July 11, 2012
Tesla Borrows From Apple to Sell Cars
Foregoing traditional dealerships, car salesmen and even an advertising budget, Tesla Motors is opening stores in high-traffic areas to get the word out on the just-launched Model S, its first mass market electric car.
On June 29, its twelfth North America store opened on Santa Monica’s Third Street Promenade, a pedestrian-only tourist area near the beach. The location sits between an Adidas and Club Monaco and is down a block from an Apple store.
Ironically, this unusual retail approach is seen as working for the launch because Tesla has few cars to sell immediately. Deliveries of the Model S, a luxury electric plug-in sedan, began in June and about 10,000 Model S reservations already awaiting delivery. Someone ordering a car from the Santa Monica store wouldn’t expect to see it until May 2013.
Car showrooms are seen as the best way to educate people about how electric cars work, including costs and benefits, before they’re ready to buy.
"We get to engage with them while they’re not thinking about buying a car, which is much, much better and much less pressure-oriented for them," George Blankenship, Tesla’s vice president of sales, told Investor’s Business Daily. "There’s a different dynamic when you walk into a car dealer."
The Santa Monica store has only one operational Model S for show, the skeleton of a Model S platform, and a design prototype of the Model X crossover SUV, which is set to launch in 2013.
Mr. Blankenship, who was hired two years ago, is best known for helping guide the opening of Apple’s first 150 stores and has likened Tesla’s retail model to Apple’s.
"You’ll never see a ‘don’t touch’ sign in a Tesla store," Mr. Blankenship told Forbes. "We want everyone — from kindergartners to grandparents — to come in and see for themselves why driving electric is the future."
Production at its Fremont, CA factory is planning to ramp up to 80 cars a day from only one a day currently to reach its goal of making 5,000 cars this year and 20,000 in 2013. Matching those plans, ten stores will open this year with 25 to 30 more set for 2013.
Observers said that, although Tesla controls the customer experience and pricing with its showroom model, it could eventually switch to the traditional franchising model to avoid the costs of retail and invest more aggressively in design and production.
- Tesla Motors Delivers World’s First Premium Electric Sedan To Customers – Tesla Motors
- Tesla Stores In Store, As Stock Falls In Model S Week – Investor’s Business Daily
- Tesla opening stores in places car buyers wouldn’t think to shop – Chicago Tribune
- Tesla Ties Car Sales Goals to Apple-Style Store Strategy – Bloomberg News
- Disney, Microsoft, and Tesla Copy The Apple Store. So Should You. – Forbes
Discussion Questions
Discussion Questions: Does it make sense for Tesla to launch its electric car through retail showrooms rather than the franchised dealer model? Does the Apple retail model naturally lend itself to a host of other technology product categories, whether cars or others?
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With a limited number of cars available, one model to sell and the difference of being an electric car, Tesla would do well to follow the Apple model. The Tesla brand is all about disruption, so why not intercept consumers where they least expect it? Placing retail showrooms in high traffic areas will build awareness for the brand and generate consumer buzz without tremendous expense. As the company grows, it can always switch to a traditional dealer model.
First question ought to be, does it make sense for Tesla to release an electric car — especially those models and then invest heavily in marketing — at all?
Be that as it may, the Apple model works here as it would for any product that requires a good deal of hands-on instruction.
Will showcasing make people buy an electric car from Tesla? Hard to say but they will sell more cars than they otherwise would and people will become more informed about electric cars in general.
We have a Tesla store in Denver — at the Park Meadows mall. And I have to admit that on the rare occasion that my family is wandering the mall, there are two places where we always stop by: Apple and Tesla. However, I don’t see Tesla’s model as following the footsteps of an Apple store model so much as breaking from the traditional auto dealer model.
I think that the franchise model, and all of the risks of an over-“stored” retail model are worth avoiding, along with the risks involved in not owning the customer — the dealer is the one trying to do that, and often gets caught up in poor customer service, as all the baggage associated with the term “used car salesman” implies.
While it might constrain their growth initially, I think there are a lot of potential advantages to keeping more control over the end-to-end customer experience. Maybe that is an Apple thing after all — certainly they learned the hard way that they couldn’t rely on partners to put Apple’s best foot forward in the market. There is definitely something to say about celebrating an owner experience, and Apple has been VERY good at that.
This is a brilliant approach to both the marketing and sales of Tesla electric cars. They can completely control and manage the customer experience in ways that would be impossible through the traditional franchised dealer model. This approach may prove to be so successful that they may leverage this approach for the foreseeable future. Why shouldn’t you be able to order a Tesla electric car with the colors and options of your choice online?
