CarMax 2008 Annual Report Download - page 18

6
money-back guarantee and at least a 30-day limited warranty. Other competitive factors include our ability to offer
or arrange customer financing with competitive terms and the comprehensiveness and cost of the extended service
plans we offer. We believe that we are competitive in all of these areas and that we enjoy advantages over
competitors that employ traditional high-pressure, negotiation-oriented sales techniques.
Our sales consultants play a significant role in ensuring a customer-friendly sales process. A sales consultant is paid
a commission based on a fixed dollars-per-unit standard, thereby earning the same dollar sales commission
regardless of the gross margin on the vehicle being sold. The sales consultant normally receives no commission on
the finance process. This ensures that the sales consultant’ s primary objective is helping customers find the right
vehicles for their needs at prices they can afford. In contrast, sales and finance personnel at traditional dealerships
typically receive higher commissions for negotiating higher prices and interest rates, and for steering customers
toward vehicles with higher gross margins.
In the new vehicle market, we compete with other franchised dealers. Historically, the new vehicle market has been
served primarily by dealerships employing traditional automotive selling methods. We believe our customer-
friendly, low-pressure sales methods are points of competitive differentiation.
Marketing and Advertising. Our marketing strategies are focused on developing awareness of the advantages of
shopping at our stores and on attracting customers who are already considering buying or selling a vehicle. We use
market awareness and customer satisfaction surveys to help tailor our marketing efforts to the purchasing habits and
preferences of customers in each market area. Our marketing strategies are implemented primarily through
television and radio broadcasts, carmax.com, the Internet and newspaper advertising. Television and radio
broadcast advertisements are designed to build consumer awareness of the CarMax name, carmax.com and key
components of the CarMax offer. Newspaper advertisements promote our broad selection of vehicles and price
competitiveness, targeting consumers with immediate purchase intentions. Broadcast, Internet and newspaper
advertisements are designed to drive customers to our stores and to carmax.com.
We have changed our marketing programs in response to the rapidly changing media landscape. We have
customized our marketing program based on awareness levels in each market. In many markets, we have expanded
the use of Internet-based advertising while curtailing the use of newspaper advertising. We are building awareness
and driving traffic to our stores and carmax.com by listing every retail vehicle on both AutoTrader.com and
cars.com. Through their syndicated networks, AutoTrader.com and cars.com vehicle listings appear on sites that we
believe are visited by a majority of buyers of late-model used vehicles who use the Internet in their shopping
process. Our advertising on the Internet also includes banner and keyword advertisements on search engines, such
as Google and Yahoo!
Our website, carmax.com, is a marketing tool for communicating the CarMax consumer offer in detail, a
sophisticated search engine for finding the right vehicle and a sales channel for customers who prefer to complete a
part of the shopping and sales process online. The website offers complete inventory and pricing search capabilities.
Information on the more than 25,000 cars available in our nationwide inventory is updated daily. Carmax.com
includes detailed information, such as vehicle photos, prices, features, specifications and store locations, as well as
advanced feature-based search capabilities, and sorting and comparison tools that allow consumers to easily
compare vehicles. The site also includes features such as detailed vehicle reviews, payment calculators and an
option to estimate trade-in values via a link to Kelley Blue Book. Customers can contact sales consultants online via
carmax.com, by telephone or by fax. Customers can work with these sales consultants from the comfort of home,
including applying for financing, and need to visit the store only to sign the paperwork and pay for and pick up their
vehicle. Our survey data indicates that during fiscal 2008, more than 60% of customers who purchased a vehicle
from us had visited our website first.
Suppliers for Used Vehicles. We acquire used vehicle inventory directly from consumers through our in-store
appraisal process and through other sources, including local and regional auctions, wholesalers, franchised and
independent dealers and fleet owners, such as leasing companies and rental companies. In calendar 2007,
approximately 21 million used vehicles were remarketed in the U.S., of which nearly 10 million were sold at
wholesale auction.
The majority of our used vehicle inventory is acquired directly from consumers through our appraisal process. The
most popular makes and models are more readily available directly from consumers than from other sources. This
buying strategy also helps provide an inventory of makes and models that reflects the tastes of each market. In fiscal
2007, we began testing a stand-alone car-buying center in Atlanta, Georgia. Our goal for the car-buying center was