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Sonic Automotive launches stand-alone used-car stores

Charlotte-based Sonic Automotive on Monday announced the opening of a new chain of stand-alone used-car dealerships, moving into a sector currently dominated by used-car giant CarMax.

The stand-alone stores called EchoPark will roll out by early November, with three stores in the Denver, Colo., area, Jeff Dyke, Sonic’s executive vice president of operations, told the Observer. Hiring for more than 150 employees has already started, and plans call for additional neighborhood stores to open next year.

Dyke described EchoPark as a “mix between Starbucks and Amazon.com.”

Instead of dealing with salespeople who walk them “through the steps to the sale,” Dyke said, customers can peruse the dealership’s inventory on mobile devices stationed throughout the store, test-drive vehicles and receive car appraisals.

“They can do everything at their own pace,” he said. “They can take the entire transaction from A to Z.”

Sonic Automotive, a Fortune 500 company founded by Bruton Smith, has more than 100 dealerships in 14 states and employs 10,000 people, including 500 in Charlotte and Fort Mill, S.C.

The company made $81.6 million in profits last year on revenues of $8.8 billion, down from $89.1 million in profits on revenues of $8.3 billion a year earlier. CarMax is a much bigger company, recording $492.6 million in profits last year based on revenues of $12.5 billion, up from a $434.3 million profit on revenues of $10.9 billion the year before.

EchoPark (which Dyke says stands for “Every car deserves a happy owner,” minus the d) will operate independently of Sonic’s new and used-car dealerships. Expansion into the Carolinas is expected, Dyke said, with possible stores in Charlotte and Raleigh-Durham.

“It’s taken seven years to get to this point,” Dyke said. “Our goal is to perfect the model. We’re going to be very patient.”

Sonic, he said, isn’t trying to keep pace with CarMax.

“We think there’s plenty of space in the pre-owned business for another operator who is going to do things in a high-quality fashion,” he said, calling Sonic “very different from CarMax … a big-box retailer.”

“We’re more of a niche retailer that caters to the local community’s needs,” he said.

“CarMax believes competition is good for the marketplace,” a CarMax spokesperson wrote in an email to the Observer. “We pioneered the used-car superstore concept delivering what consumers want when shopping for a car.”

Sonic’s strategy has a chance at success, Morningstar analyst David Whitson said, though it’s early in the game.

“If you’re CarMax, you don’t have to worry,” he said. “CarMax has about 140 stores; this is No. 1 for Sonic. They’ve got a ways to go.”

Consumer demand for used cars continues to grow after new car sales bottomed out in 2009, Whitson said.

Year to date, Americans have bought more than 24 million used cars, according to CNW, an automotive industry research firm. That’s slightly above the number from this time last year.

McFadden: 704-358-6045; Twitter: @JMcFaddenObsBiz
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