CarMax Inc. stands alone -- in size, scope and focus -- as a national used-vehicle dealership retailer. Now Sonic Automotive Inc. wants to share that space.
Late next year, Sonic will launch a national group of stand-alone used-vehicle stores. The first will open less than five miles from one of two CarMax stores in the Denver market. The stores aim to sell vehicles up to 10 years old with an average price range of $14,000 to $18,000.
"It's time for a new player," said Jeff Dyke, Sonic executive vice president of operations. He declined to specify how many stores Sonic plans, but suggested it would be a lot. A hundred, he said, would be "the tip of the iceberg."
"This isn't a test," Dyke said.
CarMax is the only publicly traded retailer with a national used-vehicle group. Others have mounted challenges but gave up for reasons that include timing, costs and the difficulty of obtaining used-car inventories at an acceptable cost.
Sonic has considered the idea at least since 2005, and began working on it in earnest about five years ago, Dyke said.
Sonic President Scott Smith said the company's technology will help make the plan viable -- for example, a centralized inventory management system. Internal and third-party sales data are analyzed to determine how much to offer on trade-ins or to bid at auctions, the best store location to sell a given used vehicle, and the optimal list price.
Sonic plans to transfer those systems -- some of which weren't available when other dealership groups attempted to take on CarMax -- and the expertise behind them to the new stores.
Mark Rikess, CEO of Rikess Group, a dealership consulting and training firm, said Sonic is a "great technology" company that can make its used-vehicle strategy work. But he also said others have stayed away from the model because "it takes a lot of courage and a lot of capital."
He said opening a store in Denver would require a minimum of $1 million for real estate, construction, inventory and other related costs. To open "at least 50 outlets or more" to be a national brand, "that's $50 million before you get up and running," Rikess said. "Markets can change and markets can turn. That's where the courage comes in."
CarMax is far and away the used-vehicle volume leader, in part because it has spent two decades positioning itself as a no-haggle seller of late-model used vehicles. It is steadily blanketing the country with its used-car superstores, with 124 stores in 62 markets today.
In an e-mail response to a query about Sonic's pending challenge, a spokeswoman wrote: "CarMax is the nation's largest retailer of used vehicles and we are currently growing nationwide -- adding 13 stores this year and 10 to 15 stores in each of the next two fiscal years. We pioneered the used-car superstore concept by delivering what consumers want when shopping for a car: an ethical, honest, and transparent car-buying experience."