to their favorite charities, or simply a donation to a local food bank to provide holiday meals for low-income families. Local organizations, such as food banks, animal shelters, and Boys and Girls Club have benefited from donations during CarMax Grand Openings.[10]
