CarMax 2005 Annual Report Download - page 6

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COMPELLING
MARKET
CARMAX BEGAN WITH A SEARCH FOR A COMPELLING RETAIL IDEA. WE LOOKED FOR A LARGE
RETAIL CATEGORY WITH NO SIGNIFICANT NATIONAL COMPETITORS AND PLENTY OF UNMET
CONSUMER NEEDS. EXTENSIVE RESEARCH SHOWED AN EXCELLENT OPPORTUNITY EXISTED IN
AUTOMOTIVE RETAILING, ESPECIALLY IN USED CARS.
1
HUGE
■With annual sales of approximately $367 billion, used
vehicles comprise nearly half of the U.S. auto retail
market, the largest retail segment of the economy.
■In 2004, there were an estimated 42.5 million used
vehicles sold compared with 16.9 million new vehicles.
■CarMax’s primary focus—1- to 6-year-old vehicles—is
a market estimated at $265 billion in annual sales and
20 million units per year.
■The used vehicle market is substantially bigger than other
large retail categories such as the school and office prod-
ucts market ($199 billion in estimated annual sales) and the
home improvement market ($271 billion in annual sales).
STABLE
■Only twice in the last 20 years has the volume of used
unit sales fluctuated by more than 3% from one year to
the next, far less volatile than the annual change in
new car units sold.
■The market for late-model used cars is generally resistant
to typical economic cycles. As the economy improves,
buyers who move from late-model used cars to new cars
are replaced by buyers who move from older, higher
mileage used cars to later model used cars.
■This stability provides the foundation for CarMax’s market
share growth strategy in both existing and new markets.
-15
-10
-5
0
5
10
15
% Change Used Vehicle Unit Sales % Change New Vehicle Unit Sales
2004200220001998199619941992199019881986
USED VEHICLE SALES STABILITY
(Percentage change)
Source: Manheim Auctions
STORE MANAGEMENT TEAMS
4
CARMAX 2005