CarMax 2006 Annual Report Download - page 7

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5CARMAX 2006
CARMAX 2006 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 superstores.
■Every retail vehicle undergoes a rigorous reconditioning
process to ensure it meets our high quality standards.
FRAGMENTED COMPETITION
■The U.S. used car marketplace is highly fragmented and
includes about 21,600 franchised new car dealers and
44,700 independent dealers, as well as millions of
private individuals.
■Our primary competitors are the franchised new car
dealers, who sell the majority of late-model, 1- to 6-year-
old used 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.
■“Car salesmen” have ranked at the bottom of virtually
every Gallup survey on the honesty and ethics of
various professions since the survey began in 1976.
■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.
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.
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050403020100999897969594
STABILITY PROVIDED BY CONSISTENT
TURNOVER OF VEHICLES IN OPERATION
(Percent annual turnover*)
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 and ADESA, Inc.
The customer experienceSuperstore display lot