CarMax 2008 Annual Report Download - page 21

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commission from the administrator at the time the extended service plan is sold. In fiscal 2008, more than half of
the customers purchasing a used vehicle from CarMax also purchased an extended service plan.
Our extended service plan customers have access to vehicle repair service at each CarMax store and to the third-
party administrators’ nationwide network of approximately 14,000 independent service providers. We believe that
the quality of the services provided by this network, as well as the broad scope of our extended service plans, helps
promote customer satisfaction and loyalty, and thus increases the likelihood of repeat and referral business.
Systems
Our stores are supported by an advanced information system that improves the customer experience while providing
tightly integrated automation of all operating functions. Using in-store information kiosks, customers can search
each store’ s vehicle inventory and print a detailed listing for any vehicle, which includes the vehicle’ s features and
specifications and a map showing its specific location on the display lot. Our inventory management system tracks
every vehicle through its life from purchase through reconditioning and test-drives to ultimate sale. Bar codes are
placed on each vehicle and on each parking space on the display lot, and all vehicle bar codes are scanned daily as a
loss prevention measure. Test-drive information is captured on every vehicle using radio frequency identification
devices, linking the specific vehicle and the sales consultant. We also capture data on vehicles we wholesale, which
helps us track market pricing. An online finance application process and computer-assisted document preparation
ensure rapid completion of the sales transaction. Behind the scenes, our proprietary store technology provides our
management with real-time information about every aspect of store operations, such as inventory management,
pricing, vehicle transfers, wholesale auctions and sales consultant productivity. In addition, our store system
provides a direct link to our proprietary credit processing information system to facilitate the credit review and
approval process.
Our inventory management and pricing system allows us to buy the mix of makes, models, age, mileage and price
points tailored to customer buying preferences at each superstore. This system also generates recommended retail
price markdowns for specific vehicles based on complex algorithms that take into account factors including sales
history, consumer interest and seasonal patterns. We believe this systematic approach to vehicle pricing allows us to
optimize inventory turns, which minimizes the depreciation risk inherent in used cars and helps us to achieve our
targeted gross profit dollars per unit.
In addition to inventory management, our Electronic Repair Order system (“ERO”) is used by the service
department to sequence reconditioning procedures. ERO provides information that helps increase quality and
reduce costs, which further enhances our customer service and profitability.
Through our centralized systems, we are able to immediately integrate new stores into our store network, allowing
the new stores to rapidly achieve operating efficiency. We continue to enhance and refine our information systems,
which we believe to be a core competitive advantage. The design of our information systems incorporates off-site
backups, redundant processing and other measures to reduce the risk of significant data loss in the event of an
emergency or disaster.
Associates
On February 29, 2008, we had a total of 15,637 associates, including 11,780 hourly and salaried associates and
3,857 sales associates, who worked on a commission basis. Sales consultants include both full-time and part-time
employees. We employ additional associates during peak selling seasons. As of February 29, 2008, our location
general managers averaged more than eight years of CarMax experience, in addition to prior retail management
experience. We open new stores with experienced management teams drawn from existing stores.
We believe we have created a unique corporate culture and maintain good employee relations. No associate is
subject to a collective bargaining agreement. We focus on providing our associates with the information and
resources they need to offer exceptional customer service. We reward associates whose behavior exemplifies our
culture, and we believe that our favorable working conditions and compensation programs allow us to attract and
retain highly qualified individuals in each market that we enter. We have been recognized for the success of our
efforts by a number of external organizations.
Training. To further support our emphasis on attracting, developing and retaining qualified associates, we have
made a commitment to providing exceptional training programs. On average, each store associate completed at least
15 online or classroom courses, totaling more than 75 hours of training per associate in fiscal 2008. Store associates
receive structured, self-paced training that introduces them to company policies and their specific job responsibilities