THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, June 12, 1996 TAG: 9606120537
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: 63 lines
Circuit City Stores Inc. on Tuesday detailed plans to become a powerhouse in used-car dealing, saying it wants to open auto superstores in Hampton Roads and dozens of other markets within the next five years.
The retailer was toying with the idea of becoming a used-car king when it opened CarMax - a large one-price dealership - in suburban Richmond three years ago. Now, the Richmond-based company wants to go all the way.
By 2001, Circuit City said it expects to be operating 80 to 90 CarMax superstores from Miami to San Francisco.
The retailer, which traditionally has dealt in consumer electronics and appliances, believes it has found the secret to used-car retailing. First, it takes advantage of the growing number of late-model used cars - still under warranty - that are flooding the market from rental companies and drivers with expired leases.
Secondly, Circuit City offers customers a no-haggle environment and other consumer-friendly features like child-care centers and lounges.
``During the past three years, CarMax has consistently delivered an improved auto retailing experience and built a large and extraordinarily satisfied customer base,'' said Richard L. Sharp, Circuit City's chairman and chief executive officer.
If CarMax becomes the Wal-Mart of used-car retailing, local dealers may feel the heat, said George Hoffer, an auto industry analyst and economics professor at Virginia Commonwealth University in Richmond.
``Never underestimate them,'' Hoffer said.
Hoffer says CarMax isn't necessarily a big threat to some of the old haggle dealerships that sell lower-end used cars, though new car dealers could get hurt, he said.
But Circuit City spokesman Paul Rakov says not every dealer is complaining.
``We're not going to say everyone's going to jump up and down at the prospect that CarMax is going to come in bringing 500 or more cars with no-haggle pricing,'' Rakov said.
``Clearly, CarMax will increase the competition in any market we go into,'' he said. ``But many dealers have found that to be a benefit.''
After jumping into used cars, Circuit City is taking a hard look at new automobiles, too. In Atlanta, CarMax operates a Chrysler franchise - an experiment for both companies.
``I predict, that within the next several years, most CarMax dealerships will have new-car franchises,'' Hoffer said.
Circuit City has not discussed plans to operate other new-car franchises.
Since 1993, Circuit City has debuted two CarMax superstores in Atlanta and one each in Raleigh and Charlotte. It previously announced plans to enter the Tampa and Orlando, Fla., markets, later this year.
As part of Tuesday's announcement, Circuit City said it wants to open eight to 10 CarMax dealerships next year, including sites in Miami, Dallas/Fort Worth and Houston. Then, Circuit City plans to step on the gas, opening 10 to 15 CarMaxes per year.
The retailer is negotiating for sites in Chesapeake's Greenbrier community, Atlanta, the Baltimore-Washington market and Chicago. It is also looking for property in Los Angeles, San Francisco and Phoenix. ILLUSTRATION: CarMax Features
Late model used cars still under warranty
A no-haggle environment
Customer-friendly features such as child-care centers and lounges. by CNB