Tesla Fashion Island Grand Opening Weekend (2011-11-18)

[Ardie]

I just got an email from Tesla announcing their Grand Opening at Fashion Island for this Friday, Nov 18, 2011.
(For those of you who are not Orange County savvy, Fashion Island is a shopping mall in Newport Beach.)

The announcement lists an address of 367 Newport Center Drive, Newport Beach, CA

I find the announcement both exciting and disturbing, as there is *already* a Tesla store in Newport Beach:
1100 Pacific Coast Highway, Newport Beach, CA, 92663, not five miles from Fashion Island.
(Tesla Newport Beach | Tesla Store Locations | Tesla Motors (http://www.teslamotors.com/newportbeach))

Since I just got this message this morning, I have not had time to dash over to see if they are moving to a new store, or adding a new store.
I know Newport Beach is loaded with people in the kind of tax bracket necessary to allow Tesla purchases, but TWO stores? Even Fletcher Jones Mercedes, Sterling BMW, Newport Lexus, and McKenna Porsche, and Ferrari of Newport Beach, have only a single store. (Audi and Bentley have to share. ) (Lamborghini Newport Beach isn't really in Newport - They're in nearby Costa Mesa.)

I'll have to clear my schedule for Friday evening and check it out. Maybe order a couple.

-- Ardie
I like white. My wife prefers black.

3442

[gg_got_a_tesla]

I think this fits into Tesla's ongoing strategy of opening Apple-like retail stores in high-foot-traffic hotspots such as shopping malls. In all likelihood, the existing store will become a service-only center.

[Mycroft]

Yep, just like Seattle/Bellevue and Chicago, they're moving the stores to the mall. Maybe they want to entice all those soccer moms.

[joefee]

The old location will be a service center …. the Mall a "store"

[Kipernicus]

I must say those Betas sure get around. Amazing the number of shows and store openings they've covered in the last few months with just 2 cars: Toronto, Houston, NY, Bellevue, Newport. It's almost like a shell game - at how many places can they seem to have a Model S at once?

[jimbakker666]

The old location will be a service center …. the Mall a "store"

Yes Ardie, as joefee said, the old location will just be a service center. I confirmed this with the sales person back in October when my wife and I stopped in to 'get a feel' for Tesla and ask about the S.

Then we scurried home to make a reservation on the S.

[smoothoperator]

This move sure makes it look like Tesla will implement the Hub and Spoke type store concept. The West Coast Hwy store is definitely their biggest store in Southern California. Perhaps they will use the West Coast Hwy store to hold inventory etc while they acquire high profile retail space in major shopping malls. I bet in the next few months they acquire another high profile retail space in LA.

[vfx]

This move sure makes it look like Tesla will implement the Hub and Spoke type store concept. The West Coast Hwy store is definitely their biggest store in Southern California. Perhaps they will use the West Coast Hwy store to hold inventory etc while they acquire high profile retail space in major shopping malls. I bet in the next few months they acquire another high profile retail space in LA.

I wanted to go to the opening but had to work though it. Like others I was told the old store will become a service center. Seems like they just finished it. It has a very prominent location next to a Ferrari dealer so I'm sure there will be some sort of sales.

The new LA store will be on the 3rd street Promenade in Santa Monica.

[smoothoperator]

I wanted to go to the opening but had to work though it. Like others I was told the old store will become a service center. Seems like they just finished it. It has a very prominent location next to a Ferrari dealer so I'm sure there will be some sort of sales.

The new LA store will be on the 3rd street Promenade in Santa Monica.

3rd Street is as High Profile as it gets (I would assume they are paying well into mid 6 figures a month for any signifcantly sized space on 3rd st) :wink: Personally I would have rather seen Tesla put that money into R&D, it seems like all these flashy grand openings/locations are wasteful for a startup car company. This is an unproven strategy and there are already so many unknowns when creating a brand new car from the ground up, is it really smart to complicate it further with expensive retail locations?


I am almost positive the West Coast store was probably a stop-gap and in hindsight Tesla probably overpayed significantly to for what will ultimately become (a service/inventory center). Pretty sure when that lease runs out they will look for a larger, lower profile space somewhere else.


Do you think this was the strategy from the beginning or that it evolved over time (i.e. Tesla needed stores in certain markets and was willing to take anything they got, and figure out where to really go later?)

[Robert.Boston]

There's been some evolution in the strategy since Blankenship signed on. Tesla is splitting the point-of-sale from the service center, which should allow Tesla to get higher-end real estate for the point-of-sale (and lower-end real estate for service) with the same marketing budget.

Tesla is wise to steer away from the "auto mile" strips that ring every U.S. city, but rather to position Tesla as a premium consumer brand like Apple or Bang & Olufsen. Rethinking the retail model for car purchases is a good thing.

