Competitors and competitive factors


Competitors and Competitive Factors


CarMax is one of the leading used car retail sellers in the nation. It is also one of the pioneers in providing a wide variety of used vehicles at highly competitive, non-negotiable, and attractive prices. CarMax has designed their customer strategy by carefully identifying and improving in the areas of dissatisfaction that customer faces while dealing with traditional car dealerships. CarMax also has standardized end-to-end operating procedures, and store layouts which help them maximize the operating efficiency and provide a true stress-free retail car buying experience such as any other retail store like Wal-Mart.

The company essentially purchases, inspects, renovates, and sells used automobiles. Majority of the vehicles for sale are less than 6 years old and generally driven for less than 60,000 miles. All the vehicles are comprehensively inspected and repaired for any kind of mechanical, cosmetic, electrical, and hull issues or damages before going for the sale. Unlike traditional car dealers CarMax also provides 5 day satisfaction-guaranteed scheme to allow customers to test drive their vehicle and make sure that there aren't any issues with it. Along with the used cars CarMax also started selling new cars in 2006. It has proved to be a smart strategy as new cars sales has been generating 7% of its total revenues since 2006.

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To improve customer satisfaction CarMax offers one stop shop for various related services such as:

  • CarMax Auto Finance
  • Extended Warranty Services
  • Sales of Accessories and Add-ons
  • Inspection and Repair Services
  • Auto Insurance Services
  • Trade-In Vehicle Appraisal Services

The trade-in vehicle appraisal process is unique and independent of the purchase of another vehicle from CarMax, and the appraisal values don't affect the non-negotiable prices on the purchasing car. Apart from purchasing vehicles from customers, CarMax also purchases used vehicles from wholesale auctions, car dealerships, and fleet operators.

Competitive Strategy:

The primary competitors of CarMax are new car dealerships; some of those also sell used cars, and independent dealers that primarily sell old cars. In both the circumstances CarMax has strategically positioned it self by distinguishing its business from its competitors by offering various value added services and flexible terms to its customers such as:

  • 125 point thorough inspection of a vehicle
  • Every vehicle has 5 day money back guarantee
  • Every vehicle comes with 30 days of warranty
  • Flexibility to refinance auto lean after 90 days
  • Discounted rates on all repairs and maintenance services

These services and terms allow CarMax to have an upper hand on all of its competitors which generally play unethical tactics to trap customers.

To remain competitive CarMax also continuously analyzes its business nationally and by stores to determine optimal inventory mix for each store, future demand, sales personal performance, and vehicle pricing.


CarMax's sales representatives get a fixed commission per car irrespective of the cost of the car, which allows them to concentrate on customer's needs, price range, and recommending a right car. This model is completely different than the sales representatives of traditional dealership which generally get paid based on the cost of the car, and profit margins on a car often restricting them to recommend a right car to a customer as per their needs.

Marketing and Advertising:

CarMax has focused it's marketing strategies to increase awareness of it's brand and making potential buyers aware of advantages of shopping with them. CarMax also conducts various market research studies to align its marketing focus on ongoing trends, changing customer habits, and needs. CarMax also utilizes various marketing channels strategically such as TV and Radio advertisements are designed to increase brand name "CarMax" awareness, Newspaper advertisements are used to promote the idea of wide variety of vehicle selection, and non-negotiable pricing strategy. Another compelling channel for their marketing is their own company website This website offers a centralized location of tools to it's customers to help them informed decisions such as:

  • CarMax offers and promotions
  • A search engine to identify a right vehicle within a price range
  • Nearby store locations and vehicle inventory
  • Each vehicle's history, mileage, and photographs
  • Online payment system
  • Kelly Blue book values
  • Customer Care contact information
Suppliers and Used Vehicles:
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CarMax obtains its vehicle inventory primarily through its customer's trade-in vehicles however also from various other sources such as car auctions, wholesalers, car dealerships, and rental car companies such as Hertz. CarMax's state of the art trade-in appraisal process gives them access to in-demand makes and models that truly represents the taste of the regional consumer market. CarMax also maintains relationship with various wholesalers and car leasing companies to get the well maintained cars at discounted rates.

