Company Overview:
CarMax is the largest retailer of used cars in the USA. It sells more than 25,000 vehicles per year. CarMax also offers automotive services such as repair, warranty, and automotive financing to customers who purchase their vehicles at CarMax. The used vehicle market is a very competitive industry. Some of the primary competitors of Carmax are “Inchcape”, “Copart”, “Penske Automotive Group”, “United Autosports”, etc.
Carmax Competitors
CarMax
Over the last few years, the internal environment of CarMax has changed from a growing company to a mature company. The change in status from a growing company to a mature company has placed a lot of pressure on management to efficiently manage costs, revenues, and earnings through managing inventory levels and increasing sales in-store and online. The management team has been able to maintain the profitability of CarMax through financial planning and monitoring, which has allowed CarMax to continue to be an industry leader. The management team has set some goals that they believe will help them maintain their market position as well as increase market share within the industry.
CarMax continues to work on improving the customer experience by redesigning its retail facilities, adding service staff, and improving its online presence for customers. Many consumers have turned to online shopping instead of going physically into a store. Through a new online car-buying service called “MyCarMax”, customers can shop from the comfort of their home or office and have their vehicle delivered right to them.
Revenue (FY 2019-20):
• Total revenue: $1,922.5 million
• Net income: $239.9 million
Competitors:
1. Inchcape
Inchcape PLC is a holding company for Nascar, George Brett Enterprises, and the National Football League’s Kansas City Chiefs. Inchcape is a global leader in sales of new and used cars, parts, maintenance services, and insurance products. The company has over 6,000 dealerships in 29 countries around the world.
Their focus is on becoming one of the leaders in the industry by making sure that their customers get the best value for their money today by purchasing quality vehicles at discounted prices. They believe that quality, affordability, and customer satisfaction are the main contributing factors to our success.
CarMax has invested heavily in their brand but Inchcape is more of a name-brand and can be found in many locations and is also more of a single-source brand. Inchcape has a good reputation for its customer service and they have been able to market to a wider range of consumers. Inchcape will have the upper hand in the sale of used cars due to its wide range of dealership locations.
Revenue (FY 2019):
Inchcape PLC has total revenue of $2,816 million which is up 8% from last year. Net income for this year was $456 million, up 27%.
2. Copart
Copart Inc. is a global leader in vehicle remarketing services. There are about 5,200 facilities around the world that buy and sell approximately 8 million vehicles each year. In addition to their vehicle remarketing services, they also provide insurance as well as auction and centralized tow operations. The Copart facilities are spread out over the US, Canada, Mexico, Australia, Argentina, Brazil, Chile, Colombia, and more. Their focus is on becoming one of the leaders in the industry by making sure that their customers get the best value for their money today by purchasing quality vehicles at discounted prices. They believe that quality affordability customer satisfaction is the main contributing factors to their success.
CarMax does not have the same national presence as Copart. Where they are present, they can offer a competitive price against Copart. Some of Copart’s advantages include its large dealership locations that can hold more inventory and its ability to offer financing to consumers through its financing division. One of CarMax’s main advantages is that it is owned by a larger firm, which allows them to have access to more capital and have deep pockets in the event of an economic downturn or need for additional investment.
Revenue (FY 2019):
Copart has total revenue of $3 billion which is up 2%. Net income for this year was $166 million, down 16%.
3. Penske Automotive Group
The Penske Auto Group is a privately held company that buys and sells new and used cars. They also provide financing, insurance, maintenance, and leasing. Their focus is on becoming one of the leaders in the industry by making sure that their customers get the best value for their money today by purchasing quality vehicles at discounted prices. They believe that quality, affordability, and customer satisfaction are the main contributing factors to our success.
CarMax and Penske both compete by offering lower prices than some of their competitors. Both firms have a competitive advantage due to their large dealer network, which allows them to have access to more inventory. Since both firms are relatively new, they are not known for their customer service. Penske will have an advantage over CarMax in the sale of used cars, due to its large dealership network.
Revenue (FY 2019)
Penske Auto Group has total revenue of $18 billion which is up 10%. Net income for this year was $516 million, up 67%.