[Norbert]

Tesla is wise to steer away from the "auto mile" strips that ring every U.S. city, but rather to position Tesla as a premium consumer brand like Apple or Bang & Olufsen. Rethinking the retail model for car purchases is a good thing.

Also, electric cars as such still need a lot of "informing the public" and reaching those who (almost) don't know about them and wouldn't look for them (even though there may be some level of curiosity).

[ckessel]

Also, electric cars as such still need a lot of "informing the public" and reaching those who (almost) don't know about them and wouldn't look for them (even though there may be some level of curiosity).
I think that's a great point. The other auto stores can exist on outskirts of the city and other areas with big lots for cars because the product brands and capabilities are well known and people seek them out. With Tesla, they need to generate name awareness and educate at the same time. Being very visible in high foot traffic areas helps achieve that goal.

[vfx]

... (I would assume they are paying well into mid 6 figures a month for any signifcantly sized space on 3rd st) :wink: Personally I would have rather seen Tesla put that money into R&D, it seems like all these flashy grand openings/locations are wasteful for a startup car company...

They have to start from scratch. Spend an hour in one of these new high traffic stores. The overtly young sales-kids answer the "howfardoesitgoHowlongdoesittaketochargeDoesyourelectrictybillgoup?" questions nonstop. Dozens per hour. Maybe they get a buyer nibble 3 times a day. For them the manager comes out and talks money and gives them the ride of their life.

If Tesla were in an Auto mall the only customers that would walk in would be someone already educated about electric cars and interested in hearing about them. Though an automall might get more traffic than the LA store does now. The Newport store (ex-Rolls Royce dealer) probably gets some one-stop Ferrari-Tesla shoppers.

[DaveD]

Tesla's avoidance of the traditional use of dealers is giving them the flexibility to evolve their marketing/sales strategy. If they had gone with dealers, they would've been stuck with the same old way that everyone else markets and sells cars. Owning the stores, they can change things relatively quickly, as needed.

[Mycroft]

Tesla's avoidance of the traditional use of dealers is giving them the flexibility to evolve their marketing/sales strategy. If they had gone with dealers, they would've been stuck with the same old way that everyone else markets and sells cars. Owning the stores, they can change things relatively quickly, as needed.

Yep, they've really taken the Apple model to heart. Own EVERYTHING! :)

[Lloyd]

Yep, they've really taken the Apple model to heart. Own EVERYTHING! :)

I think more appropriately would be "controll everything"!

[Mycroft]

You got it! I thought of that just as I was posting. :)

[VolkerP]

Elon stated that he had to own Tesla (=be CEO) in order to control everything. Basically the same here.

[Mycroft]

Elon stated that he had to own Tesla (=be CEO) in order to control everything. Basically the same here.

A very good thing IMHO.

[smoothoperator]

There's been some evolution in the strategy since Blankenship signed on. Tesla is splitting the point-of-sale from the service center, which should allow Tesla to get higher-end real estate for the point-of-sale (and lower-end real estate for service) with the same marketing budget.

Tesla is wise to steer away from the "auto mile" strips that ring every U.S. city, but rather to position Tesla as a premium consumer brand like Apple or Bang & Olufsen. Rethinking the retail model for car purchases is a good thing.

I do not think that the Newport Beach Store on West Coast hwy is lower end than Fashion Island, probably the opposite. It does not make much sense to acquire high visibility/expense real estate for service centers (like they did in Newport Beach). Its obvious they were in a rush and just took what they could get in this market.

I guess I cannot grasp the concept of purchasing a car the way I would purchase a TV or Computer. Most of the people who will be buying these cars are not the casual mall shopper but rather individuals who have done research and knows what they want. This may change over time, but right now there is no doubt in my mind that the vast majority of people who buy these cars, do a ton of research beforehand. If this is the type of consumer that are buying these cars, is it necessary to lease expensive shop space where 90% of the people who come through the doors are not your customer? Heck I think this strategy may help Chevy and Nissan, people will go into Tesla's showroom, learn about ev's, hop online and go and buy a cheaper electric car. Its good for the cause I guess, but when you are selling 60-100k cars instead of 2k computers or 400 dollar ipods I think the type of consumer that you are trying to attract is different than the ones that shop at malls. If Tesla was selling Tata Nano's or Vespa's this concept may work but at that price point I am not sure how much of an increase in sales this type of store concept will add over the traditional model. People tend to seek these cars out (like any other high end marque). This is why Rolls Royce moved from that space to over by the airport, they realized that visibility is not necessary, the individuals that want that particular car will go and seek it regardless of where the dealership is located. Some mighty risky moves Tesla is making! I could understand implementing this later on, they could have very easily kept their existing stores (and added new locations similar to what they have now in new markets), and just leased nearby warehouse space for the cars/service.

