The time is right for national marketers because the $20,000 average price of a new vehicle is forcing many consumers to consider used cars, driving up their profit potential. And many consumers are looking for assurance they won't get burned in the used-car buying process.
"These seasoned retailers wouldn't be getting involved unless they saw dollar signs," said Doug Dohring, chairman-CEO of the Dohring Co., a Glendale, Calif.-based auto marketing research company.
Richmond, Va.-based electronics retail giant Circuit City is already operating four used-car lots under the CarMax brand in Richmond; Raleigh, N.C.; and in Norcross and Kennesaw, Ga., with a fifth outlet under construction in Charlotte, N.C.
A CarMax TV campaign created by DeVito/Verdi, New York, illustrates how the company differentiates itself from other used-car stores: a huge inventory, no haggling over prices, a 110-point inspection of vehicles before they're sold and a 30-day warranty.
"The goal is to take the fear out of purchasing a used car by emphasizing the quality of the product and the quality of the experience," said agency President Ellis Verdi.
Mr. Huizenga, former chairman of Blockbuster, is heading up a group that has formed Fort Lauderdale, Fla.-based AutoNation USA, with ambitious plans for a chain of high-volume used-car stores beginning in 1996 with two Florida sites.
"We envision this as being bigger than Blockbuster," said Tom Gruber, senior VP-chief marketing officer for AutoNation.
Mr. Gruber, formerly director of marketing with McDonald's USA and senior VP-chief marketing officer with Blockbuster, created the new company's name, logo and theme, "The better way to buy a car."
Mr. Gruber will oversee an agency review after the new year. He said local and national agencies will be asked to participate, but he declined to say how many or which would be included.
An estimated 35 million used vehicles changed ownership in transactions last year, said Ken Cherven, associate product manager at market researcher R.L. Polk & Co., Detroit.
Even after eliminating the estimated two-thirds of used-car sales that take place through classified ads and other private transactions, used-car sales still are an estimated $100 billion business.
According to the National Automobile Dealers Association, dealers average $300 per unit profit on a used vehicle.
That's double the profit margin on a new car or truck, even though NADA expects the average transaction price of a new vehicle to top $20,000 this year for the first time.
Mr. Dohring said CarMax and AutoNation can capitalize on lessons learned in other retail areas, such as a commitment to customer satisfaction, an upscale look to stores and consistency in look and service.
On the new-car side, auto malls and megadealers that operate several franchises are already beginning to develop their own brand names in many markets, advertising their stores as a destination rather than touting the vehicle brands they carry.
CarMax, in addition to its used-car operations, is talking to Chrysler Corp. about acquiring a new-car franchise, according to Automotive News, Detroit.
That would allow CarMax to participate in factory auctions of used cars that are closed to everyone except franchised new-car dealers.
DeVito/Verdi, which handles broadcast creative for CarMax, has come out with a pool of about a dozen witty spots that address various aspects of the business and carry the theme "The auto superstore."
One spot shows two rams butting heads as they're heard negotiating price, in contrast with the CarMax no-haggle policy.
Another commercial shows a mechanic disappearing under a hood and reappearing from the trunk of the car to illustrate the CarMax 110-point inspection.
CarMax also uses advertising to tout the fact it's in the market to buy used cars. One TV spot points up the aggravation of selling through classified ads.
"I'd like to come over and see the car tonight if it's OK with my parole officer," says one respondent leaving a message on an answering machine.
"It's retail advertising that is concept-driven, not focused on price-and-item," Mr. Verdi said.
Jeffery D. Zbar contributed to this story.