To copy CarMax's success, though, other companies would have to copy its complete business model, she said. For example, over the last few years, CarMax padded its per-vehicle gross profit by wringing $250 out of its reconditioning costs, she said.
"You can bet that we're paying close attention to what Sonic and Asbury are doing and where they plan to open stores," Kenny told the Robert W. Baird & Co. Inc. Growth Stock Conference in Chicago on May 7.
"Having said that, I think the bottom line is we feel there is no real evidence that the competition, the franchise dealers, are doing anything significantly different from what they've done in the past," Kenny said. "We'll see if that changes."
CarMax's business model is built on technology and strong management, says George Hoffer, an economics professor at Virginia's University of Richmond, who has studied CarMax extensively since its inception.
For example, he notes, the retailer places bar codes on parking places on its lots and on each vehicle to make vehicles easy to find. CarMax is run by "Ph.D. technocrats" who analyze every aspect of its business, he says. "It is management science to the nth degree."
CarMax advertises nationally, even though it is not yet in all markets. Hoffer believes the company wants to stake its claim to a national presence ahead of its competitors.
CarMax calls itself a big-box retailer that happens to sell cars. It was created in 1993 by big-box retailer Circuit City, which has since closed.
CarMax built its brand on no-haggle prices, a low-pressure sales environment and salespeople who are paid a commission based on a fixed dollar amount per unit. Most of its stores stock 250 to 300 used vehicles.
Others have abandoned or stayed away from the cash-intensive concept because they were unwilling to risk the money, industry watchers say.
In the 1990s, AutoNation was a fierce CarMax competitor that sold used vehicles only. It dumped the concept in December 1999 in favor of acquiring new-car dealerships.
CarMax was hurting then, too. In its early years, CarMax built stores that were too big, and it lost money through fiscal 1999. But it was backed by Circuit City's deep pockets.
Tommy Gibbs, of used-vehicle consultancy Tommy Gibbs & Associates in Treasure Island, Fla., said Circuit City's willingness to eat those losses while CarMax perfected its business model made the difference. But he believes large public groups such as Sonic have the money, expertise and technological savvy to make their concepts work.
"They are going to commit to it because they are going to separate it from their normal thinking, their normal business model," Gibbs says. "Why hasn't somebody done it before now? Maybe they were too focused on growing their new-car operations or weren't willing to take a chance."