[smoothoperator]

They have to start from scratch. Spend an hour in one of these new high traffic stores. The overtly young sales-kids answer the "howfardoesitgoHowlongdoesittaketochargeDoesyourelectrictybillgoup?" questions nonstop. Dozens per hour. Maybe they get a buyer nibble 3 times a day. For them the manager comes out and talks money and gives them the ride of their life.

If Tesla were in an Auto mall the only customers that would walk in would be someone already educated about electric cars and interested in hearing about them. Though an automall might get more traffic than the LA store does now. The Newport store (ex-Rolls Royce dealer) probably gets some one-stop Ferrari-Tesla shoppers.


Ok....So say a couple "nibblers" walk in and are intrigued by the vehicle. Say these nibblers want to trade in their Mercedes S550 for a Model S...How exactly is this going to work....Please drive to our other store a few miles south of here where they will take care of the paperwork, trade in etc? Applesque?

So the only interaction Tesla Customers will have with these mall stores is the initial purchase? applesque? Its a neat idea on paper, and will definitely grow the branding, but from a $ spent/sale it does not look like its money well spent. Personally when I go and buy a car, I want to drive it, then if I like it I want to buy it immediately. I do not want to drive somewhere else to complete the transaction.

[vfx]

Tesla had a small percentage of returns early on. Driving Electric was not for everyone. I'd say those people did not do thier research but just jumped on the new sportscar bandwagon.

I have no way of knowing if this new apple store idea is going to work. A normal car dealer has the fancy model under glass and you drive the one on the lot. Tesla has a car in the mall and a driver in the parking garage. Will it work? Time will tell.

[Cobos]

Not to mention the idea I get from how Tesla wants to do it is that they will not have a big lot full of cars. Maybe one or two "popularily equiped" cars ready for an immediate sale but otherwise they will help you order online and get the car delivered right to your door. I'm guessing part of the reason they don't need to use high pressure sales techniques is that they get you to sign a contract in the fancy store, and you get the car a few weeks later, so until you do decide on colors or options or whatever they want you in and out of the store considering your purchase.

So the sales idea goes something like this. You stumble on the store, and you look inside. You talk to the nice salespeople and they convince you this might be worth checking out.
You go home do your research, and find the car to be a good idea.
You go back to the store and talk some more with the salespeople, and you get a testdrive in one of their testdrive cars in the parking garage.
You now convince your spouse or your bank that you want this car with these options, and go back to the store to finalize the deal. You sign contract and get a delivery date for your car. Wait 3 weeks and car is delivered to you or ready for pickup somewhere convenient.

That's how I would want such a process to go anyway :)

Cobos

[ckessel]

Most of the people who will be buying these cars are not the casual mall shopper but rather individuals who have done research and knows what they want.
...
This is why Rolls Royce moved from that space to over by the airport, they realized that visibility is not necessary, the individuals that want that particular car will go and seek it regardless of where the dealership is located.
I think you're missing the point of the strategy. Tesla needs to get name recognition, they don't have it now. Everyone knows their competitors: BMW, Audi, Lexus. The store strategy is to create buyers that didn't exist by raising brand awareness in locations likely to be visited by the target demographic.

Rolls Royce's marketing strategy isn't comparable. I doubt much of anyone considers a Rolls in the same category as a BMW. Rolls doesn't advertise on TV. BMW and Lexus advertise like crazy. Tesla needs to raise their name awareness among BMW and Lexus buyers, not Rolls Royce buyers, which means Tesla can't sit in a warehouse in the middle of nowhere hoping people read about them online.

[Mycroft]

I agree with Cobos and ckessel. As much as I think Blankenship is crappy marketing director when it comes to the website and PA work, his strategy of installing Apple type Tesla stores in upscale malls is an excellent one. I have to think that this is the reason he was brought in.

[smoothoperator]

I think you're missing the point of the strategy. Tesla needs to get name recognition, they don't have it now. Everyone knows their competitors: BMW, Audi, Lexus. The store strategy is to create buyers that didn't exist by raising brand awareness in locations likely to be visited by the target demographic.

Rolls Royce's marketing strategy isn't comparable. I doubt much of anyone considers a Rolls in the same category as a BMW. Rolls doesn't advertise on TV. BMW and Lexus advertise like crazy. Tesla needs to raise their name awareness among BMW and Lexus buyers, not Rolls Royce buyers, which means Tesla can't sit in a warehouse in the middle of nowhere hoping people read about them online.