Merchandising and Pricing:

CarMax executes its "No-haggle" and "Everyday Low-Price" pricing strategy very effectively. The company makes sure that it is offering competitive prices on all of its vehicles by analyzing inventory available in the market with competitors. CarMax also expand its "No-Haggle" pricing strategy to other services it provides such as vehicle documentation fees, auto loan rates, accessories sales, extended warranty plans, and even vehicle trade-in appraisal values.

Extended Warranty Plans:

CarMax offers an extended service plan for majority of the vehicles it sales. Unlike other local dealer's extended service plans on used vehicles, CarMax's service plans provides it's customers a nationwide network of thousands of independent service providers along with service stations of it's own nationwide stores. CarMax sells these plans on behalf of third party vendors, and receives commissions on each plan it sells to its customers. Pricing of extended service plans is based on the vehicle's prior repair history, mileage, year, and overall condition.

As per CarMax the extended plans service has been very effective in maximizing customer satisfaction, referral to another customers, and higher chances of getting a repeat business from its existing customers.

Information Systems:

To improve customer experience CarMax also provides computer kiosks in store, which provides real time information about store's current inventory, pricing, vehicle location, specifications, and details. This allows customers to take their time to go through the vehicles of interest with comfortable pace, compare it with other vehicles, and make informed decisions. All the vehicles in the inventory have tracking devices and bar codes to prevent any kind of theft.

AutoNation, Inc.:

AutoNation is known as the nation's largest automotive retailer, selling both used and new vehicles. AutoNation is one of the Fortune - 500 companies with 272 dealership locations, 25,000 employees, and sells cars of about 37 various brands across the nation. In Tampa Bay area AutoNation is know as "Auto Way". Similar to CarMax, AutoNation also heavily uses their online website and offers its regional and national inventory for online viewing. AutoNation also offers all related products and services to its customers such as:

  • Parts and Accessories for used and new cars
  • Onsite repair and maintenance services
  • Auto Finance
  • Auto Insurance

AutoNation leverages quality of their managerial talent, market brands and advertising, standard procedures, which allows them to achieve higher efficiencies.

Business Strategy:

Like CarMax, AutoNation also focuses strongly on maintaining strong relationship with its customers. AutoNation implements several strategies to reach highest operational excellence such as:

  • Provide a unique and pleasant customer service experience in stores
  • Continuously seek to improve operating efficiencies by leveraging their large scale of operations
  • Continuously look for opportunities to improve productivity
  • Customize the brand for each local market.

AutoNation also partners with outside vendors such as Edmunds.Com and publishes reviews on various cars, customer views, current trends, and efficiency of cars as an value added service to its customers.

Inventory Management:

AutoNation takes its inventory management very seriously specially in the current economic environment. They maintain their inventory as per the customer demand and market trends and tries to maintain minimum inventory for low volume stores. As per AutoNation its inventory management practices which are also based on brand forecast and inventory sharing among near by stores has helped company weather the current economic downturn. To manage used cars inventory tightly AutoNation also liquidates its inventory of cars that it finds difficult to sell. Despite of all these efforts AutoNation had to write-off around $1.7M in 2008, and $2.0M in 2007. AutoNation also implement FIFO (First-In First-Out) method to minimize the cost of Parts, Accessories, and some other related inventories.

Customer Experience:
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AutoNation makes painstaking efforts to make its customers in store visit successful and pleasant. They have taken several initiatives and implemented standardized practices to make its customers happy such as:

  • Improved Customer Service: AutoNation has deployed a very customer friendly sales staffs via continuous trainings, easy and customer friendly service processes, and a sales menu that clearly discloses the purchase and lease agreements. To promote this practice across all of their locations by compensating it's sales personnel based on the customer feedback that they receive.
  • Parts and Service Sales: Parts and maintenance along with collision services is one of the key revenue generating segments for AutoNation. The key initiatives of this segment are focused around improving processes, optimizing prices, and improving customer satisfaction which eventfully leads to customer retention. AutoNation makes every effort to offer a full range of maintenance and repair services for all the brands it sells. They also regularly compare themselves to other competitors and adjust their pricing on regularly performed vehicle services to remain competitive with the market rates.
  • Car Donation Program: AutoNation provides several value added services to its customers such as car donation program. Lots of customers like to donate their cars when they purchase a new one. Identifying this customer need AutoNation maintains list of charities on its website. Customers can talk to live operators seven days a week, or chat with them online, fill out the forms and AutoNation picks up the car from customer's door way saving customer lot of time and efforts.
Other Used Car Retailers:

