Case | HBS Case Collection | January 2013 (Revised October 2014)

CarMax: Disrupting the Used-Car Market

by John R. Wells, Hong Luo and Galen Danskin

Abstract

In 2012, CarMax was the leading retailer of secondhand cars in the United States and a fast-growing competitor in the used car auction market. After its founding in 1993 by Circuit City's management, CarMax had grown rapidly. The company had been profitable since 2000 and independent from its parent company since 2002. While Circuit City went bankrupt in 2009 under pressure from Best Buy and challenging economic conditions, CarMax flourished and expanded through the economic crisis. Fiscal 2012 revenue reached $10.5 billion and net income, a record $413 million. However, CarMax still only accounted for less than 3% of the fragmented secondhand car market. Additionally, it was keen to avoid the fate of its parent and to stay ahead of copycat competitors. What should CarMax do to grow its market position and continue its success in used car retailing and auctioning?

Keywords: Product Positioning; Business Growth and Maturation; Competitive Advantage; Auctions; Insolvency and Bankruptcy; Growth and Development Strategy; Service Industry; Auto Industry; Retail Industry;

Citation:

Wells, John R., Hong Luo, and Galen Danskin. "CarMax: Disrupting the Used-Car Market." Harvard Business School Case 713-467, January 2013. (Revised October 2014.)