Is the target demographic the casual mall shopper or someone that is looking for a vehicle? Lets take a look at Fisker, they have signed up dealership franchises that already sell high end cars (i.e. BMW, Audi etc). Would it not make more sense that the type of person that would purchase one of these cars would cross-shop with other similar marques? It seems like opening dealerships in malls is basically shooting in the wind where as opening next to existing car dealerships actually attracts the type of customer that may buy your car (as they are already in the market for a vehicle).

The first Tesla Newport Beach store is not "in the middle of nowhere" it was literally right next to a Ferrari Dealership and several other high end dealerships. The strategy, at least in the Orange County market, makes absolutely no sense. Why would they lease space next to a Ferrari Dealership in a high rent district if it was going to be converted into a service center?

The mall that Tesla located to in Newport Beach is not busiest mall in OC, its more of a boutique type of mall, the major regional mall is South Coast not Fashion Island. If they wanted that regional draw why did they open there instead of the worlds most expensive mall (on a Sales/psf basis and double the sales of Fashion Island) just up the road? It does not seem like they did enough research in this market when deciding where to place the 2nd store.

Do you think opening dealerships in malls is a better strategy and a legitimate replacement for conventional advertising?

[ckessel]

Is the target demographic the casual mall shopper?
Mall shopping is what they're doing, not who they are demographically (in the financial sense of someone that would consider Tesla).

I see BMW, Audi, Lexus signage all the time driving around because lots of those cars are sitting around. I have never, once, seen either a Ferrari or Rolls store. If Tesla wants to compete with the BMW's of the world then they need visibility like BMW. Given Tesla isn't planning to carry the kind of standing inventory BMW lots carry, it seems raising visibility through a mall strategy is a viable alternative strategy. Whether it works or not, we'll see I guess.

[smoothoperator]

Mall shopping is what they're doing, not who they are demographically (in the financial sense of someone that would consider Tesla).

I see BMW, Audi, Lexus signage all the time driving around because lots of those cars are sitting around. I have never, once, seen either a Ferrari or Rolls store. If Tesla wants to compete with the BMW's of the world then they need visibility like BMW. Given Tesla isn't planning to carry the kind of standing inventory BMW lots carry, it seems raising visibility through a mall strategy is a viable alternative strategy. Whether it works or not, we'll see I guess.

Demographics is a lot more than "financial sense" these real estate decisions are based on the demographic that shop a particular mall (i.e. Education Level, Household Size, Income, Ethnicity, Age, Daytime Population, Avg Consumer Expenditure etc etc etc) I am sure Tesla has a demographic profile which include all of these categories and then some of who their customer is and where they are. I am pretty sure if they located up the street at South Coast it would have been a much better move as that location is much more regional than this one. The foot traffic and sales numbers are 2x+ more than what this mall does.

If Tesla wants to be mass market they will have to carry inventory at some point, right now they are a boutique type of store, when they ramp up to 20k+ units, the will be carrying inventory that is just the nature of the beast. How well Tesla is able to scale will determine how successful this concept will be. I do not think they need to raise their profile via malls, I think that with the advent of the internet and social media/marketing the necessity for brick and mortar stores at malls may not be necessary to boost the profile. These guys are selling 60k+ cars not $400 Ipods!

[ckessel]

I think the strategy looks like a good alternative to classic advertising. You think it's a bad idea. It simply sounds like we don't agree.

[smoothoperator]

I think the strategy looks like a good alternative to classic advertising. You think it's a bad idea. It simply sounds like we don't agree.

Has it worked before? What are the benefits over classic advertising?

[ckessel]

Has it worked before? What are the benefits over classic advertising?
I have no idea. Are you stating Tesla should only stick with what's been done before? That doesn't seem to be their approach, for better or worse.

[VolkerP]

IMO this shop strategy discussion belongs in the tesla store thread.

[jcstp]

Has it worked before? What are the benefits over classic advertising?

1 thing already different with conventional advertising = direct contact!
I bet with normal advertising you will not have the same quality of contact!

If it works or not, is the same question as "does an electric car work, yes or no"! Surely at the beginning of roadster-sales it was a guess too!

I guess they have certain targets to achieve in the area of these "boutique"-shops! If they are not achieved, moving one will be lot faster and easyer then moving a whole servicestation with shop!

[Lloyd]

Has it worked before? What are the benefits over classic advertising?

What, Billboards, Television adds, Media print as classic advertising? I wont buy anything I see on a billboard, I hate them with a passion. IMHO a blight on our landscape. Television adds: I don't watch any of them anymore. I record everyting I watch so I can forward through them. Media print: Well maybe, but I am buying less printed reading material in favor of electronic versions.

I believe that Tesla has the right idea, as long as they can keep their costs under control.

