CarMax last week opened its first used-car superstore in Houston, the first market in which the company will compete head to head with archrival AutoNation USA.
AutoNation USA, owned by Republic Industries Inc., operates three stores in Houston. CarMax opened its new store Thursday, July 10. It plans to open a second Houston-area store July 21 and a third before the end of its 1998 fiscal year next Feb. 28.
In addition to the Houston stores, CarMax will open two Dallas-and Miami-area stores before the end of the year. And CarMax is making plans for Los Angeles and Chicago. AutoNation has two stores open in the Miami area and three in Dallas.
The first two CarMax stores in Houston will have space for 500 used vehicles, while the third and largest will have room for 800, according to Val Brown, CarMax spokesman. All three will have additional capacity for new cars, though there are no plans for new-car franchises.
INDUSTRY IS WATCHING
Watchers of the used-car industry have been waiting to see what happens when the two retail giants compete in the same market.
'The bottom line: Who is going to make money in this marketplace?' said Art Spinella, general manager of CNW Marketing/Research in Bandon, Ore., which studies the used-car market. 'They could ... cream each other and neither one of them make money.'
That could be difficult for either, since used-car sales are flat and new-car sales are also suffering, Spinella said.
'Transportation in general is not doing extremely well,' he said. 'How much profit can somebody generate in what is a stagnant industry?'
George Hoffer, an economics professor at Virginia Commonwealth University who follows auto retailing, said CarMax benefits from the management experience of parent company Circuit City Stores Inc. He said Circuit City has opened home electronics retail stores in other markets where other so-called big-box retailers are entrenched.
CARMAX SALES UP IN JUNE
In addition, CarMax per-store sales increased 6 percent in June over the same month last year. CarMax reported sales of $61.6 million during June, up 35 percent from $45.7 percent for the same month last year.
CarMax passed the $1 billion mark in cumulative sales in late June. The first CarMax store opened in 1993 in Richmond, Va., hometown of Circuit City.
In addition to Richmond and Houston, CarMax has three stores open in Atlanta, and one each in Orlando and Tampa Bay, Fla., and in Raleigh and Charlotte, N.C.
CarMax plans to have 80 to 90 stores open in major markets in four years. The company is advertising for store general managers in Chicago and Los Angeles. The ads say the company is searching for candidates with experience in the auto industry, including 'new & used car product line experience.'
CarMax plans six to eight stores in Los Angeles by 1999, and is evaluating sites in the Chicago area.