Sonic plans to open stand-alone used-car stores in 2014, take on CarMax

Article by Anita Panait, on October 23, 2013

Sonic Automotive Inc. is planning to launch independent used-vehicle specialty stores in late 2014, taking on CarMax Inc., the largest used-vehicle retailer in the United States. The independent used-vehicle specialty stores will be separate from Sonic’s existing franchise dealerships. Jeff Dyke, executive vice president of operations at Sonic, remarked that the retailer is planning to break ground on the first specialty store in Denver, "less than 5 miles" from one of two CarMax stores in the market.

Dyke remarked during the Sonic’s third-quarter conference call that the retailer is planning around a hundred used-car stores, but the figure is only “the tip of the iceberg." He remarked that "it's time for a new player." CarMax is No. 1 on the Automotive News list of the top 100 dealership groups in the US -- based on used vehicle sales -- disposing 408,080 units in its fiscal year ended Feb. 29, 2012. Sonic is fourth on the list with used-vehicle sales of 105,615 in 2012.

On the other hand, CarMax is 107th on the Automotive News list of the top 125 dealership groups in the US – based on retail new-vehicle unit sales – selling 7,679 new units in its fiscal year ended Feb. 29, 2012. Sonic sold 132,136 vehicles in the period, good enough to be named third in the list. According to Dyke, Sonic has been considering the independent used-car store concept since 2005.

Sonic, however, only commenced working on the concept in earnest over the last five years or so. According to Sonic President Scott Smith, the retailer’s technological advances will help make a separate used-car operation possible, citing the development of a centralized inventory management system wherein internal and third-party sales data are analyzed to settle the optimal list price and best store location to sell used-vehicle acquisitions. The system will help store employees offer the best possible price to customers selling their existing vehicles.

In July, Sonic Automotive disclosed that its stores across the US will carry the Sonic name starting 2014. This branding move corresponds with a new sales approach in which staffers will use iPads to handle entire vehicle transactions.

Sonic launched True Price to stores early this year but the strategy met some issues. Sonic intends to introduce the iPad process starting July 2014, with the Sonic rebranding to roll out at the same time, according to Jeff Dyke, executive vice president of operations at the dealership group.

Sonic Automotive, Inc. is regarded as one of the largest automotive retailers in the US, with 111 dealerships in 14 states in the country as of December 31, 2012. Sonic Automotive also operates around 21 collision repair centers across the country.

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Topics: sonic, carmax

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