Talking from CarMax： The used car industry has entered the era of ＂all-round＂ war.

foreword

In general, the second-hand car market in China and the second-hand car market in the United States are also facing the challenges brought by the Internet and e-commerce, but there is still a big gap between the two sides in land policy and market environment, so it is impossible to make a parallel comparison. However, whether in China or the United States, the used car industry has entered the era of online and offline all-round war, and the lack of any link may make used car retailers at a disadvantage in the competition.

The used car market in the United States is highly dispersed. According to the data of the used car industry in the United States, there were about 40 million used cars sold in the United States in 2017, of which about 22 million were between 0 and 10 years old. There are about 18,000 franchised dealers in the United States (similar to domestic 4S stores). CarMax thinks this is their main retail competitor. Franchisees sell both new and used cars, so they master most of the new used cars. Franchisees also use their franchise relationship with automobile manufacturers to mark some used cars as "officially certified used cars", which is an advantage that ordinary used car retailers do not have, and CarMax is no exception.

Of course, in addition to franchised dealers, second-hand car retailers will also face competition from independent second-hand car dealers, e-commerce platforms and C2C trading organizations.

Established in 1996, CarMax, a second-hand car retailer, showed in its latest financial report that it has retailed 71,512 second-hand cars. With this achievement, CarMax has ranked first among second-hand car retailers in the United States.In addition, CarMax is one of the largest wholesale vehicle auction operators in the United States and one of the largest used car financing providers in the United States.

A long history does not mean that CarMax is complacent. In FY 2018, about 90% of customers who bought vehicles from CarMax first visited websites or mobile applications online.

Overview of CARMAX FY 2018 data

Today, we will briefly outline the commercial prototype of the largest used car retailer in the United States from three parts: retail, auction and finance.

retail

According to the latest annual report of CarMax, the company currently has 188 used car stores in the United States, of which 111 stores are located on their own land and 77 stores use leased land.. In FY 2019, CarMax plans to open 15 stores. In FY 2020, CarMax plans to open 13-16 stores.. At present, the number of CarMax employees has exceeded 25,000. In terms of vehicle sources, most of them come from individual car owners, and a smaller part comes from wholesalers, franchisees and independent dealers, and leasing companies.

The second-hand car business in the United States is also seasonal, with the strongest traffic and sales in spring and summer. Sales usually grow the slowest in autumn. In February and March, the traffic and sales of used car retailers began to increase, which coincided with the federal income tax rebate season in the United States.

The second-hand car industry in China also has seasonal laws, which started to decline in December of the previous year and gradually picked up in July.

The car purchase process in CarMax stores is different from the traditional American car retail experience. First of all, CarMax provides a free evaluation for the vehicle, and also provides a written quotation for the owner. After purchasing used cars, CarMax refurbished each used car to meet the relevant quality certification standards. This process includes checking the engine and all major systems. CarMax quality certification standards are developed by CarMax internally and are not affiliated with any third party or original equipment manufacturer. CarMax has the cost of renovation and maintenance in the quotation to consumers. Almost all used car shops in CarMax provide vehicle maintenance services, and the larger stores even have renovation services, which is similar to having the qualification and ability of a domestic first-class repair shop.

CarMax every used car must pass the inspection before it is sold, and promises to get a refund within five days. Each car is also provided with a 30-day limited warranty service, and some paid extended warranty services and financial services are provided to consumers.

Among the domestic second-hand car retail e-commerce companies, Renren, Guazi and Youxin have also adopted the methods of self-construction, joint venture or selection of a third party for second-hand car servicing. The preparation of used cars has a great influence on the price of vehicles and the consumer experience in the process of vehicle sale.

CarMax will transfer almost all the used cars in the inventory to local stores, and the storage is the store. In addition to retailing used vehicles, CarMax also sells new vehicles in two locations under franchise agreements. The integration of warehouses and doors and the sale of new cars are also one of the focuses of domestic used car e-commerce players.

auction

It is worth noting that CarMax pays attention to used cars of 0-10 years old; These vehicles usually cost between $11,000 and $35,000. CarMax evaluates vehicles by age, mileage or condition, and less than half of them meet its retail standards. Vehicles that do not meet the retail standards will be auctioned to franchisees through CarMax’s on-site wholesale auction.