The rapid growth of the internet and its user base has prompted lots of retailers to offer online purchasing option to its customers. The customer base which prefers to purchase online has been small but steadily increasing, as purchasing online is little cheaper as compared to purchasing in-store. On top of that it also provides convenience to consumers as they can avoid going in traffic, save time, and gas. Some of the online retailers such as eBay Motors, and leverage this change in the purchasing pattern and offer entirely online used car buying experience. Both the companies offer very unique features and services to attract and retain customers.

eBay Motors:

eBay Inc. is the parent company of eBay Motors, one of the pioneers who took the idea of traditional auctions and started offering it on the internet. Similar to eBay Inc., eBay Motors provides a platform to buyers and sellers to come together directly without intermediaries which leads to a cost effective solution for both the parties.

Customer Confidence while buying and selling online:

Even if the online purchasing customer base has been increasing, all the customers have a primary concern around loss, theft of personal information, and non-delivery of items after paying for it. Keeping this customer concern in mind eBay Motors has developed various tools and features to improve customer trust and safety such as Feedback Forum, Verified Rights Owner Program, Safe Harbor Program, and 24x7 customer support. These features and safety measures help customers perform online transactions with peace of mind.

Unlike CarMax and AutoNations, eBay Motors offers several unique features to its customers such as:

  • Online Advertising and Other Services: To increase their customer reach they partner with various online and mailing services. They also launched their own advertising service in 2008 that allowed its customers to purchase a standard text for their online listings on eBay
  • Comparison Features: eBay Motors also offers comparison tool using which customers can compare 2 cars for its specifications, features, and overall condition. Customers can also use the tool provided by Kelley Blue Book to appraise their cars.
  • Vehicle Purchase Protection Program: This is one the best program that eBay Motors uses to ease the customer anxiety while making a big purchase like a car online. The program provides protection up to $50,000 to all of its customers at no cost against certain types of losses which could occur from some types of fraud.
  • Parts and Accessories: eBay motors has the largest inventory of parts and accessories for various car models on the web. It even has the inventory of parts of very old cars that are generally hard to find in local stores. This strategy helps them to distinguish their brand from competitors and attract and retain its customers. has been recognized as a Best Website for car shopping by various agencies. is the most comprehensive website for customers who are planning to buy or sell used or new cars. The website has listings of over 2 million used and new cars from various car dealerships, private parties, and classified advertisers. This type of setting offers its customers the best selection of cars in the local market. also partners with CarFax which provides an option to check the history of a car before customer makes plans of buying it. also provides lot of other value added services such as customer reviews about specific year and make of a car, photo galleries, comparison tools which helps millions of shoppers connect with each other at one low flat rate.

Marketing and Business Strategy: publishes its advertisements across 175 nation's leading online newspapers such as, and so forth. They also advertise with online websites such as Yahoo,, etc..

Like other used and new car retailer to increase consumer satisfaction also offers some unique features to its customers such as:

  • "Sell It By Yourself" program: This programs allows sellers to put their listing on the website at one low flat rate. After 90 days if the car has not been sold the customers are eligible to obtain their entire advertisement fees back.
  • Build Your Own Car: This unique feature allows customers to build their own car by selecting make, model, color, accessories, and various customized upgrades. This unique feature helps customers see the exact picture and the final target price, a great tool for people who love to drive customized automobiles.
Auto finance and Insurance options

Auto Finance:

A few decades ago it used to be very difficult to get auto financing from banks or car loans from other financial institutions, however that trend has changed dramatically in recent years. Auto manufactures and used car sellers have thousands of vehicles in their inventory and they need to sell these cars as soon as possible. On the other hand lot of people can not afford to purchase a car with outright cash and this is where Auto Financing comes in to the picture. Banks, credit companies, car manufacturers, and vehicle dealerships work together and provide auto financing to its consumers at low flat monthly payment enabling common man to own a vehicle. All the financing firms compete intensely to acquire new customers, and often offer excellent rates of interest and various exiting offers and benefits to attract new customers. They also work actively to maintain their existing customer base by offering the refinancing options or gifts to remain a preferred financer for any new business from such customers.