[smoothoperator]

I have no idea. Are you stating Tesla should only stick with what's been done before? That doesn't seem to be their approach, for better or worse.

I think Tesla's core business is developing/manufacturing Electric Cars, I know they like to think of themselves as a pioneer in all aspects of the automotive industry. The technology is what drives people to showrooms, copying the "Apple Store" concept and trying to sell cars in this manner I think are a distant second with regards to what will determine the overall success of Tesla Motors. It has already been proven that people will buy these cars regardless of where the stores are located and possibly what they look like. A lot of the Roadster sales have come from people purchasing the cars remotely via the internet. Heck, most of the Model S sales in the next year or so will probably be purchased via Internet.

What I am merely inferring is that Tesla has a lot of things on their plate in the next year or so, they have a brand new revolutionary car that they are rolling out. The normal way worked, the new way who knows if it will work but even if it does work it will surely be more expensive than the old way (I am referring to the Newport Beach stores, I cannot speak for stores in other markets as I am not familiar with that market). Instead of opening this store I would have rather had the money spent on developing a better bezel for the touchscreen. I think that would have made a lot more difference than opening two stores within a few miles of each other in the same market. If Tesla was going to go with this strategy why not open in the premiere shopping mall in the country? This move is neither here nor there, it really does not follow any specific strategy other than placing retail stores in the same general areas as their existing stores.



1 thing already different with conventional advertising = direct contact!
I bet with normal advertising you will not have the same quality of contact!

If it works or not, is the same question as "does an electric car work, yes or no"! Surely at the beginning of roadster-sales it was a guess too!

I guess they have certain targets to achieve in the area of these "boutique"-shops! If they are not achieved, moving one will be lot faster and easyer then moving a whole servicestation with shop!


I don't think this has anything to do with the brilliant technology that Tesla Motors has developed but rather the need to create a buzz. I just question the decision making process. If Tesla wants to create a buzz why not go all in? Opening at Fashion Island does not create nearly the buzz as opening at South Coast Plaza. I don't see how they can capture a significantly larger audience here as opposed to their current location. If they were to open at South Coast Plaza then I could see this move as a big league one, as it stands now this move looks to be a "we need a retail store in the market so we will go to the closest mall to our existing store and put one there" type move. Looks like Tesla is making rushed Real Estate moves.

[Ardie]

I guess I need to report back.

So, Friday evening of opening night, I went over to Fashion Island to look at the Tesla store. It is located in the previous spot for the Apple store (Apple isn't gone; they just moved around the corner and down toward Nordstrom's, so there will probably be some interesting conversations about intersecting strategies here.)

It was around 7:00pm, and it was busy. Not 90-minute-wait-for-a-Disneyland-ride crazy busy, but there were a lot of people milling around in the store. But it was also well-stocked with Tesla staff. At least six of them, probably eight, I'd say. There was a gray Roadster, a Model S chassis, a white Model S roped off, and a manned cappuccino machine. Several large-screen tvs were showing silent film clips of the Roadster and Model S. The roped-off Model S had a short 5-6 person line to get in and sit in the car and to listen to the spiel from one of the staff.

At the rear of the store is a small area with chairs and a circular coffee table (or perhaps in sales parlance, the "high pressure room") where it looks like a sale would come to its conclusion. Or possibly where small children can be corraled as their parents chat with the sales rep.

It was less than a 10 minute wait before getting into the car. Sitting in the driver's seat was -- seductive. New car smell and all. Seats that are comfortable and adjust even to me. I'm 6'-4" (192 cm), so "I live in a 9/10 scale world." I have gotten used to being the one who pushes the ergonomic envelope when it comes to products designed for 98% of the population, but I fit *much* better than their tiny Roadster. Inboard armrests on each seat slide back a bit to reveal a cup holder. The Tesla rep mentioned that the headrest design is still under development, so the current large bump will be replaced with something that will be up/down adjustable.

The sales pitch centered on the infotainment system, and it is amazing. That 17" (~45 cm) display is *huge*, being so close to your fingertips. I scooted the seat rather far rearward, but my right knee was still in danger of getting jabbed by the pointy bottom left corner of the display.

My biggest gripe about that center infotainment console is that it is almost *too* alluring. A list of your favorite tunes, the display of the car as you open the sunroof, the power management system, the GPS map, the climate control, the link to your cell phone, the list just went on and on. We have two BMWs, and when each was new, we have almost killed ourselves because we got too involved in pressing buttons on the center console instead of actually driving the car. I swear the second time we looked up, the entire front view were brake lights. We screeched to a stop, leaving enough room between us and the car in front of us to set a 50-cent piece across the gap between his back bumper and my front bumper. I predict that this kind of exciting revelation that you actually need to drive the *car* and not the *touchscreen display* will happen to more than one ill-fated Tesla. Oh, the Tesla staff dismissed it with a desultory wave of the hand, stating that the user interface is so much more intuitive than ever before, and it will have voice-command capability. (Whew.)