4. United Autosports
The United Autosports Group is a privately held company that specializes in commercial vehicle operations. They provide transportation services to the US Military in Europe, Africa, and the Middle East through their subsidiary AFG. They also provide transportation services to the government, industries, and private companies. Their focus is on becoming one of the leaders in the industry by making sure that their customers get the best value for their money today by purchasing quality vehicles at discounted prices. They believe that quality, affordability, and customer satisfaction are the main contributing factors to our success.
CarMax versus United Autosports is a direct competition since they both own car lots and dealerships in Texas. Both firms have been able to provide low prices due to the large amount of inventory available. Where CarMax has had an advantage over United Autosports is that CarMax has been able to provide financing options for consumers through their financing division, CarFinance Capital. One of the main advantages that United Autosports will have over CarMax is the ability to offer vehicle delivery for customers who purchase vehicles from their lot.
Revenue (FY 2019)
The United Autosport Group has total revenue of $3 billion which is up 3%. Net income for this year was $258 million, up 56%.
5. Wolfe Auto Group
Wolfe Auto Group is an Australian company that specializes in the sale, repair, and service of new and used cars. They have sold since 1967 and have grown to serve customers with over 100 employees at their five different dealerships around Australia. They have been able to market to a wider range of consumers over the years from those who just want a good car at a good price, to those who want a luxury car. They believe that quality, affordability, and customer satisfaction are the main contributing factors to their success.
CarMax has been able to offer some of the lowest prices for vehicles with the largest inventory. This allows consumers to get a great deal on their vehicle by receiving a low-interest rate and taking advantage of financing options through the dealer network. CarMax has also been able to provide quality vehicles at reasonable prices, which is what Wolfe Auto Group is trying to do as well. Where Wolfe Auto Group will have an advantage over CarMax is in the sale of used cars, since they sell more than just new and used car models.
Revenue (FY 2019)
Wolfe Auto Group has total revenue of $2 billion which is up 10%. Net income for this year was $150 million, up 83%.
6. Autotrader
Autotrader Group is an online automotive marketplace that provides buyers and sellers with an online platform for automotive shopping and one-click research. They provide the ability to search millions of vehicles at over 1,000 dealerships nationwide, allowing consumers to find what they are looking for without having to go through a tedious sales process. They believe that quality, affordability, and customer satisfaction are the main contributing factors to their success.
Autotrader will have an advantage over CarMax because of its presence on the Internet, where it can provide consumers with a superior sales experience compared to CarMax’s presence. Autotrader has also been able to provide financing options for customers through their financing division, Autotrader Finance Capital. Where Autotrader will struggle is in the sale of used cars, since they do not sell them and focus on only selling new cars and vehicle products. In addition, Autotrader does not have as many dealer locations for consumers to go to purchase a vehicle from them.
Revenue (FY 2019):
Autotrader Group has total revenue of $1,500 million which is up 9%.
7. Carvana
Carvana is the largest online car marketplace in the US that offers customers the ability to buy their dream car without ever leaving home. They have partnered with more than 600 dealerships across the country to deliver instant access to thousands of cars nationwide. Their business model allows them to physically hold on to cars until they are physically delivered, which reduces overhead costs for both customers and dealers. They believe that quality, affordability, and customer satisfaction are the main contributing factors to their success.
CarMax has been able to offer certain vehicles for a discount. These discounts are sometimes offered at a loss, however, the dealers are willing to offer those prices because it is cheaper for them. Since CarMax does not sell the actual vehicles themselves, they do not have to pay rent, insurance, and other overhead costs associated with owning an actual dealership. Their main advantage over Carvana is that they have more dealerships than they do on the Internet making it easier for consumers to locate a location near them with a CarMax nearest them.
Revenue (FY 2019):
Carvana Group has total revenue of $200 million which is up 19%.
8. Vroom
Vroom is an online car buying service that allows customers to purchase quality cars at a great price in the convenience of their own homes. They have partnered with hundreds of dealerships across the country to offer customers instant access to thousands of cars nationwide. They believe that quality, affordability, and customer satisfaction are the main contributing factors to their success.