Opting for an Auto Finance also makes lot of sense to majority of consumers as the interest rates on these loans are generally lower than other commercial or personal loans. Additionally, financing companies show lot of flexibility towards down payment amount, the saved amount can yield more returns to consumers if they invest that money in some other financial instruments. Now days car dealerships even tie up with multiple auto financing companies to get the lowest interest rates for their customers. In recent years to gain more customers finance companies are even tapping into the customer segment with bad credit history. Few years back that would be very difficult for individuals with bad credit history.

Same way, even ABC can provide assistance to its customers in selecting auto financing company by making a tie ups with one of the Banks or auto loan company, who can provide the best interest rates in Tampa Bay area to its customers. So, ABC can hire a professional staff for taking care of customers' requirements. ABC can also opt for installing Java software on its website for monthly car payment estimator or calculator, which can help customers to get the quotes for vehicles easily and quickly without any hassle. Below please find prevailing rates of interest from some of the banks that provide auto financing.

Auto Insurance:

Auto Insurance is a protection against any unintentional losses caused by accidents. Cost of auto insurance is a significant portion of one's monthly budget for owning a car. With more and more people owning vehicles number of accidents and relative losses has been increasing, and auto insurance companies eventfully put burden of this increased cost on to its customers by increasing their auto insurance rates. Auto Insurance business has also evolved over the period of time, insurance companies not heavily depend on one's driving history and accidents in a particular zip code to generate quotes for its customers. To reduce the administrative cost almost all of the companies have online tools to get insurance quotes online, it is also convenient, accurate, and faster than other traditional methods.

What tips can ABC provide its customers regarding Car Insurance?

Many buyers overlook the importance of getting a good deal on car insurance as well and often pay more on insurance than they should be.

ABC can remind its customers to keep following discounts and offers that majority of the auto insurance companies provide and educate them on how to take advantages of it. Various such discounts and offers are as follows:

  • Purchasing Auto Insurance online: As mentioned before majority of the insurance companies have developed web based tools to enable customers to get their insurance quotes online. These tools have also sparked a stiff competition amount the major players. Customers are encourages to go on the insurer's website and get quotes from all of them, compare and then make the decision.
  • Car Safety features: All major insurance providers give heavy discounts on cars that are well equipped with the safety features and equipments such as anti-lock brakes, seat belts, anti-theft alarm, and internal GPS tracker. Many states require insurance companies to take these features in to account and provide appropriate discounts to customers who install these features.
  • Combined Coverage: Lot of insurance companies also sells umbrella insurance policies. Umbrella policies can insure home, multiple cars, boats, RVs and so forth. These kinds of policies can save good amount of money for customers who purchase various insurance policies from different providers.
  • Renewal Discounts: Insurance companies like to retain their existing customer base and often offer a renewal discounts for continuously staying with them for specific period of time.
  • Appetite for risk: Insurance companies also offer various deductibles to it's customers in that customers have to bear a certain amount of money in case of loss or damage to property. Insurance rates are lower if customers opt to choose higher deductibles.
  • Discounts for being "Accident - Free": To reduce the cost of insurance administration, insurance companies often offer discounts to its consumers who are accident free for certain period of time.
  • Age based discounts: Insurance companies also take age of drivers into account while providing a quote to its customers. Customers should always make sure that they have been receiving discounts based on their age.

Lots of companies offer insurance services in the Tampa area, below please find a list of few of such providers

  • Geico
  • Auto Insurance Quotes
  • Esurance (online auto Insurance)
MaxCare Extended Service Plans:

Each and every car eventually needs some kind of repair. Monthly payments on cars is something that can be planned and predicted, however sometimes repair cost can come up anytime, and most of the time at undesirable times. Naturally as cars get older, the likelihood of incurring such a repair cost increases. Most of the manufactures provide warranty on cars that they manufacture for around 3 years. However, what after 3 years that's when there are greater chances of having repair costs. CarMax has identified such customer need and provides a warranty on the used cars that it sells. CarMax provides several options to its customers around this service. The popular term is extended service warranty for 5 years or up to 100,000 miles. The cost of the plan varies for various makes and models, but generally cost around $1,500 for 5 years.

Some of the unique features of MaxCare are such as:

  • Nationwide coverage of authorized dealers
  • Low deductibles
  • Non-covered parts can be repaired
  • Payment arrangements are directly made between authorized dealers nationwide and CarMax
  • Affordable and flexible payment options
  • Road side assistance
  • Rental reimbursement
  • Comprehensive coverage for parts of power terrain
  • Coverage is transferable to another owner is car is sold by existing owner