My second biggest gripe is the lack of storage places for automotive bric-a-brac. On the center of the floor, usually where the center hump is on ICE cars, has what reminded me of a large secretarial IN/OUT tray on the floor going all the way between the front seats as a place to toss or dump your stuff. I suppose it will be fine for my wife's purse, but not a place to plop my cell phone, sunglasses, the garage remote, and gas purchases record book. (Oh. I guess I can deep-six that last one.) Time will tell if more compartments show up in the door, or overhead behind the sun visor, or above the rear view mirror.

But theese peeves are tiny compared to the overall features of the car. The interior is comfortable, roomy for four adults, and appointed nicely enough to compete with the likes of BMW or Jaguar. I didn't get the impression of the ultimate in coachwork the way I do when I'm aboard a Gulfstream, nor does it scream "I'm trying to be classy!" I just felt right at home, save for the iPod-like driver's speedometer (& more) display and the TV-like infotainment system. Those two items reveal a peek at the giddy new technology that is the future.

But back to the Tesla store itself.
What, exactly, is Tesla's grand plan? Will the mall paradigm succeed? I dunno. There *is* a lot of foot traffic, and there *is* a lot of interest. Whether this translates into deposits and eventual sales, I cannot say.

But here's my take on what Tesla is scheming: This is a short-term strategy to get the Tesla name out to the upper-middle (and up) class of people, and to be able to teach them about battery powered cars, maybe even do a test drive at a place where your guard is down (i.e., not at a car dealership). You may indeed decide on a new car the way one decides to pick up a new bauble for your significant other, or pick up a new pair of jeans, but I think that the plan is to educate, not to sell. As it is today, most of the people around us will *not* actually get into their car and go to a Tesla dealership when they are in the car-buying mood. It just isn't on their radar. So having a place in the mall may indeed be an effective way to address that issue and worm their way into your mind. Tesla will be in your head when you start thinking about a new car.

People may remember that this is what Saturn did with the EV-1 back in the 80's. Showrooms in shopping malls. It was short-lived, but it *did* generate a lot of interest.

The biggest bugaboo is the rent. Renting space in a successful shopping mall is not for the faint of heart, nor for the light of pocketbook. It has to be a rather pretty penny that Tesla is paying every month, especially since they will not be able to deliver anything for over a year. (Water bottles and t-shirts excepted.) I can't see this continuing forever. So it is probably a plan to create brand awareness, generate interest, and educate the buying public about the advantages of going electric. Once Tesla becomes a household name, they may dump such a pricey storefront and shift to a more traditional car showroom and parking lot.

-- Ardie
Amazon.com > cars > Tesla > Model S > virtual test drive > click to buy

[Tommy]

I dropped by Monday morning to look and sit in the Model S and spoke to one of the reps about foot traffic and sales during the grand opening. He told me foot traffic was something like 10K (that's 10,000) and 40 people had made reservations. I can attest that even on a Monday morning, there was a steady stream of people visiting the store. Meet one guy outside the store who asked for directions to the Apple store. So there is going to be a lot of accidental buyers thinking they are going to the apple store and get seduced by Tesla.

[Robert.Boston]

40 * $5,000 = $200,000. With a 25% gross margin, that's $50,000 of profit in a short period, which probably pays the rent for a bit.

[SByer]

...but not a place to plop my cell phone, sunglasses, the garage remote, and gas purchases record book. (Oh. I guess I can deep-six that last one.)

Why wouldn't your cell phone stay in your pocket? That's what BlueTooth is for. Garage remote? Should be handled by the entertainment center using HomeLink. The only things in my Roadster are my sunglasses and company badge.


As for the store concept, time will tell, but I think Fisker took exactly the wrong tactic - tying up with the current very, very broken dealer system means they'll have un-passionate and probably not very knowledgeable salespeople - who almost certainly will not be Fisker employees - as the first point of contact. At places where selling a niche car isn't top priority. That's a huge lack of control there, and quality of that contact will not be very good. The current system is just not the way to sell a durable good. It's said that car advertising doesn't bring in many new sales, but is mostly about trying to make current customers feel better about their purchase - to make up for that sales experience!

At it's pricing level, the customer base for the Model S is quite narrow. Getting the right traffic in the door is important. Alphas, influencers, bleeding edge weenies (hi!). At least here in the Bay Area, the Santana Row store is very well placed, especially compared to where the McLaren/Fisker dealership is (and yeah, it's mostly branded McLaren, for all the... what? 0.4 cars they'll sell a year?). And even though it's 'selling' McLarens, you can still recognize the totally offsetting meta-patterns of a standard not-fun commission-based dealership. Blech.

