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AUTONATION AND CARMAX GEAR UP FOR USED-CAR CLASH; SUPERSTORES READYING CAMPAIGNS FOR NEXT MONTH

By Published on .

The used-car superstore battle is finally heating up.

Entrepreneur H. Wayne Huizenga's AutoNation USA opened its first superstore last week in Coconut Creek, Fla., after months of hype.

Advertising will begin in mid-November, giving the new operation time to "get the bugs out," said Bo Morgan, the store's general manager. The only promotional materials visible now are in-store displays featuring road signs with AutoNation's logo.

SIMILAR TAGLINES

The road-sign theme is expected to carry over into AutoNation's ad campaign, which will carry the slogan, "The better way to buy a car."

The tagline resembles rival CarMax's "The new way to buy a car."

AutoNation in March hired Hill, Holliday, Connors, Cosmopulos, Boston, to handle what could become an estimated $75 million account by 1999.

CarMax, owned by Circuit City Stores, started testing the used-car superstore concept when it opened its first store three years ago. It currently operates five stores, but starts a national rollout Nov. 6 with a store opening in Orlando.

DeVito/Verdi, New York, developed four new spots that start running in CarMax markets in November. They use subtle humor to promote the chain's low prices and wide variety.

"We're branding a whole new category of retail," said Ellis Verdi, president of the agency. "The core idea of CarMax we're trying to deliver is a retail idea that develops trust where there was none."

NO HIDDEN FEES

One new spot compares CarMax to "Sid's Cars," a small used car lot with a salesman sporting a tacky plaid sports jacket. It emphasizes that CarMax shoppers don't have to worry about things like hidden fees.

CarMax posted a $7 million loss on revenues of $304.5 million for the fiscal year ended Feb. 29. The company expects similar results for the current fiscal year next year, but improved results, said David McMillan, in-house media coordinator.

"It takes time to get returns on new locations," he said.

Another big player, United Auto Used-car dealerships

USED CARS from Page 3

Group, is expected to complete its initial public stock offering this week. The company has 37 new-car franchises and six used-car dealerships with 1995 sales of about $1.35 billion.

$1 MIL TO ENTER MARKET

The retailers aren't discussing ad spending, but auto marketing consultant George Peterson said a well-financed used-car player like CarMax or AutoNation "could easily spend over $1 million" on advertising to enter a new market to compete with local, high-volume new-car dealerships.

The overall category is eventually expected to generate more than $200 million in ad spending.

"Once they expand their sites, they'll have mega ad budgets," said Mr. Peterson, president of consultancy AutoPacific.

AutoNation expects to open 80 stores within four years, with revenue of about $8 billion, according to Automotive News.

CarMax hasn't publicly discussed how many stores it plans to open, but analysts have projected it could have 55 stores by the turn of the century.

United, CarMax and AutoNation have all said they want their companies to become well-known national brands.

KEY TO SUCCESS

The winner in the category won't be based on the number of stores, said Carl Spielvogel, the former chairman of Bates Worldwide, now chairman-CEO of United. The key to success, he said, is buying good used cars at the right price to resell at the right price. "The way you buy on trade-ins and wholesale determines your success," he said. "I tell people, `We're not in the business to sell cars. We're in the business to sell cars at a profit.' "

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