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Beepi and Vroom and Carvana - will they make a DENT?

Discussion in 'Industry News, Press Releases, & Current Events' started by Jeff Kershner, Oct 6, 2015.

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  1. ruggles

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    Re: "Publicly Traded." It allows for an enterprise to grow rapidly, which can create the impression of "success." Success in my world is measured by profit. For those who think growth is success I can suggest buying some Tesla stock. Year to year store performance is a better way to measure success than adding sales by opening new sales points because of easy access to capital. The point is, apples are apples amd oranges are oranges.


     
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  3. Chris Cachor

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    @ruggles@ruggles CarMax went public a long time ago. They had no choice but to raise a ton of money for the model to work. It's "big box" retail. I think it's a pretty solid business, but I also think if dealers got smart they could inflict a great deal of pain on CarMax.

    As far as your comment on Tesla. People will think it's a growth story until they figure out Tesla can put their cars together in hours rather than days. They're going to absolutely crush every other manufacturer at the assembly line. You're looking at a company that's become incredibly skilled at pulling off first-of-kind capital intensive projects in a record amount of time. I don't own any stock, but I pay close attention to what they're doing. Their assembly line is going to resemble a bottling factory. It's mind boggling. Even more surprising is the velocity they're doing it.

    If I was to put money on what manufacturers will do well in the next decade, it's Tesla and General Motors.
     
    #232 Chris Cachor, Oct 10, 2017
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  4. Cullen C

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    CarMax has been selling cars the same way since 1993. Tell me, how long do we have to wait to constitute a "business cycle" exactly? Their model works better when times are good? Wouldn't you be able to say that any dealer sales model works better when times are good?? And to be clear, were "times good" after 9/11, where they "good" in late 07/08 and 2009? Is that why there was a huge reduction in franchise dealers during this point and CarMax has never closed a store?

    Again, you say things like "so called" "One Price" stores, as if they descriptions are pliable terms that may or may not be followed. I know you worked at a store in 1970 that evidently didn't go so well but please, please, please just stop.
     
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  5. ruggles

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    Yes, CarMax went public long ago, although initially it was merely a tracking stock under the Circuit City heading. And it floundered initially. They sent rookie buyers out with lists of vehicles to buy. And they always came back with the cars, although they often paid retail for them. They didn't do very well in the new vehicle business either. About the time of the Great Recession, their stock was languishing at about $20. per share, versus $76. today. The point is that they were able to refine their systems, especially their inventory management. AND they have thrived since the Great Recession in an environment of really low interest rates and fewer competitors. I have never said they aren't a really solid business, but I have pointed out that their business model is under attack and the favorable business environment won't continue indefinitely. The country has to return to a more historical interest rate structure at some point or the cost will be dear.

    The same "word of mouth" that helped CarMax thrive can also work against it as stories of high prices are shared from consumer to consumer on social media. High prices don't mean large margins, BTW. Don't get them confused.

    There are some Dealers in the same market as CarMax who DO inflict pain on them. But so far, they seem to be rolling along. That doesn't mean they're invulnerable. The key stat to watch is individual store performance year over year.

    They key story on Tesla is Elon Musk's subterfuge and chicanery and their loyal following in the face of actual evidence. But that's another thread. Read Seeking Alpha for real information on Tesla.


     
  6. AdamMurray

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    Guess I'm still not getting your problem here. While your CarMax IPO story was cool, your answers seem wholesale pedagogic. If success "in your world" is measured in profit, then CarMax ranks right up there with all the other publicly traded companies I listed...gross margins in the 13-16% range, ~300m EBIT and a strong 4% net.

    Sounds pretty successful to me...
     
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  7. Tallcool1

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    @Chris Cachor@Chris Cachor I am interested in your thoughts regarding the part of this post "if dealers got smart they could inflict a great deal of pain on Carmax". Not a challenge, I enjoy your perspective and the fact that you focus on messages not delivery of those messages.
     
  8. Chris Cachor

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    Thank you for the compliment. To elaborate on that a bit, the headline text when you visit their website is "Experience clear and simple car buying and selling." You won't see anything like that on franchise dealer sites, let alone their used car sites if they have them. I think CarMax competes well largely because of their marketing and distribution network. From my experience at the stores around me, they don't really emphasize skilled salespeople, which I think is incredibly important. I feel like dealers could compete pretty easily in terms of marketing (just by copying them) but the distribution network part is more challenging. There's a lot of value to dealers being located in close vicinity to each other, though. Using that to your advantage (through some sort of hyper-local LMA) I think would capture plenty of marketshare from them. And since many of the dealers in close vicinity serve many different buyers, I think there's actually a better selection of vehicles to choose from.

    Or I don't know what I'm talking about! Something along those lines, though. The goal being competing directly with them on marketing, merchandising, and selection *online*.
     
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  9. TomLaPointe

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    so about the time that carmax popped up (literally lol), autonation formed and bought a whole bunch of dealers with stock capital. then went about 'disrupting' the market with visions of one price and a transition to online-only purchasing. it crashed and burned and most stores that i know of today have traditional pricing structures. i did hear salespeople have a salary option payplan there now.

    i think where carmax was different is that they didn't try to take a traditional store (and staff) and transform them, they STARTED with the big-box experience. just like circuit city. i have bought two used cars the past couple of years and looked at carmax when i wanted to sit in a lot of seats (my family is tall). the price structure was crazy. . . but it's like best buy. people can buy their stuff on amazon but don't. but best buy has almost shut its doors a couple of times. AND CIRCUIT CITY DID. carmax optimizes its economies of scale, has creative advertising and appears VERY PROFITABLE marketing their own F&I products - like JM Toyota / Lexus has done with JM&A.
     
  10. Ryan Gerardi

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    You do know what you’re talking about @Chris Cachor@Chris Cachor. Dealer marketing and advertising isn’t all that creative. Too focused on “best price, best selection, and great customer experience.”

    Anyone remember the badger commercials and trunk monkey? Those were original and funny that people could relate with.
     
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