I'm not sure that Tesla's model is optimal, but it's sure a heck of a lot better than the current model, IMO. A Tesla store is far more inviting than the last two sales experiences I've been through (Porsche and Mercedes).

[drees]

This is a short-term strategy to get the Tesla name out to the upper-middle (and up) class of people, and to be able to teach them about battery powered cars, maybe even do a test drive at a place where your guard is down (i.e., not at a car dealership). You may indeed decide on a new car the way one decides to pick up a new bauble for your significant other, or pick up a new pair of jeans, but I think that the plan is to educate, not to sell.
Yep - and IMO all the other companies with EVs (ok, only Nissan at this point) should be thanking Tesla - because not everyone can afford a $50k car - but a $35k car fits into a lot of people's garages! I certainly know that when Tesla does produce a $35k (preferably less as I really dislike spending so much on depreciating assets) I'll be looking at them.


Once Tesla becomes a household name, they may dump such a pricey storefront and shift to a more traditional car showroom and parking lot.
I don't know - the only way Tesla would go this route is if they want to keep a large inventory on hand - but even those big parking lots in less than desirable locations are very expensive. I could see Tesla keeping a similar structure with a very lean inventory. I certainly don't mind waiting for a car if I'm able to get it exactly as I want. Heck - I and many others waited over a year for my LEAF! As long as Tesla has a fairly high end car I see them continuing this way.

[Norbert]

To educate, and also to familiarize people not only with the idea of electric cars, but also with the fact that they are real, that you can actually sit in them and see the touchscreen working etc. ;)

Even if the Model S could be sold just by media reports, word of mouth, website info, plus test drives... the Bluestar isn't that far away, and preparing a 200,000-per-year market needs good preparation. People who go to an auto mall probably want to buy a car soon, and may not have the time it takes to inform and familiarize themselves with the concept of EVs. I couldn't imagine myself buying an EV just a few days or weeks after the first time I heard of their existence. It took me quite some time to get to that point. So they'll buy a more common car type, and then they already have one for the next 10 years or so. Whereas a store in an area with high foot traffic of more general nature allows people to gradually acquaint themselves with the possibility of buying an electric car.

[jimbakker666]

I dropped by Monday morning to look and sit in the Model S and spoke to one of the reps about foot traffic and sales during the grand opening. He told me foot traffic was something like 10K (that's 10,000) and 40 people had made reservations.

Not to mention those who may have gone and reserved from home.

I didn't make the store open due to my work schedule, but I like the store being at the mall rather than next to the Ferrari dealership. It's intimidating to pull into that place...a thought that might have been shared by Tesla execs who opted for the mall location to target the less-than-super-rich.

[smoothoperator]

Why wouldn't your cell phone stay in your pocket? That's what BlueTooth is for. Garage remote? Should be handled by the entertainment center using HomeLink. The only things in my Roadster are my sunglasses and company badge.


As for the store concept, time will tell, but I think Fisker took exactly the wrong tactic - tying up with the current very, very broken dealer system means they'll have un-passionate and probably not very knowledgeable salespeople - who almost certainly will not be Fisker employees - as the first point of contact. At places where selling a niche car isn't top priority. That's a huge lack of control there, and quality of that contact will not be very good. The current system is just not the way to sell a durable good. It's said that car advertising doesn't bring in many new sales, but is mostly about trying to make current customers feel better about their purchase - to make up for that sales experience!

At it's pricing level, the customer base for the Model S is quite narrow. Getting the right traffic in the door is important. Alphas, influencers, bleeding edge weenies (hi!). At least here in the Bay Area, the Santana Row store is very well placed, especially compared to where the McLaren/Fisker dealership is (and yeah, it's mostly branded McLaren, for all the... what? 0.4 cars they'll sell a year?). And even though it's 'selling' McLarens, you can still recognize the totally offsetting meta-patterns of a standard not-fun commission-based dealership. Blech.

I'm not sure that Tesla's model is optimal, but it's sure a heck of a lot better than the current model, IMO. A Tesla store is far more inviting than the last two sales experiences I've been through (Porsche and Mercedes).


