Good to Great to Gone by Alan Wurtzel

Author:Alan Wurtzel
Language: eng
Format: epub
Tags: BUSINESS & ECONOMICS/Corporate & Business History
Publisher: Diversion Books
Published: 2012-10-17T16:00:00+00:00

These revolutionary policies resulted in immediate customer approval and ongoing consumer satisfaction ratings in the high nineties.

Sharp decided on the name CarMax. The first store opened in Richmond in late 1993. Each store included a large showroom and repair facility (50,000 square feet), typically on fifteen or twenty acres, with room to display five hundred to twelve hundred cars, depending on the size of the market. Most were in suburban locations, on or right off a major freeway. On the lot were no fewer than 350 used cars, every one of which was fully repaired and in excellent condition. Except for a few highly selective older cars, they had to be either no more than six years old or have fewer than 60,000 miles on them.

In the showroom were a number of touch-screen computer workstations that enabled customers, with or without sales assistance, to enter their needs and preferences. The computer then displayed a color picture of each vehicle on the lot that matched the customer’s parameters together with its age, mileage, price, location on the lot, and other relevant details. The customer could also print out a fact sheet of each relevant car. This process narrowed the search to those vehicles the customer liked and could afford before he decided which car to inspect and test drive. 168

With few exceptions, the CarMax salespeople had never sold cars before. Most were young and clean cut, in their twenties or thirties. Many were women. Since they were paid the same whether they sold a Mercedes or a Hyundai, their goal was to sell customers something that would meet their needs, not to “step them up” to a more expensive car.

The price was fixed. You could not buy it a dollar cheaper unless it did not sell for a specific period of time, at which point it would be marked down for everyone. Finally, the customer could finance the purchase at CarMax or though his or her own bank or credit union. Online credit approval was typically secured within ten minutes. All finance charges, titling taxes, and other fees were open and fully transparent. The whole operation could not have been more consumer-friendly, and women, who were often insulted, ignored, or intimidated at other dealerships, especially loved it. The first year the original store did $53 million in sales.

The following year a second store opened in Raleigh, North Carolina, and the year after that, two in Atlanta. All were immediately successful. Smelling an exciting new business model, Wayne Huizenga, whose early successes included Waste Management, Blockbuster, and the Miami Dolphins, offered to buy CarMax. When Sharp refused to sell, Huizenga built AutoNation and competed directly in the Florida market. He also took AutoNation public, giving it access to cheap capital. Sensing a battle for first-mover advantage, Sharp ramped up the growth of CarMax and invested heavily in systems to improve the consumer experience and productivity and reduce costs.

To finance CarMax’s growth Sharp elected to create a publicly traded tracking stock—that is, a

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