CarMax Buys Into Edmunds to the Tune of $50M

By Desiree Homer

More M&A news out of Richmond, VA, as CarMax announced its recent investment in Edmunds. CarMax, one of the country’s largest used-car retailer, is buying $50M worth of a minority stake in the automotive and consumer online resource. What happens when a retail giant invests in an unbiased, automotive omnichannel? We take a look behind the headline, to see what this partnership means to CarMax competing dealerships.

How the Partnership Is Mutually Beneficial

Bill Nash, CarMax president and chief executive, said this relationship “strengthens CarMax’s new omnichannel experience.” He goes on to discuss how consumers trust Edmunds and rely on its automotive reviews, editorials, and unbiased position. Tapping into this trust will allow CarMax to gain customer and market insights, to enhance the online customer experience.

Edmunds CEO, Avi Steinlauf, expressed excitement about the opportunity to collaborate with a “well-respected industry leader.” Edmunds focuses on engaging car buyers by arming them with information and direction and ultimately making the buying process easier. Steinlauf said, “with our expanded resources and capabilities, we’re confident this will be a mutually beneficial partnership.”

The Announcement Comes on the Heels of Edmunds Layoffs

Edmunds filed a notice with the state of California last month, citing plans to lay off more than 100 employees in its Santa Monica head office. The layoffs will take place on March 7th and are suggested to be permanent. Edmunds launched initially in 1966, as an automotive pricing guide and transitioned to its web-based business model of advertising and lead referrals, about 25 years ago. In more recent years, Edmunds has faced increased competitive pressure from the likes of Google, Facebook, Carfax, and Kelley Blue Book, for strategic online advertising positioning.

How a Stake in Edmunds Makes CarMax a Stronger Competitor

CarMax has more than 200 store locations across the country and employs more than 25,000 associates. According to the numbers from its last fiscal year, the used car giant sold almost 750,000 used cards and 450,000 wholesale units. The company continues to innovate and provide customers with transactional options to buy from home or in-store. This recent partnership and Edmunds investment will help CarMax to roll out its omnichannel experience and better leverage the ability to engage car buyers online. This move will allow CarMax to strengthen its ability to be competitive in a big way.

How this Partnership Might Affect Your Dealership

Anytime a used-car competitor enhances its online efforts to engage buyers, dealers should take notice. CarMax already enjoys a nationwide presence and offers popular and flexible buying options. It will now have a stake in one of the most reliable consumer content and review platforms, positioning itself to be a first line of communication for buyers in the vehicle info-seeking phase of the buyers’ cycle. Dealers may be confident in their abilities to reach those ready to buy but might want to consider a strategy that targets consumers earlier in the fact-finding process to compete.

For now, when consumers browse Edmunds for information on new models, appraisal rates for trade-ins, and vehicle reviews, the next step they take might just be with CarMax, now a $50M stakeholder and partner.