Electronics store sellng used cars in test of market


December 07, 1993|By Ted Shelsby | Ted Shelsby,Staff Writer

GLEN ALLEN, VA — GLEN ALLEN, Va. -- On a 12-acre lot just outside of Richmond, Va., Circuit City Stores Inc. is betting the same approach that made it the nation's leading retailer of consumer electronics and appliances will work in an entirely new field -- used cars.

If successful, buying a used car may never be the same.

Julie M. Mullian, a Circuit City spokeswoman, makes it sound simple as she strolls around a lot packed with about 500 late-model cars, vans, pickup trucks and sports utility vehicles.

"All we are doing is applying our expertise in customers service, financing and selling big-ticket durable goods to a new market," she says.

Ms. Mullian stresses that Circuit City's CarMax, which opened here in October, is just a test. But the company is seeking to bring the same respectability to the used-car industry that it applied to the consumer electronics market as it built a nationwide chain of superstores that grossed $3.3 billion last year.

"In the old days, consumer electronics was dominated by mom-and-pop operations that were slippery at best and unsavory at worse," said Kenneth M. Gassman Jr., a retailing analyst with Davenport & Co. in Richmond. "Circuit City brought a lot of professionalism to the industry."

If Circuit City can clean up the used-car business the way it

changed the selling of electronics, Mr. Gassman says, the rewards for the company can be significant.

In two or three years, he sees CarMax as a "very profitable" operation generating annual sales of between $25 million and $30 million.

"CarMax," he added, "was conceived by people with no experience in the used-car market, but a lot of understanding of consumers needs and wants. They may not offer the lowest prices, but they give a good value for the money and make the shopping process a lot more pleasant.

"You buy peace of mind. And that's critical to this business."

CarMax looks more like a high-tech new-car dealership than the typical used-car lot.

There's a large showroom with floor-to-ceiling windows. It's brightly painted in shades of blue, yellow and gray. The tile floor is spotless, and the carpet is clean. There are spacious conference areas with comfortable furniture. The grounds are landscaped and sprinkled with tall oaks.

Phil White of Winchendon,Mass., had heard about CarMax, but wanted to see for himself what all the fuss was about.

He came in recently for a cheap full-size pickup truck. He left empty-handed, but was treated to an eye-opening insight into a new approach to the $150 billion-a-year used-car business.

Mr. White was greeted by Meade Trible, a 23-year-old sandy-haired sales consultant -- as the company likes to refer to its salespeople -- dressed in a blue polo shirt, gray slacks and Docksiders. "Welcome to CarMax," he said. "We have a large selection with competitive prices."

The first stop was at a touch-screen computer terminal where the salesman entered information on the make of truck Mr. White wanted, along with features desired and the price range he was willing to pay.

The computer screen filled with three columns,each topped by a color photo of a truck in inventory. Beneath each photo was information on the body style, mileage, features, type engine, wheelbase, length, gas mileage rating and price.

Customers can get a colorful computer printout, with photo, of data on any vehicle. The printout pinpoints the vehicle's location on the lot.

The customer is then driven, in a golf cart, by the salesperson to the cars he is interested in seeing. If it's easier to leave the children behind,they can entertain themselves in a playroom equipped with Nintendo games, big-screen television and toy trucks.

Customers are also welcome to roam on their own. If they find a vehicle that strikes their fancy, Ms. Mullian says, all they must do is go to a nearby pole, pick up a phone and say, "This is where I am, and I'm interested in so and so." A salesperson shows up a in few minutes, ready to take the customer on a test drive.

There's no haggling over price. It's the same as buying a $H refrigerator or VCR from Circuit City -- the price on the tag is the price you pay.

CarMax salespeople are paid on a commission based on the number of cars they sell, not the price of cars sold. "The incentive is for the sales consultant to help you find the car that meets your needs," said Ms. Mullian, "not sell you the most expensive car."

Circuit City's cars are former lease and fleet vehicles, and also come from trade-ins and purchases from auctions around the country.

There are always exceptions to the rule, Ms. Mullian said, but generally the vehicles are 1988 or newer models with no more than 70,000 miles on them.

Cars are cleaned and polished before going to the lot and go through an inspection that checks all major mechanical and electrical systems. If a repair is made, it's noted on the price tag attached to the car's window. Each car comes with a 30-day, bumper-to-bumper warranty.

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