From apparel and fresh groceries to home-improvement goods and bulky furniture, most product categories that once seemed shielded from the online sales threat are shifting into the digital space today. Consumers are demanding e-commerce options in a widening range of industries, and companies like lululemon athletica, Walmart, Home Depot, and Wayfair are finding ways to satisfy this demand while generating healthy profits.
Still, the car shopping experience is different. It's one of the biggest purchases a consumer makes, after all. And the process involves complicated steps like securing financing and appraising a trade-in vehicle. Paperwork is voluminous and includes contracts, warranties, disclosures, registrations, and licenses, to name just a few items. And who would buy a car without test-driving it, anyway?
CarMax (NYSE:KMX), the country's biggest used car retailer, has recently pushed key parts of its sales process offering online so that customers can, if they want to, spend less than half an hour at the actual dealership before leaving with their new car. That's just the start, though, as the company is currently testing a home-delivery service that could move the entire purchasing process online.
Follow the growth
The retailer is reacting to the clear messages it's getting from customers. While traffic has inched lower across its network of 195 used car lots over the past year, e-commerce is a completely different story. About 20 million people visit CarMax's website each month right now, up from an average of 19 million last year.
CarMax is finding major benefits to using that sales channel, too. It can feature many multiples of the 56,000 vehicles it holds in inventory at a typical store, for example. Machine learning is helping the company make better vehicle recommendations, too, which has contributed to a rising proportion of online shoppers turning into buyers in recent quarters. That improved conversion metric, or the rate at which browsers become buyers, has helped lift sales despite the sluggish customer traffic trends at lots.
Customers are enthusiastically taking advantage of the portions of the buying process that CarMax has already placed online. Over 200,000 people submitted finance applications through the website in the first quarter, and the management team says its online appraisal functionality is popular, even though it is only available at a handful of stores right now.
The biggest online advancements are still to come. CarMax is testing an express pickup service right now that aims to get the physical part of the auto-buying experience down to just 15 minutes, plus the time a customer needs to take for their test drive.
There's no reason the test drive can't happen in your own neighborhood, though. Home delivery of vehicles is being tested right now at a few of the retailer's lots in North Carolina, in fact.
CarMax executives believe the company's national footprint and large sales base position it uniquely well to lead the industry into this promising but unproven sales channel. Its brand is suited for the shift, too, thanks to its "no haggle" pricing policy and its 5-day money-back guarantee.
Many of its biggest e-commerce initiatives are in testing mode right now, but management is prepared to scale them up quickly as they prove their worth. Considering the successes they've had in all the recent improvements to the online shopping experience, it wouldn't be a surprise to see those offerings roll out nationally over the next year or so. At that point, CarMax could win itself a pioneering spot in the shift of yet another industry into the omni-channel selling environment.
Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends CarMax and Wayfair. The Motley Fool has the following options: short February 2019 $185 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot and Lululemon Athletica. The Motley Fool has a disclosure policy.