It seems completely reasonable to assume that a Tesla electric car is not that unlike buying a MacAir laptop. Perhaps a hybrid approach would be to develop Tesla ‘shop-in-shops’ at select dealer locations to address the follow-up and maintenance issues. New innovative product categories can, and will, be taking this same approach in the future.
Remember what happened to your father’s Oldsmobile?
Automobile retailing must change just like all retailing. Except for consolidation, the dealer model has been basically the same for the last 90 years.
Cars of the future will be more and more about technology and less and less about macho sensibilities. The only hiccup is that people like to drive a car before they buy. Solve that problem and you have a winning strategy.
The Apple experience (yes, it’s a showroom) is a model for every retailer.
It sounds like Tesla has taken a page or two directly out of Apple’s playbook, and it’s a good move. Apple nurtured a cult like following for years before their products become Walmartatized.
This car is innovative and might actually be a mass marketable vehicle in the long run, but it’s going to take education which takes time and money.
The electric car market is nascent and tarnished by past busts. Tesla is building awareness and educating potential customers on the category, not just their nameplate.
In addition to stores, Tesla is building branded charging stations in malls. Their parking spots are nothing short of lavish, with mood lighting, the convenience of charging, and preferred parking locations.
The traditional dealer networks and human capital will not cut it. Tesla needs to own the end experience as much as possible to drive primary demand and build brand. Like any new tech market, as the ecosystem matures they will certify and sell through independent dealers.
These boutique showrooms should suffice for specialty products like electric cars, Segways, and other novel forms of transportation. But if electric cars ever become mainstream, they will ultimately need many models, colors, and options to keep the American car buyer engaged. “Apple” style showrooms will be hard pressed to serve their needs if and when that day comes.
But in my view, electric cars have a “long road” ahead of them to critical mass. They must first crack the code on affordability, utility, and style, not to mention the small detail that the electricity needed to charge all of these cars, will chiefly be generated by burning the fossil fuels these cars are designed to save. I digress.
So in the short run, Tesla can sell their car(s) in unconventional venues, but should hope to have the problem of outgrowing this approach for the more practical dealership model.
Terrific move for Tesla to launch its own showrooms vs franchising. This is a a game changing product and to ensure you get a consistent customer experience and passion, they should control the entire customer experience.
Google stores anyone?
Initially I like the idea, as the locations they are choosing are in high traffic, high income areas. Tesla cars are quite expensive for now, and as the costs come down to a middle class income price, than the showrooms should be put in.
Perfect! They don’t have many cars to show anyway and when they do, they can always move to a larger lot (or not). But allowing people to try it out in an environment where there is a lot of traffic is a great way to let customers experience the electric car. I’d imagine that with a plan like this, they will not only have a line of people signing up to buy the car, but also a line of people wanting to test drive the single car they have on display.
With a smaller number of cars available and a lack of awareness, a retail outlet approach may be helpful.
The Apple retail model works when the relationship between products and consumers is similar for other products. The Apple model is not a model to be followed for every product in every circumstance. The Apple model works for specific reasons. If those reasons and assumptions do not apply to other products, the model will not work.
Let’s think about this for a moment! What is Tesla really selling? They aren’t selling cars any more than Porsche or Roll Royce. What they are selling is exclusivity. You are going to buy something from them that the 99% can’t buy. You won’t see any financing packages and maybe not even any leases. Tesla is selling exclusivity and a store front will suffice. I would strongly suggest that they publicize that they will only accept 20 appointments per week and that you have to put down a $500 deposit that is not refunded if you miss your appointment. The harder this is to get, the brighter its future becomes.
Sorry, but I feel that something is missing here. This is a car that they are selling, and an expensive one at that. Most of the customer service comes in after you buy the car; you know when the air conditioner doesn’t cool, or the window won’t close, or the batteries catch fire. Tesla might be selling exclusivity, just as RR does, but the exclusive dealerships have service departments that I can examine. Are there Tesla service departments? Where are they? Where are the dealerships? (The salon showroom with one car does not a dealership make.)
I am going to wait on this one. Product desirability, enthusiasm, being one of the club aside — a Tesla is an expensive car, not a cheap electronic commodity that isn’t expected to last or be useful for more than a few years.
For now, with the style of the Telsa and the limited competition the store concept with a strong “purchase ready” website works.
Their target market maps well to this style of selling. In the future this car space will shift and they will move the cars to the middle of the malls or onto Telsa car lots. Competition in auto space — electric, gas, propane, or diesel is a cutthroat space.
Being a car guy, if this was a ’68 GTO knock off store, I would visit and order one :>)