In the United States, CarMax car auction market has two main competitors: Manheim, a subsidiary of Cox Enterprises, and KAR auction service company, which together account for 70% of the wholesale car auction market in North America. These competitors auction vehicles of all ages, while CarMax’s auction mainly sells older vehicles with higher mileage.

At present, the vehicles sold in CarMax wholesale auction are about 10 years old and have more than 100,000 miles. Dealers pay CarMax a certain percentage according to the sales price of the vehicles they buy. Its auction activities are usually held once a week or once every two weeks.　

In other words, retailers who have the ability to obtain car sources from the C end will have more and better used car sources, while retailers like CarMax may keep good car sources for themselves and auction almost used cars to other players. Generally speaking, the ability to collect cars independently is very important in the used car industry.

Previously, Dasou car carried out an advertising campaign in the name of car dealers, one of the purposes of which was to strengthen the car dealers’ car collection ability and ensure that car dealers in the system maintained a strong C-end car collection ability.

At present, there are many e-commerce companies engaged in the auction of used cars in China, including Cheyi Auction, Youxin Auction, Alliance Auction, Weipu Used Car Auction and Daily Auction. Even a number of C2C second-hand car e-commerce companies have begun to actively deploy auction modes, such as the speed auctions of many car groups and the quick sales of everyone under Renren.

finance

In addition to the trading link, CarMax Auto Finance (CAF) is also one of the main sources of the company’s revenue. According to its financial report, as of February 28, 2018,CAFTotal revenue in fiscal year 2018$421.2 million,Compared with FY 2017, it increased by 14.1%.CAFIn its $11.62 billion managed accounts receivable portfolio, it is about895,000 customer accountsprovide services. However, it is worth mentioning that CAF is not the most important participant in automobile consumption finance, and the mainstream players are still banks, exclusive financial departments of new car manufacturers, credit cooperatives and independent financial companies.

Overview of CarMax automobile finance

CAF’s main competitors are banks and credit cooperatives that provide direct financing to customers who buy used cars. The main driving force of CAF’s growth is the growth of CarMax retail used car sales, and typical transactions drive financial growth.

The increase of CAF income is mainly due to the increase of average management accounts receivable and the decrease of loan loss reserve, which is partly offset by the lower percentage of total interest rate.

CarMax auto finance is mainly oriented to the retail market, and there are many players in China, such as Murray Finance and Youxin Finance. China used car e-commerce company also provides B2B storage services for used car dealers, and the main players are the No.1 car loan and the used car home. Earlier, the IPO financial report of Youxin showed that Youxin also participated in the second-hand car storage service.

Competition from Internet and E-commerce

However, it is undeniable that in the United States, the Internet is increasingly used in the second-hand car market. Buying and selling second-hand cars and providing vehicle financing may have a significant adverse impact on the sales and operating performance of CarMax.

American second-hand car retailers also face competitors from e-commerce, including second-hand car pricing information can be queried online, which makes it difficult for second-hand car dealers to distinguish their customers’ products from competitors’ products, resulting in a decline in retail profit margins. Although search engines and online classification websites are not the direct competitors of American used car retailers, online traffic is directed to the websites of competitive car retailers, which makes the competition of used car retailers more diversified.

It is more and more difficult to sell used cars through a single channel (whether online or offline), which is similar to the environment faced by domestic used car retailers.

For example, some websites provide consumers with online evaluation tools to generate quotations and promote consumers to buy at any used car retailer, and evaluation tools have become one of the entrances to used car transactions. There are also a large number of online appraisal companies in China, such as blueprint price, fair price, accurate appraisal, car 300 and car E appraisal. CarMax believes that online evaluation tools may increase the purchase cost of used car retailers because of price transparency.

In addition to the Internet and e-commerce, some companies in the United States sell software and data solutions to new and used car dealers, so that these dealers can provide source and price inventory more effectively. Domestic second-hand car management system providers include Big Windmill, Car Win, Car Netcom, Car Visitors and so on.

In general, the second-hand car market in China and the second-hand car market in the United States are also facing the changes brought by the Internet and e-commerce, but there is still a big gap between the two sides in land policy and market environment, so it is impossible to make a parallel comparison. However, whether in China or the United States, the used car industry has entered the era of online and offline all-round war, and the lack of any link may make used car retailers at a disadvantage in the competition.

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