March 11 (Reuters) - Activist investor Starboard Value

on Wednesday urged CarMax ( KMX ) to revamp its digital

car-buying and selling platform and tighten costs, arguing the

used-car retailer has "fallen well short of its underlying

potential".

In a letter to incoming CEO Keith Barr, Starboard said

simplifying CarMax's ( KMX ) online trade-in process and improving

conversion rates could help the company regain market share as

more consumers compare offers digitally.

Starboard, which holds a stake worth about $350 million in

the company, also called on CarMax ( KMX ) to target selling, general

and administrative expenses at 70%-75% of gross profit, arguing

tighter cost discipline would help the company price vehicles

more competitively and restore growth.

"We believe modest price reductions of approximately $100 to

$300 per vehicle and combined with a more responsive,

data-driven pricing system that adjusts in real time to local

market conditions can restore competitiveness," Starboard said.

The investor also nominated Bill Cobb, chief executive of

Frontdoor ( FTDR ), along with Jeffrey Smith, Starboard's

founder and CEO, to join CarMax's ( KMX ) board of directors.

Starboard added that advances in artificial intelligence

could help CarMax ( KMX ) streamline workflows, cut manual processes,

improve customer interactions and move away from legacy

management systems.