CarMax 2004 Annual Report Download - page 7

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CARMAX 2004
5
NON-COMMODITY
■Unlike new cars, every used car is unique, reflecting
differences in mileage, condition, and age. This uniqueness
provides CarMax the opportunity to add value.
■We carefully select the vehicles we offer for retail sale.
Our choices are driven by our high quality standards and
our exceptional understanding of consumer buying
preferences at each of our stores.
■Every retail vehicle undergoes a rigorous reconditioning
process to ensure it meets our high quality standards.
■We back our quality promise with a 5-day, 250-mile, no-
questions-asked, money-back guarantee and a free 30-day,
industry-leading limited warranty. We also sell extended
service plans that can provide coverage up to 6 years.
FRAGMENTED COMPETITION
■The U.S. used car marketplace is highly fragmented and
includes 21,700 franchised new car dealers, 54,000
independent dealers, and millions of private individuals.
■Our primary competitors are the 21,700 franchised
new car dealers who sell the majority of late-model,
1- to 6-year-old vehicles. These dealers focus primarily on
new cars and secondarily on financing and service. Used
car retailing is often a lower priority business for them.
■Independent dealers predominantly sell older, higher
mileage cars than does CarMax.
■To date, there have been no successful, large-scale attempts
to replicate the CarMax used car superstore model.
CONSUMER NEED
■Our consumer research confirms that most consumers
dislike the traditional high-pressure sales tactics employed
by many auto retailers.
■For more than 20 years, “car salesmen” have ranked last in
the annual Gallup survey on the honesty and ethics of
various professions.
■The CarMax customer-friendly consumer offer is unique
in auto retailing. We eliminate the traditional adversarial
relationship and let customers shop for cars the same way
they shop at other “big-box” retailers.
STABILITY PROVIDED BY CONSISTENT
TURNOVER OF VEHICLES IN OPERATION
(Percent annual turnover*)
0
5
10
15
20
25
0302010099989796959493
1 out of 5 vehicles in operation in the U.S. changes hands annually.
* Total used vehicle sales divided by total vehicles in operation
Source: Manheim Auctions