CarMax 2010 Annual Report Download - page 16

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may apply, depending on the distance the vehicle needs to travel. In fiscal 2010, more than 25% of our vehicles sold
were transferred at customer request. Our Certified Quality Inspection assures that every vehicle we offer for sale
meets our stringent standards. We back every vehicle with a 5-day, money-back guarantee and at least a 30-day
limited warranty. Other competitive advantages 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 profit 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 profit.
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.
In our wholesale auctions, we compete with other automotive auction houses. We believe our principal competitive
advantages include our high vehicle sales rate, our conditional announcement and arbitration policies, our broad
geographic distribution and our dealer-friendly practices. Because we own the cars that we auction, we generally
sell between 97% and 100% of the vehicles offered, which is substantially higher than the sales rate at most other
auto auctions. Our policy of making conditional announcements, noting mechanical and other issues found during
our appraisal process, is also not a typical practice used at other auctions of older, higher mileage vehicles.
Together, these factors make our auctions attractive to dealers, resulting in a high dealer-to-car attendance ratio.
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, Internet search engines and online classified listings. Television and
radio broadcast advertisements are designed to build consumer awareness of the CarMax name, carmax.com and key
components of the CarMax offer. Broadcast and Internet advertisements are designed to drive customers to our
stores and to carmax.com.
We continue to adjust our marketing programs in response to the evolving media landscape. We have customized
our marketing program based on awareness levels in each market. We are building awareness and driving traffic to
our stores and carmax.com by listing every retail vehicle on AutoTrader.com, cars.com and usedcars.com. We
believe using these online classified services allows our vehicles to appear on sites that 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 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 each of the thousands of 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 email
alerts when new inventory arrives. Virtually any used vehicle in our nationwide inventory can be transferred at
customer request to their local superstore. 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 they 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 2010, approximately 75% of customers who purchased a vehicle from us had
visited our website first.