Tesla goes to the mall
The latest Tesla Store in Fullerton embodies the electric carmaker’s unusual retail approach
The glass doors at the new Tesla store at Brea Mall were not even open five minutes on a recent morning when Ataa Ghomashchi and his two friends walked by and spied a scarlet Model S sedan parked just inside.
The men stopped in their tracks, strode into the store and within seconds, Ghomashchi planted himself in the driver’s seat as an employee showed off the car’s dashboard.
Tesla: By the numbers
$69,900: Starting price for the Model S
20,000: Number of Model S sedans to be produced in 2013
3,300: Square footage of the Tesla store at Brea Mall
$2,500: Deposit on a Model S
240: Volt outlet recommended to charge the car more quickly
30: Number of Tesla stores opening globally, half in North America
2: Tesla stores in O.C.
Source: Tesla Motors
“That is something freaky,” said Ghomashchi, a 19-year-old college student from Diamond Bar. His eyes widened as he watched the 17-inch long touch screen – the size of two stacked iPads – light up with such options as Web browsing and customized acoustics.
Ghomaschchi isn’t in the market for a car but said his mom and dad are considering a Range Rover. “I’m showing this to my parents,” he said.
As for the question that auto salespeople often ask – “What would it take for you to buy this car today?” – it never came up.
The Palo Alto-based automaker is upending long-held retail conventions when it comes to selling its fully electric cars. Tesla stores are not traditional dealerships, where shoppers can drive off with a new car. Instead, they’re mall marketing stores for electric vehicle technology and both of the company’s current models.
“Today’s mall crawler is tomorrow’s mid-priced car buyer,” said Andrea James, senior research analyst and vice president at Dougherty & Co. LLC. in Minneapolis. “It makes sense to get in front of them.”
The Brea store, which debuted Friday, is one of 30 new outposts opening this year in the United States and overseas. The automaker launched its first Orange County store – at Fashion Island mall in Newport Beach – in November 2011.
Tesla’s product specialists in the store do not work on commission, said Alexis Georgeson, spokeswoman for Tesla Motors.
“Our strategy is not necessarily to sell our cars from our stores, but rather to educate people about the product and technology and learn about the benefits of going electric,” she said. “Model S orders can be completed in-store, but customers may also place an order for Model S from their computer, smartphone or iPad.”
Tesla bypasses franchise dealerships entirely by selling directly to consumers online or through its network of company-owned stores – an unorthodox strategy that has riled auto industry competitors.
The strategy hasn’t been an issue in California, but it is a big deal in other states – including Colorado, Illinois, Massachusetts, New York, North Carolina, Oregon and Texas – where dealer organizations have filed lawsuits against Tesla. Dealer organizations in those states say that Tesla is violating state franchise laws. Tesla has won some lawsuits and lost others; several cases are ongoing.
In Arizona, Texas and Virginia, the automaker has Tesla galleries that show cars but cannot sell them.
Elon Musk, CEO of Tesla Motors, has suggested that he may seek federal relief to resolve the larger issues involved, though he hasn’t offered specifics. “If we’re seeing nonstop battles at the state level, rather than fight 20 different state battles, I’d rather fight one federal battle,” Musk recently told Automotive News.
The National Automobile Dealers Association, which represents nearly 16,000 dealerships with more than 32,000 franchises, supports each state’s right to control how new vehicles are sold and serviced in their states.
“State governments require the dealer to invest in brick-and-mortar facilities to ensure there is an independent franchised dealer available to car owners for the life of the vehicle, not just at the point of sale,” according to an association statement.
The group said that when manufacturers such as startups Coda and Anaheim-based Fisker run into financial trouble, and when manufacturers such as Pontiac, Mercury, Oldsmobile or Saturn discontinue a brand, “auto dealers still remain to help the customer.”
The lawsuits, however, may serve to make Tesla an underdog and garner public support for the company, analyst James said.
Auto manufacturers “have trouble challenging the status quo” because they don’t want conflict with their dealerships. “Tesla doesn’t have this problem,” James said in a note to clients. “It is starting fresh, not going out and competing against existing dealers. The lack of existing dealers means that it is difficult for dealers to claim that they are harmed by Tesla’s business model.”
Musk has stated on the Tesla website that the company’s intent is to provide an entirely different car-buying experience than that in traditional dealerships. The differences include location, aesthetics and the absence of a car lot. Tesla provides service centers, including one in Costa Mesa for Orange County customers who own the Model S, the Performance Model S or the discontinued Roadster.
Tesla locates its stores inside malls or in shopping districts with high foot traffic, Georgeson said. “We place stores in strategic locations based on where we think our current and future customer base live and in areas where people are educated and interested in technology,” she said.
The Brea Mall store features two cars – one red, the other pearl white – flanking a chassis that resembles a giant skateboard. Overhead, a white suspended ceiling runs the length of the store. The walls are covered with a mix of large scenes of the Model S in the outdoors, touch screens that provide more product information, including how to customize a Tesla, and samples of the colors for the paint and interior finishes meant to be touched. Tesla products – T-shirts, beverage containers and infant onesies emblazoned with “It’s electric, baby!” – are arranged on shelves. Chrome-and-white barstools sit in front of a big video screen in the back of the store.
This clean and quasi-minimalist design borrows from the Apple store aesthetic. Apple stores “are beautiful and stylish, but also simple, fun and friendly at the same time,” Musk wrote at the Tesla blog. Musk brought on board George Blankenship, a former vice president at Apple and Gap and retail consultant to Microsoft, to become Tesla’s vice president of sales and owner experience in 2009.
Orange County is “one of Tesla’s strongest markets,” Georgeson said. “Our two Orange County stores will serve different customer bases; Fashion Island supports southern Orange County, while Brea will support the heart of the county. The expansion of our retail presence in Orange County is a testament to the fact we believe the area will continue to be a strong market for us.”
Dougherty & Co.’s James said that although many shoppers who visit Tesla stores might not have the means to buy the car at the time, the company is taking “a longer-term view.” Musk has stated plans to introduce a lower-priced model after it launches its Model X crossover next year.
James said that “the 18-year-old going into the store will be the 22-year-old starting professional” who might be a customer by the time lower-priced Teslas enter the market.
“This is only the beginning,” she said. “What Tesla is able to do is to reach the next generation.”
$ell SmArt… with Art!