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CarMax: Disrupting the Used Car Market

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by

Dave Hauter

on 4 August 2014

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Transcript of CarMax: Disrupting the Used Car Market

Born out of Circuit City
Used cars, not new cars
We want to know!
The History of CarMax
What Do You Think?
Hypothesis:
How could CarMax effectively scale its business and maintain a steady supply of used cars?
Will competitors be able to duplicate its data advantage?
Will CarMax regret its retreat from new cars?
Where does wholesaling fit into CarMax's future?
Do you see other limiting factors to CarMax's growth?
Would you buy a car from CarMax?
CarMax should continue to
focus
its strategy on offering late model vehicles as opposed to new vehicles. Their business model emphasizes a broad
variety
of
affordable
, popular vehicles with
economies of scale
driving down operating cost.
$1.25
Saturday, April 26, 2014
Vol MGT, No. 625
Haggle
CarMax: Strategic Issues
To Infinity (previously owned) and Beyond!
Conclusion
Low, no-haggle prices
Flexible financing options
CarMax needs to continue to
expand
upon their successful beginning & continue studying regional markets and supplying cars that are regionally
desirable
. They have done well to build a trusting
reputation
. With proper safeguards in place, CarMax can keep its
proprietary
research and tools within their company and stay ahead of any competition that tries to copy their business model.
Competitors
can copy processes and tools, but it will take some time and data collection.
CarMax: Disrupting the Used Car Market
1991 Circuit City sought growth and diversity
Rick Sharp (CEO)
Austin Ligon (Vice President)
1996 Acquires first new car franchise.
1999 Records first annual profit
2002 Spun off from Circuit City
Purchased rights to locations from new car manufacturers such as Chrysler, Jeep, Mitsubishi, and Toyota
Purchased Auto Mall in Kenosha, Wisconsin that had additional manufacturer
Thousands of cars priced under $12,000
Sales consultants are all paid the same
125+ point inspection
No cars with flood or frame damage
Free full vehicle history report
5-day money-back guarantee
The End
Traditional dealerships rely on profits from used cars to offset the lower margins they get on new cars.

CarMax focuses on the products that already have the high margins - used cars - it is what they're structured to do.

4.5 million
17 million
99%
17.5%
1.1%
30,000
250-500
30-100
80%
2%
772,507
25% / 5
Full transcript