PROJECT X

PROJECT X

From Chicken Soup for the Entrepreneur's Soul

Project X

I have always been driven to buck the system, to innovate, to take things beyond where they’ve been.

Sam Walton

It’s no secret. Most people do not enjoy the experience of shopping for a used car. Though cars are a necessity in our society, few like the hassles and the haggling associated with making such a purchase. But we had a revolutionary idea that would forever change the used-car buying experience, and it was cloaked in secrecy and shrouded in mystery.

In 1991, I was senior vice president of Circuit City. Circuit City was on a mission to expand its investments into markets that offered future financial rewards combined with the best practices of a strong retail concept. This new market needed to be relatively untapped, with few if any major competitors. Though several options were explored, ultimately a select group of individuals including Richard Sharp, Circuit City’s president and CEO at that time, decided that there was great potential in the used-car market. Thus began a secret operation that we referred to as “Project X.”

The goal of Project X was to develop an industry-changing used-car retail concept, not just another run-of-the-mill car dealership. There were many doubters, but those of us intimately involved in the project possessed an unwavering belief that we could incorporate the characteristics of a big-box store into the used-car industry. This revolutionary idea would also involve the development of a high-tech computer system, an innovation that had never been applied to the automobile sales industry. In December 1991, a one-and-a-half-page proposal was presented to the Circuit City board for consideration, and the board approved spending up to $50 million testing the idea.

Our project was kept under wraps for two years. In the weeks and months that followed the acceptance of our proposal, we quietly recruited others, people who would become key players in the development of this unique concept. Those coming aboard were not always told outright exactly what the project entailed. Even after agreeing to be involved in the secretive endeavor, some, including computer programmer Richard Smith, thought we were joking. Why would Circuit City want to tarnish its image by associating itself with an industry perceived by many as replete with loud and obnoxious polyester-clad salesmen haggling over the price of a dressed-up jalopy? Our intention, however, was to radically alter that very image by forever changing the concept of used-car sales.

Our team surveyed thousands of consumers in order to determine what they liked and disliked about car shopping. Many were far more verbal about what they disliked than what they liked. Based upon their responses, it was obvious that buyers wanted to purchase a reasonably priced automobile in an environment that was hassle-free and haggle-free. In addition, they wanted to have at their disposal a large selection of makes and models. Guaranteed quality was also vitally important, as was shopping in a dealership that was customer friendly, with everything from on-site financing to a supervised children’s play area.

Armed with this information and the invaluable input and assistance of automobile industry experts such as Mark O’Neil and Tom Folliard, the first CarMax superstore opened its doors on September 21,1993, in Richmond, Virginia. In addition to giving customers what they wanted, we also provided consumers with sales associates who possessed the highest levels of personal honesty and professional integrity. Applicants went through a rigorous, multilayered hiring process, and only one in ten met our requirements and high standards for employment. Not only was our sales concept unique, so, too, were our associates. They were pioneers in the industry as well.

Now, more than a decade later, CarMax has grown from that one location to sixty-two used-car superstores, as well as seven new-car franchises. In the company’s fiscal year 2005, CarMax sold over 253,000 used cars, more than anyone else in the United States. Though we had our ups and downs in the beginning, in 2002, CarMax became an independent company publicly traded under the symbol KMX, with earnings of more than $112 million. In addition, we are recognized as a Fortune 500 company, and in 2005 and 2006, CarMax was included in Fortune’s list of the “100 Best Companies to Work For.”

The secret is out. Eliminating the hassles that come with buying a car and giving customers a fair deal makes the car buying experience much less painful. Selling used cars is like any other retail business, and our innovative idea has fundamentally changed the automobile retail business. Project X, now known as CarMax, cracked the code on how to make car buyers happy.

Austin Ligon
As told to Terri Duncan

EPILOGUE: CarMax, whose home office is located in Richmond, Virginia, is now the largest used-car retailer in the United States and employs more than 11,000 associates. Austin Ligon serves as the company’s president and CEO.

CarMax’s innovative business practices are what sets them apart from the industry and makes car shopping a hassle-free experience for their customers. Used-car superstore amenities include supervised play areas for children, and in addition to a wide, onsite selection of high-quality makes and models, there are more than 20,000 vehicles available online at www.carmax.com. Customers are presented with written cash offers for their trade-ins, good for seven days regardless of whether or not they purchase a car from CarMax. Sales associates are knowledgeable, and because most are paid the same no matter which vehicles they sell, they do not pressure customers. Along with low prices, financing and no-haggle pricing policy, all vehicles are sold with five-day money-back guarantees as well as limited thirty-day warranties.

It is safe to say that secretive Project X successfully turned the auto sales industry upside down—and it’s obvious that Austin Ligon and his team love being on top!

Terri Duncan

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