Fisker's model is much cheaper than Tesla's model, and Fisker's model is proven to move units (conventional Ice). I worry that this new store concept may have a negative impact on the bottom line for Tesla. Take a look at Apple, they did not roll out their new store strategy until they were financially able to do so. I am not sure if Tesla from a cash flow perspective is at the point where they can afford to roll out this strategy effectively. Every two store market takes at least one store away from a new market. Do you think that having an additional store that is a few miles from an existing store will attract more customers as opposed to if that store was placed in a new (demographically equal) market? I think the Bay Area is an anomaly with regards to market trends. The Bay Area has a ton of rich techies who love this type of technology, I do not think the rest of the nation mirrors this type of demographic, but rather wealthy individuals who will cross shop Tesla's with other vehicles priced similarly (i.e. the practicality of a vehicle will be the primary focus and the techie portion of the car will be secondary). Also So Cal and other areas around the country iare more spread out than the Bay Area, so range anxiety will be a huge factor, people often travel hundreds of miles down here daily and frequently, I know this is not the norm up in the Bay Area.

When the Model S and future models start to ramp up I am not sure how this store model will work. I also think (as pointed out earlier) that this is just a short term strategy to create a buzz. Once the buzz is created it will be interesting to see what Tesla does.

The local Fisker dealer here in Orange County is within the confines of a BMW dealership. I think this is the ideal scenario where people essentially are in the market for a luxury car can compare in the flesh a regular ICE car and this new breed of vehicle. The franchisee makes money either way so I do not see them push selling a Fisker over a BMW or vice versa etc. Personally I like the ability to negotiate on a car, and I have never purchased any car at asking price and never will (including my Roadster).

The biggest problem I have with the Tesla stores have been the lack of knowledge by the young sales staff. The people whom I have dealt with really do not have a technical background and cannot explain a lot of the concepts accurately. They are great at using cliches and reciting the marketing material, but if a technical question is posed they seem to be tripped up pretty quickly or give an uninformed answer. Maybe this has improved (it has been a bit over a year since I was last in a Tesla Showroom) but I was not very impressed by the knowledge of the staff.

[vfx]

I think Tesla's core business is developing/manufacturing Electric Cars, I know they like to think of themselves as a pioneer in all aspects of the automotive industry...

And marketing as well apparently. New car, new car technology, and new way of selling cars.

And the the old stores like Newport and LA and Menlo are just places they opened before they decided on this strategy. As others have said, once the leases are up they will probably go with the NY, Italy and Japan model of a low(er) rent service site and high end store location. Who knows, maybe the stores in those markets were working so well they saw it would work worldwide as a marketing, advertising, educating, and brand awareness tool that can also sell cars onsite.

[smoothoperator]

From the OCBJ:

"Tesla to Shift Service Center as Retail Focus Changes
AUTOMOTIVE: Most local selling moved to Fashion Island store
By KARI HAMANAKA
Sunday, December 11, 2011

Palo Alto-based luxury electric vehicle maker Tesla Motors Inc. will relocate its Newport Beach service center as it pursues a new retail strategy.

The service center location on Pacific Coast Highway is no longer “optimal,” spokesperson KC Simon said. The company plans to open another service center, but its search for a new service site in Newport Beach won’t start until a new tenant is found to assume the 4 ? years remaining on the present location’s lease.

“We will not close down service before we find a replacement service property and intend to execute a seamless move between locations,” Simon said.

Tesla opened the 10,500-square-foot location across from the Balboa Bay Club & Resort on Pacific Coast Highway as a dealership and service center in mid-2010. It took a space previously occupied by a Rolls-Royce dealership.

Emphasis

The automaker has shifted the emphasis of the center to service of late and plans to sublease the space. The developments come weeks after it opened up shop at a former Apple Store location at nearby Fashion Island, where visitors can view Tesla models, order a vehicle, arrange for test-rides or shop for branded merchandise.

L.A.-based CBRE Group Inc. is also listing a 10,000-square-foot Tesla showroom in Los Angeles for sublease. Simon declined to comment on the L.A. property.

“The traditional dealer model is one we want to get away from,” Tesla Communications Vice President Ricardo Reyes said last month.

One of Three

The Fashion Island store was one of three that opened last month. The other two opened at malls in Bellevue, Wash., and Chicago.

Tesla now operates 20 stores and service centers worldwide. Tesla’s debut vehicle was the sporty Roadster, with a starting price of $109,000.

The automaker is now looking to make inroads with more middle-of-the-road customers at malls and other shopping centers with its Model S sedan set to come to market in mid-2012. The sedan is more affordable than the Roadster but still pricey at a starting price of $57,400.

Tesla has about 2,000 Roadster customers, mostly in California.

Reservations

Reservations for the Model S total about 6,500, surpassing the 5,000 model year 2012 sedans set to be made and sold next year. Model S production, which occurs in Fremont, is expected to ramp up to 20,000 annually beginning with the 2013 model year.

The eight-year-old company’s retail strategy could help set it apart from other automotive brands as it looks to grow sales. Tesla reported a loss of $65 million on revenue of $57.7 million for the three months through September. "