CarMax CEO Bill Nash once shared an anecdote he said perfectly illustrated the company’s personalized retail strategy. A customer who had had a baby didn’t want to trek 60 miles to a CarMax location, so the company delivered a car to her.
Less than a year later, millions of Americans are barred from going to dealerships because of stay-at-home orders during the coronavirus pandemic. And while some traditional dealers have been forced to adopt an arm’s-length sales strategy basically overnight, the crisis also led used-vehicle industry leaders such as CarMax and Carvana to tweak their approaches.
CarMax launched contactless curbside pickup at most of its stores that are open nationwide. At press time, about a third of the company’s 217 stores were open for curbside pickup and by appointment only, and about 35 were closed for retail operations. Most of CarMax’s service departments remain open, deemed an essential service by states.
Nash alluded to a focus on curbside sales in the company’s fourth-quarter earnings call when he noted that this aspect of its omnichannel retail strategy rollout would be accelerated along with online sales. Omnichannel refers to allowing customers to shop where and when they want, and from a personal device or in the store.
CarMax’s omnichannel strategy has been in the works since it was launched in Atlanta in December 2018. Before the coronavirus outbreak, the company expected to complete the rollout by February 2021. Some aspects, such as in-store training of associates, have been put on hold.
Instead, the company officially debuted CarMax Curbside on April 14.
Customers complete most of the buying process online and in advance, then can take a solo test drive of the vehicle before buying it. There is a seven-day return policy.
Carvana, too, has a seven-day return policy. And since its inception, the company has been a digitally focused retailer: Its main physical assets are a couple dozen vehicle vending machines and a handful of reconditioning centers.
But in an era of social distancing, Carvana on March 25 announced its Touchless Delivery and vehicle pickup. The process includes a Carvana representative sanitizing the customer’s vehicle at delivery, leaving the paperwork and keys inside, then getting into the Carvana vehicle hauler.
The customer can then take a test drive, and if all is good, they call the service representative — still in the hauler — who then walks the buyer though the related paperwork over the phone.
Once the paperwork is done, the Carvana rep asks the customer to place the vehicle registration envelope, as well as any title or payment information, in a secure spot for the rep to pick it up.
Of course, it’s one thing to continue to sell cars during a pandemic. It’s quite another for customers to be able to pay for them as millions of Americans lose their jobs.
CarMax Auto Finance, the company’s in-house financing arm with $13 billion in average managed receivables, has been providing payment assistance for customers struggling to make payments and waiving late fees on payments due in March and April.
CarMax also extended its 90-day limited warranty, effective March 16. The extension effectively freezes the 90-day countdown for any vehicle purchased after Dec. 17, 2019.
Carvana announced April 6 that it would give customers up to 90 days to make their first payment.
The company declined through a spokeswoman to provide more details about how its business is being affected by the pandemic. It most certainly has taken a hit, as total used-vehicle sales are expected to be down double digits nationwide.
On March 30, Carvana announced an offering of 13.3 million shares of Class A common stock to existing investors, with each share priced at $45.
The offering included investments of $25 million from CEO Ernie Garcia III and $25 million from his father, Ernie Garcia II, a controlling shareholder. The offering raised $600 million from investors.
On March 24, the company announced Ally Financial would provide $2 billion of capacity for the purchase of finance receivables during the next 12 months. The company previously had a $1 billion credit facility with Ally that expired in April.
Carvana is set to report its first-quarter results May 6. CarMax reported record sales and earnings in its fiscal fourth quarter and full year, ending Feb. 29. But Nash noted in an earnings call this month that, while momentum carried into January and February, March had been “the most volatile month I’ve ever seen.”