CarMax: Competing with Carvana | In Practise

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CarMax: Competing with Carvana

Former Sales Manager at CarMax

Why is this interview interesting?

  • How CarMax reacted to Carvana entering Raleigh in 2015
  • The offline vs online sales progression
  • Challenges for CarMax selling vehicles online and through the hybrid model
  • How to incentivize sales staff between offline and online sales
  • How CarMax looks at managing both slow and fast moving inventory
  • CarMax in-store reconditioning efficiency
  • Advantages Carvana could have over CarMax

Executive Bio

George McGhee

Former Sales Manager at CarMax

George has over 8 years experience working at CarMax as a Senior Sales Manager in one of two Raleigh stores. George’s store sold over 500 units per month and he was responsible for the full sales process and pioneering the transition from physical to online sales. He also oversaw the procurement of inventory and worked closely with the General Manager to manage inventory for the store. Carvana have a vending machine 15 minutes from the Raleigh store so George has first-hand experience competing with the pure-online player. George is now the Managing Director for Vehicle Exchange at WestGate Automotive, an independent auto dealer in Raleigh. Read more

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Interview Transcript

George, can you provide a short introduction to your role and responsibilities at CarMax?

I oversaw the profitability of the store. To make a long story short, I oversaw different processes. I oversaw that the sales process was executed 100% by our sales managers and consultants. I also oversaw procurement of inventory; how we sourced and priced our vehicles, as well as reconditioning them. It would either be from clients who purchased from us or from auctions we attended. There is a massive amount of paperwork involved to ensure all the vehicles on our lot had titles. And there was all the paperwork which clients sign get sent off to financing companies. I oversaw that whole process. It was a very broad spectrum of the inner workings, from the procurement of the vehicles to the sale of the vehicle to the actual paperwork that is needed before and after the vehicle is sold. Sometimes I would handle service department issues when needed.

How many cars did your store sell and where was it located?

The store was in Raleigh, North Carolina, close to Wake Forest. It is the second of two stores in our market and sold on average between 500 and 600 cars per month.

Was that the second store added to the region after the more mature store?

Yes, we were the second store added in 2014. The original Raleigh store was the second store CarMax ever built and was opened in 1994.

How many cars did the more mature store sell a month?

That store sold between 800 and 900 cars per month.

Did you work together much?

Absolutely, since Raleigh was what they call a prime-time market or a market ready to be saturated even more, we had to work together. Many times, our regional vice presidents would come in and ask how our P&L looks and how many vehicles we sell per month, but they would also ask the big question of how many vehicles we sold in the Raleigh market. Our monthly target between the markets was between 1,200 and 1,300 cars. Many of our consultants we opened the store with came from that location.

They transferred over because they were closer to home. There was a lot of communication and working together, especially when we talk about transferring vehicles and handling customer issues.

Does the fact that CarMax had two stores, relatively close together, provide them with more protection from online players like Carvana?

Absolutely. In American basketball the NBA Golden State Warriors say “Strength in Numbers”; the same thing can be said for CarMax. If there is a concerning issue concerning, we have more room to exercise more options.

Can we walk through the old car shopping experience in the store? What happens after a customer researches the car online and comes into the store?

In the old shopping experience the client would come into the location and be greeted by a sales consultant. There would be some discovery questions at that point. The sales consultant would go on through the sales process and asking questions to find out how they were going to pay for the vehicle and then make recommendations after that. There are test drives involved after which the client makes a decision whether or not they want the vehicle. After that, it is moved back inside the building where finance and payment options are further discussed.

How would you do an in-store appraisal of a consumer's trade-in vehicle?

The sales consultant would hand over the vehicle to a certified appraiser, who would go through a long check list including options on the vehicle, the year, VIN and what works on the vehicle. They would take the vehicle on a one-mile test drive to see the inner workings of it; does it change into gear and do the air conditioner, heater and blinkers function correctly?

After that they do another walk around the vehicle taking note of any dents. They then come back inside and at that point, they will research using different tools such as NADA and CarMax Auction Sites to see what that vehicle is selling for in the market at that moment. They would then make an offer to the client. If it was an exotic vehicle like a Lamborghini, Rolls Royce or a Bentley – believe it or not, we would see those type of cars every now and again – the certified appraiser would involve another certified appraiser and a purchasing manager to calculate the most accurate value of the vehicle.

How long does that process typically take?

Between 30 and 45 minutes.

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CarMax: Competing with Carvana

December 8, 2020

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