Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 13, 1994 TAG: 9403110209
SECTION: BUSINESS PAGE: D-6 EDITION: METRO
SOURCE: By MITCHELL MILLER Associated Press Writer
DATELINE: RICHMOND LENGTH: Medium
But CarMax: The Auto Superstore is banking on a new approach. It believes buying a used car should be a low-pressure experience with prices that are non-negotiable.
Circuit City Stores Inc., the giant electronics retailer, opened its first CarMax dealership in suburban Richmond last October.
CarMax advertises heavily to draw customers into a gleaming dealership filled with computer terminals that customers use to browse through an inventory of 500 vehicles.
The sales building has a play area to occupy children while their parents kick tires or tap into the computer.
Sitting down with a CarMax sales representative, the customer uses the touch-screen computer to pull up various vehicles, their features and their fixed price. The computer also adds up monthly payments.
A printout - complete with a computer-generated photo of the vehicle - includes a map of CarMax's lot and where the car is located.
CarMax determines the price by reviewing the condition of the vehicle and its listed book value. The company said it is able to sell all vehicles below the book value because of its high volume.
Retail sales of used vehicles total at least $150 billion annually. Circuit City got into the used-car business because it is a highly fragmented market, without a leader, said spokeswoman Julie M. Mullian.
"We felt that we could give value to the industry through our expertise in customer service, management and operating systems," Ms. Mullian said.
She said selling consumer electronics and selling cars are not as different as some may think. They both require a broad selection, quality service and well-trained sales staffs, she said.
Competitors acknowledge CarMax brings a new philosophy to selling used vehicles.
Dick Strauss, a Richmond auto dealer and former president of the National Automobile Dealers Association, said he's not sure if the CarMax concept will shake up the industry. But it is on the "cutting edge" and deserves attention, he said.
"Anytime you get a new player in the market that has a lot of money and a lot of clout in the area of merchandising and promotion, they're going to have an impact," said Strauss, chairman and chief executive of Dick Strauss Ford-Isuzu-Suzuki.
Circuit City will not reveal sales figures for its first CarMax dealership, saying only that it is pleased with early results. Ms. Mullian said the store is a test for future expansion but she declined to talk about new sites.
"It would appear they're marketing Atlanta and Raleigh," said retail analyst Kenneth M. Gassman Jr. of Davenport & Company of Virginia Inc.
Circuit City in December filed a rezoning application for a 13-acre site in Gwinnett County, northeast of Atlanta. An attorney representing the company said recently that Circuit City will not develop the site, although it is still interested in putting a dealership in the county.
A site plan was filed in December with the Raleigh, N.C., planning department under the name Acme Commercial Auto Dealership. The name is similar to one used when Circuit City filed in Richmond.
Gassman said the company is preparing for expansion a little faster than he expected. He thinks CarMax has the potential of generating $35 million to $40 million in annual revenue.
"It doesn't make a difference if it's a washer, a television or an automobile," he said. "They know how to sell, they know how to keep consumers happy."
Gassman thinks the softer sell is a good approach. He noted CarMax doesn't have the "cigar smoking, back slapping" stereotypical car salesman.
Chris Vance of Richmond visited the CarMax lot and several other dealerships recently while looking for a car. Rather than accessing CarMax's computer system, he roamed around the lot for nearly two hours.
"I was left alone. I liked that," he said, adding that he was impressed with the selection.
A consumer survey earlier this year by The Dohring Company found many people still like to do some horse trading when buying a car.
Of the respondents who negotiated their last vehicle purchase, 53 percent said they liked the process.
"We have found through our research that the majority of people don't mind the negotiation process, as has been portrayed," said Doug Dohring, chief executive of the Glendale, Calif., market research company that conducted the survey.
While the sleek CarMax dealership is attractive to customers, an official of a nearby dealership said he doesn't believe it is cutting into his business.
"We find that most people still want to negotiate," said Wayne Satterwhite, general sales manager of Haynes Jeep-Eagle, which is just down the road from CarMax.
Vance said he likely will return to CarMax.
"I saw a couple cars that interested me," he said. "It's such a shell game."
by CNB