The CarMax approach: Personalize car buying

A CarMax customer who lived about 60 miles outside Atlanta did not want to make the trek into the city with a newborn baby in tow to shop for a vehicle. "She is the perfect example of a customer who needed the option to shop on her terms," CarMax CEO Bill Nash said last week during the company's second-quarter earnings call.

That customer had begun her shopping journey with a competitor to CarMax but "wasn't getting the help she needed," Nash added. Once she made it to CarMax's website, she completed an online finance application. A consultant at the company's "customer experience center" — essentially a customer service unit — reached out the same day, and the car the customer had selected was delivered to her driveway with a surprise gift for her newborn.

"She was blown away and said it was the best customer service she has ever received," Nash said. "Not the best car-buying experience she has had, but the best experience ever. That is exactly what we are going after with omnichannel."

Omnichannel has become a well-worn word, not just in automotive retail, but retail in general, as people increasingly shop from the comfort of wherever they have an Internet connection, and companies such as Amazon make web shopping and quick home delivery the norm.

CarMax's omnichannel strategy boils down to personalizing the customer's car-buying journey — whether that person is at a physical store, online or chatting by phone with a company representative — and then streamlining the purchase, in some places offering vehicle delivery and test drives. Expedited vehicle pickup is available for customers who complete some of the car-buying process remotely.

Nash said omnichannel retail is available to about a third of CarMax customers, and it should be rolled out to all markets where CarMax operates by Feb. 29, the end of the fiscal year. Nash wasn't available for an interview, the company said.

This month, CarMax rolled out facets of its omnichannel retail offering to several cities in Texas, including major markets such as Houston, Dallas and Austin. The Lone Star State joins Florida, Georgia, Maine and North Carolina, as well as select cities in Alabama, Louisiana, Mississippi, New York and Virginia, where CarMax is at least dabbling in seamless car-buying.

Some markets, such as Atlanta, are more mature than others, and some do not include all of the company's omnichannel offerings. For example, home delivery is available in the aforementioned Texas cities, but not in Lubbock, Tyler or Corpus Christi, although CarMax said it is offering its "personalized buying experience" there.

To further support the rollout, CarMax opened customer experience centers in Atlanta and Kansas City, Kan., during the quarter. The centers are still in the early stages. Nash said the most tenured associates at the Atlanta location, the first one opened, have been taking calls there only since June. The company plans to add a third center, in Phoenix, this year.

The rollout of the omnichannel effort will add to costs, but so far those costs appear to have been more than offset by strong sales of used vehicles, of which Car Max is the leading retailer. In its second quarter, CarMax reported net profits were up 5.8 percent to $233.6 million on operating revenues that grew 9.1 percent to $5.2 billion.

CarMax's used-vehicle sales rose 6.2 percent to 209,091 during the second quarter. On a same-store basis, used sales were up 3.2 percent. Wholesale-vehicle sales were up 4.7 percent to 126,513. The company's average used-vehicle sales price grew 2.9 percent to $20,581. The average gross profit per used vehicle was $2,183 in the quarter, compared with $2,179 in the year-earlier period.