Vroom can provide financing through their financing division, Vroom Finance Capital. One of the largest advantages that Vroom has over CarMax is that they offer options to customers who are looking for a specific type of car, whether it is a certified pre-owned vehicle or any other kind. This allows them to cater their services to a wider range of consumers.
Revenue (FY 2019):
Vroom has total revenue of $50 million which is up 46%.
9. Beepi
Beepi is an online car marketplace that connects buyers and sellers on one platform, allowing them to choose their preferred mode of transportation. They believe that quality, affordability, and customer satisfaction are the main contributing factors to their success.
Beepi was able to offer certain models of cars for a lower price than CarMax, which gave them an advantage over CarMax in the sale of certain vehicles. The main issue that Beepi had, though, was that their website experience suffered from poor design and functionality.
Revenue (FY 2019):
Beepi has total revenue of $80 million which is down 16%.
10. Zipcar
Zipcar is an online car rental marketplace that allows members to rent cars for short periods. They currently operate in 12 major metropolitan areas within the US and are looking to expand their business further into the UK market. They believe that quality, affordability, and customer satisfaction are the main contributing factors to their success.
Zipcar uses a different business model than CarMax. They charge less than CarMax because they believe that they can provide customers with better service and care, as well as maximize their value by charging less.
Revenue (FY 2019):
Zipcar has total revenue of $440 million which is up 13%.
What changes can CarMax bring to keep up with the competition?
1. Tap into their brand equity:
CarMax has a strong reputation online and doesn’t need to invest heavily in marketing its new business to keep it going. If they can replicate the success of their brand, they will be able to generate a steady flow of qualified leads from the beginning.
2. Invest in their customer base:
Another way that CarMax can expand is by investing in customer acquisition. They have been successful at building an email list, but it would be wise for them to focus on customer retention and not just acquisition since most customers will not stay with them long term, and they will need to incentivize customers who were interested in purchasing vehicles but did not use the site for whatever reason.
3. Invest in employee hiring/retention:
Another area that CarMax can improve is its employee retention. Salespeople are the backbone of any business and it is clear that they need to hire more people to fill roles within their organization. They need to focus on building trust between employees and customers since losing trust will always be a problem with online used car sales.
4. Keep up with their competitors:
As seen by the comparison chart, CarMax has similar or less revenue than many of their competitors, even though they are the last company listed on this list. Losses could be due to competition versus themselves, which is discussed in 1.
5. Focus on their strengths:
CarMax has a proven track record of success so it is safe to say that they are doing things right. If they can replicate this, they will see an increase in new vehicle sales, and the price of used vehicles will decrease since their cars will have less mileage – just like the charts prove.
Conclusion:
CarMax might be losing ground to its competitors overall, but as shown throughout the article, the company is still a leader. They have a proven track record of success so it would be wise for them to use this as a guide for what they should do next. They have been able to tap into their brand equity and generate leads from it which drove a lot of their revenue growth. This is a strong strategy that CarMax should continue to use moving forward since it gives customers confidence in buying cars online without ever having met the salesperson first.
Some frequently asked questions and answers:
Q: Why is CarMax having a hard time generating revenue?
A: The main reason why CarMax is losing revenue to competition is that they are focusing more on their brand rather than the actual customers. They have a huge presence online and there is no need for them to invest heavily in marketing since they have a reputation for being trustworthy and dependable. The main reason why their revenue has been declining is due to the investment that CarMax has been making into their brand. Marketing does not directly contribute to customer acquisition, which can be costly if there are no returns.
Q: Does this affect CarMax’s ability to make a profit?
A: No, CarMax is still a profitable company because the company believes in reinvesting its money back into the business. This is why they spend a lot of money on marketing and branding since it doesn’t contribute directly to the bottom line. They could increase revenue by making small changes such as lowering their prices but they would rather keep their brand name and maintain customer trust. In general, decreasing prices would only lead to more free-riding on their brand name rather than increasing revenue overall.
Q: Should CarMax focus more on increasing revenue or keep its current pricing strategy moving forward?
A: With the increasing competition in the used car sales market, there is no reason for CarMax to not lower its prices to attract customers. Lowering prices would increase demand, which would lead to profitability and a better return on investment.
