When the coronavirus pandemic first intensified and shocked business markets, the question on the minds of many auto experts was “who is going to want to buy a car now?” Unsurprisingly, it changed how many people have been buying new or used cars considering the ongoing global health crisis and rising unemployment numbers. But more recently, car companies have started to bounce back, even ones facing serious problems like CarMax.
CarMax had some serious cutbacks in April
CarMax earned just $5 million in the first quarter of 2020, a 98 percent decrease compared to last year’s numbers. Back in April, CarMax made the decision to furlough roughly 15,500 of its employees. CarMax also cut executive leadership pay along with implementing other company-wide cost reductions. To ease the blow, CarMax provided furloughed employees with transition pay in addition to covering their medical plans.
At the same time, CarMax closed half of its 217 stores in the U.S. The ones that stayed open operated on a very constrained basis. This was a huge deal, given that CarMax is the U.S.’s largest used-car retailer.
But even with these cutbacks, CarMax was still able to open four brand-new locations. The retailer opened new facilities in Tampa, Fla., and Philadelphia before the cutbacks in April. CarMax was also able to open new stores in New Orleans and Los Angeles. Fortunately, signs of hope in the car industry came shortly after these store openings.
CarMax is on the rebound
There’s still a lot of uncertainty in today’s market, but at least there are signs of recovering sales for car companies like CarMax. By the end of May, all of CarMax stores had reopened. Half of them though were still working under strict safety guidelines.
In the first few weeks of June, CarMax saw some promising signs that consumers were ready to start purchasing cars again. While CarMax sales are recovering, the company’s CEO Bill Nash isn’t getting excited just yet.
“We’re well-positioned,” Nash said. “And having come through this, I think we’re more agile and resilient than ever before. So … we’re prepared for wherever it may go.”
How CarMax survived
Despite facing challenges that every other dealer was experiencing, CarMax had an ace up its sleeve: a program it started in late 2018 called the omnichannel experience. The omnichannel experience allows customers to finance and buy a car entirely online. It’s also possible for customers to decide how much of the process they want to complete online. An updated version also includes the option to have the car delivered to the customer’s home with zero contact. With many dealers still resisting the move to online sales, that gave CarMax an advantage.
Before the coronavirus lockdowns, about half of CarMax’s sales originated with a customer using its online customer experience centers. More recently, that number has jumped to about 60% Nash says this change shows that customers really value the online experience. But he also pointed out that customers haven’t completely abandoned in-store visits.
Also in June, CarMax’s physical stores saw similar sales figures to this time last year in 2019, which is a substantial increase compared to earlier this year. Because of the rebounding numbers, CarMax was able to bring back 85 percent of the furloughed employees.