Carmax Case Analysis

Introduction

Carmax (NYSE:KMX) is in a slight tight situation now, as investors and Wall Street thinks of new and used car market being on top while its net profit is declining. As an example, when Carmax’s first quarter results were not able to match the expectations, its stock price fell nearly 5%. This clearly points out the question on Carmax’s proven tremendous growth story.

Economic Conditions

According to Carmax annual report (2016), used car retailing business is dependent on many economic factors and unemployment rate is one of the factors. It helps in determining consumer buying power. Gradual decrease in it from 10% to 4.9% since financial crisis, (U.S bureau of Labour Statistics, 2016), provided the boost to the automotive retail

Their low, no haggle price; high quality vehicles; a broad selection; and customer friendly sales processes, these four pillars, have created a solid and loyal customer base, (Carmax, Inc., 2016). Tom Dougherty, CEO of Stealing Share, wrote an article ‘The Process at Carmax Wins the Day’ praising the ease of buying from CarMax. He bought two cars for his children from Carmax, (Tom Dougherty, 2015). Such strong brand equity provides Carmax competitive advantage over competitors.

As mentioned above, the four pillars of value creation are in practice by Carmax since very long, which obviously got noticed and practiced by the competitors. To stand out from this competition and maintain their competitive advantage, Carmax CMO Jim Lyski, has chosen the emotional way. He said “We know our competitors have tried to replicate our key pillars, so we set out to communicate the unique Carmax experience in more emotional way.” (Scott Davis,

According to CarMax annual report, 90% of their customers who bought from them had visited their website or mobile app, and they committed to provide the same customer experience that they have always received at the stores. (CarMax, Inc., 2016) In order to do so, earlier this year, CarMax announced its Digital and Technology Innovation Centre, (CarMax, Inc., 2016b) where their employees will work on development of new features for apps and platforms to enhance CarMax’s buying experience, in a start-up like environment. (Jonathan Lacoste, 2016)

Historically, CarMax had used mass marketing, like broadcasting and mass promotion, for growing its brand value. Now with the CMO’s vision, they have great opportunity to create value through personalised experience using analytics. Using information, provided by customers through website or mobile app, to help them have better personalized experience. Customers nowadays do a lot of online research before going to a store and using that information, keeping those researched cars ready when they reach the store. This personalization gives CarMax a great push. (Eric Krell,