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The Consumer

By Published on . 0

What's real in real estate

In 2004, the typical U.S. home sold for 99% of the original asking price, according to the National Association of Realtors, leaving little room for haggling on price. In the West, more than one-fifth of homes sold above asking price as competing bids drove up the price. There is little downward price haggling in the booming housing market, though haggling is sure to return when the cycle turns from seller's to buyer's market.

Consumer Friendly

How CarMax cleaned up the sleazy business of selling used cars by listening to consumers.

The pitch:

"CarMax provides its customers the opportunity to shop for vehicles the same way they shop for items at other `big-box' retailers by offering a broad selection of high quality vehicles at low, no-haggle prices in a customer-friendly atmosphere."

Sales strategy:

* Used cars sold at no-haggle prices listed on vehicles, in newspaper ads and on carmax.com.

* Trade-in done as separate transaction; CarMax offers a price that allows owners to sell their cars regardless of whether they intend to buy a vehicle.

* Sales reps paid fixed dollars-per-unit commission.

* Financing rates, extended-service plans and accessories offered with no-haggle approach.

* Vehicles backed with five-day, 250-mile, money-back guarantee.

* Average used-vehicle sale price (fiscal 2005): $15,789

Profit strategy:

"We are still at an early stage in the national rollout of our retail concept. We believe the primary driver for future earnings growth will be vehicle unit sales growth from comparable store sales increases and from geographic expansion. We target a roughly similar fixed dollar amount of gross profit per used unit, regardless of retail price."

* Average gross profit: $1,817/11.5%

1. Percentage change in used vehicles sold at stores open at least a year. Fiscal years ended February

Advertising Age's American Demographics appears the first Monday of each month. Go to AdAge.com QwikFIND aaq37m to search the American Demographics archives. Send consumer research to bjohnson@crain.com

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