CarMax 2007 Annual Report Download - page 9

CarMax’s ultimate goal is to have the right vehicle in the right
place at the right time at the right price. Superior, proprietary
systems, our extensive database of vehicle information, and our
team of skilled buyers help us to optimize our inventory selec-
tion and inventory turns. CarMax buyers have online access to
cost and sales information on our current inventory and recent
sales. They also have a variety of wholesale industry information
to assist them in determining the appropriate amount to offer for
both in-store appraisals and auction purchases. In addition, our
high volume of purchases provides our buyers an experience
advantage compared with other used car retailers — approxi-
mately half of our 800+ person buying team have each appraised
more than 5,000 vehicles, and more than 20% have appraised in
excess of 10,000 vehicles. Our inventory management systems
also allow us to ensure our inventory selection is tailored to the
buying preferences at each store, and they help us respond
faster and more effectively to changes in the wholesale vehicle
market, economic conditions, and/or customer demand.
We carefully monitor the business environment and provide
our store teams with the information that allows them to quickly
respond. We have developed a superior inventory management
and pricing system that allows us to make the systematic
pricing adjustments necessary to optimize inventory turnover
and help maintain targeted gross profit dollars per unit.
CarMax has increased profitability over time because we
are committed to continuous improvement in every aspect of
our business. We have increased our stores’ efficiency and
throughput over time by focusing on the most efficient and
effective use of available space. This has allowed us to buy,
recondition, and sell more vehicles through a smaller infra-
structure, providing a substantial offset to inflation in real
estate and construction costs.
CarMax is committed to improving associate engagement
for a variety of reasons. Engaged associates remain with
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CarMax longer, which reduces the cost of turnover. Engaged
associates also help us target waste reduction and improve
our processes.
Greater efficiency at our auctions continues to attract more
dealers and contributes to the increase in our wholesale
margins. We continue to focus on increasing the speed and
consistency of our auctions, as well as expanding the services
offered to dealers. In fiscal 2007, we upgraded our CarMax
auctions website, expanding the available vehicle data and add-
ing new search and alert features. We also expanded our free
vehicle history service to include all our wholesale vehicles, and
we added a third-party financing provider to all our auctions.
We also continue to improve our vehicle delivery methods
and the associated costs, including the use of our own
transport vehicles on some routes. Transferring vehicles at
the request of our customers adds efficiency to the car-buying
process. Any customer at any store has access to our nation-
wide used vehicle inventory. More than 20% of our used
vehicle sales result from customer-requested transfers.
Our website, carmax.com, boasts more than 25,000 vehicles
and it allows our customers to search makes and models in a
variety of ways. It has become the central feature of our sales
and marketing program and is the most efficient way for our
customers to shop for a vehicle. More than 4 million customers
currently visit our website every month and approximately 70%
of our in-store customers visit the site before coming to the
store, and we expect these statistics to continue to increase
over time. Our ongoing improvements to the website, including
enhancements that we made this year to the vehicle photo-
graphs that accompany each online vehicle description, give
the customer more of the information they need before ever
arriving at our store. Ultimately, our goal for the website is to
replicate the in-store experience of our customers and serve
as a leading site for vehicle-related information.
[FAR LEFT] More than half the cars
we retail are purchased directly
from consumers, an excellent
source of quality, high-demand
vehicles. We have a team of
approximately 800 skilled
buyers who are the backbone
of our inventory system.
[LEFT] Vehicle reconditioning
is a critical function that
supports our used vehicle
retail sales.