CarMax to Enter Southland Market With Superstores
Southern California is poised to become a new battleground for two national giants of auto retailing as Virginia-based CarMax unveiled plans Tuesday to jump into the region’s lucrative car market and spar head to head with rival AutoNation USA, which has been busy laying its own plans to dominate vehicle sales in the Southland through a string of automotive superstores.
CarMax, a publicly traded subsidiary of Circuit City Stores, said it intends to open as many as eight of its own superstores in Southern California next year, with the first to be in Carson, company spokesman Val Brown said. The move is part of a larger expansion plan to open up to 70 new and used-car supermarkets nationwide over the next three years.
The company, which for its last fiscal year posted sales of $874.2 million, operates 19 outlets nationwide, all east of Dallas.
CarMax also said Tuesday that it has signed an agreement with Carson-based Nissan Motor USA to own and operate Nissan franchises. Under the deal, CarMax could sell new Nissans at any of its outlets nationwide, Brown said. The agreement is similar to one CarMax has with Chrysler, which in the last two years has allowed CarMax to begin offering new Chrysler vehicles at two outlets in Georgia.
The deal with Nissan will be launched locally at its proposed Carson outlet, which is scheduled to open in 1999 and will offer new Nissans alongside the chain’s usual selections of used cars and trucks from various manufacturers, Brown said.
In New York Stock Exchange trading, CarMax shares fell 63 cents to close at $12.06. The company also reported Tuesday that same-store sales for April fell 9%.
CarMax’s agreements with both Nissan and Chrysler are part of the company’s overall strategy to add more new cars and trucks to its used-car lineup. Brown said the company hopes to strike sales arrangements with other auto makers, domestic and foreign, in the near future.
“We plan to add new-car franchises to our used-car superstore locations wherever possible,” Brown said.
Nissan spokeswoman Debra Sanchez Fair said company officials hope the agreement with CarMax will help the Japanese auto maker turn the corner on sluggish domestic sales, which have fallen more than 14% since 1994.
“We evaluated [CarMax] on their customer performance as well as their business philosophy,” Sanchez Fair said. “A lot of the things they were articulating were in line with our own operating philosophy.”
Nissan, in fact, said it plans to spend $17 million on a training program for its dealers to teach them sales techniques similar to those CarMax says it pioneered.
CarMax, launched in 1993, sought to take some of the sting out of shopping for a new car by offering a large selection of vehicles at fixed, no-haggle prices with salespeople coached to act more like consultants than pitchmen.
AutoNation USA has used a similar approach to build its own nationwide chain of 26 used-car superstores, including its first California outlet, which opened January in Irvine.
The company and its parent Republic Industries have also set their sights on the Southern California car market, snatching up existing dealerships in Valencia, Manhattan Beach and the San Fernando Valley, and leasing sites for new AutoNation superstores in Oxnard and Long Beach.
Donald Keithley, a consultant who tracks the automotive industry, said the arrival of the superstore chains will cause other dealers to adapt their sales techniques to stay competitive. Keithley said he could envision, for example, other dealerships offering child care to copy CarMax’s For Kids Only program to allow parents to browse unencumbered.
“The customer is going to be the big winner as this rivalry intensifies because all the players are going to offer customer-oriented kinds of services.”
Nissan originally had wanted to strike formal agreements with both CarMax and Fort Lauderdale, Fla.-based Republic Industries, but talks broke down with Republic and Nissan sued to block Republic’s buying dealerships representing more than 5% of its U.S. sales.
