Thinking Outside the Box: Model 3 to be offered through Costco?

igotzzoom · Jun 4, 2015

Okay. Bear with me folks. I know some of you are going to pooh-pooh my speculation right off the bat, but I think it could happen. I think this could potentially be a very elegant work-around to the state-by-state dealer battles. Some of you may be familiar with Costco's auto buying service. While the final sale and delivery is done at a dealership, the intermediate steps are handled by Costco.

If the Model 3 is truly going to be "mass-market" and Musk wants nationwide availability and coverage, what better way to go with one of the largest warehouse store chains in the country? I know some of you may feel associating with Costco would be "cheapening" the brand, but in my experience, I've found a lot of the Costco products to actually be very good quality, and that most of the shoppers there are solidly middle to upper-middle class. Also, Costco co-founder Jim Sinegal is a well-known advocate of progressive causes, and reportedly owns a Model S himself.

The potential negatives with this could be: Strong blowback from the dealers, threatening to yank their business with Costco. Also, there would probably be an added incremental expense to buy through Costco, and I don't know how many buyers would be willing to pay a "middleman" fee of say $300-400 for delivery and pickup at Costco, unless it included a $250 gift card. Actually, I think even if Tesla deliveries were a net loser for Costco, at least by themselves, if they threw in some kind of spiff or gift card, they could end up coming out ahead in the end. What are everyone's thoughts?

Stoneymonster · Jun 4, 2015

Insert obligatory "but I don't need a 3-pack of Model 3s" joke here.

(I actually think the idea is interesting).

deonb · Jun 4, 2015

You know who is growing even faster than Costco, and rated even higher in customer service & satisfaction?

Amazon.

Imagine that: Model 3 with 2nd day air Prime delivery.

(Or same day delivery ... in selected markets).

tracksyde · Jun 4, 2015

I think it's an interesting idea. But, correct me if I'm wrong, all Costco would be doing in this case is essentially taking your order and then going to the Tesla website to place your order on your behalf? I guess what I'm saying is, as a buyer, I would just be buying the car through Costco versus placing the order myself. If I were in a state that doesn't sell direct, they would still deliver the car to me, right?

I'm not trying to pooh pooh the idea. I do think its a good idea.. I mean, why NOT offer it through Costco too.. the only issue, as you mentioned, would be the "cheapening" of the brand, but I dont see that as an issue, personally.

igotzzoom · Jun 4, 2015

@tracksyde...I see this primarily as a work-around in the states or areas where they don't have a gallery or factory store. Obviously, in some areas where there is a high concentration of outlets (i.e. SF Bay Area, L.A. Metro area) it wouldn't be necessary. But it would make the Model 3 a lot more available and accessible to a larger number of people. Just throwing it out there.

roblab · Jun 4, 2015

The cars I see at Costco are just dealer leaders. They give you an imaginary discount off the price of your new "car" when bought through the dealer, which of course is a joke.
If you are thinking that Model III would be sitting on a shelf to be driven through checkout, well....

The Amazon Idea might be interesting, but what we are dealing with is ONE company, ONE web site. Amazon tries to get several "dealers" to compete, and generally you're not buying from Amazon, though you might pay Amazon.

The way it is now, you order on line, no price haggling, no sleazy person trying to sell you miracle diamond coat for $400, or some wacko insurance policy for a few dollars a month additional. Then you have to wait until it gets built.

I don't see how Costco or Amazon could improve the process, other than adding some fantasy value that you end up paying extra for.

Zarwin · Jun 4, 2015

Wouldn't having a third party involved in the sale give fuel to the dealership nonsense? The dealership lobby would claim Tesla is now using dealerships, and then run around making lots of loud noises.

igotzzoom · Jun 4, 2015

Zarwin said:
Wouldn't having a third party involved in the sale give fuel to the dealership nonsense? The dealership lobby would claim Tesla is now using dealerships, and then run around making lots of loud noises.

I think the dealerships would cry foul for anything that's positive for Tesla. I'm not a lawyer, but it seems to me that if Tesla wants massive, immediate nationwide availability and delivery, this could be one way to do it.

stopcrazypp · Jun 4, 2015

Zarwin said:
Wouldn't having a third party involved in the sale give fuel to the dealership nonsense? The dealership lobby would claim Tesla is now using dealerships, and then run around making lots of loud noises.

Not just noises, but I'm pretty sure there are already laws that prohibit Tesla from discriminatorily signing up exclusive deals with certain "dealerships" (Costco in this case), or it'll be relatively easy to add them (as had been done in some states in terms of banning Tesla). If Tesla signs even one franchise agreement or third party sales agreement, their entire argument breaks apart.

So until Tesla decides to go with dealers (an idea Elon says he will likely entertain in the future with more volume) I think the role Costco will serve is just as a place to display the car (similar to Tesla stores).

Jaff · Jun 4, 2015

...Amazon will need to get bigger (home delivery) drones...perhaps the "Sikorsky" model...:wink:

deonb said:
You know who is growing even faster than Costco, and rated even higher in customer service & satisfaction?

Amazon.

Imagine that: Model 3 with 2nd day air Prime delivery.

(Or same day delivery ... in selected markets).

igotzzoom · Jun 4, 2015

Just food for thought. Here's a quote from a recent Bloomberg article about Costco's car buying service:

Costco makes no money on the auto sales. It offers discounted vehicles to attract members and keep existing ones paying the club’s $55 annual fee. “Their primary, overwhelming interest is members’ willingness to join and renew,” says John Rand, senior vice president for retail insights at Kantar Retail. “The filter by which they do anything is, ‘What do my members think?’ ”

http://www.bloomberg.com/news/articles/2015-06-04/costco-moves-the-metal

vinnie97 · Jun 4, 2015

roblab said:
The cars I see at Costco are just dealer leaders. They give you an imaginary discount off the price of your new "car" when bought through the dealer, which of course is a joke.
If you are thinking that Model III would be sitting on a shelf to be driven through checkout, well....

The Amazon Idea might be interesting, but what we are dealing with is ONE company, ONE web site. Amazon tries to get several "dealers" to compete, and generally you're not buying from Amazon, though you might pay Amazon.

The way it is now, you order on line, no price haggling, no sleazy person trying to sell you miracle diamond coat for $400, or some wacko insurance policy for a few dollars a month additional. Then you have to wait until it gets built.

Oppo high-end Blu-ray players are sold similarly. In fact, buying from Amazon represents the better deal because they offer free shipping. I can't see why they wouldn't be able to arrange a similar arrangement with Tesla, but selling a car is of course a whole other ballgame.

S'toon · Jun 5, 2015

There's no Tesla presence here. I'd go through Costco. I love that place.

EVNow · Jun 7, 2015

Don't Costco work thr' the dealers ? I don't think Costco is authorized to sell directly - the same franchise laws would bar them.

ItsNotAboutTheMoney · Jun 7, 2015

EVNow said:
Don't Costco work thr' the dealers ? I don't think Costco is authorized to sell directly - the same franchise laws would bar them.

Exactly. Tesla will not use franchise dealerships for Model 3 because of the laws. Change laws to allow manufacturers freedom to use any model and you still wouldn't see sales at Costco because there'd really be no benefit.

gregincal · Jun 8, 2015

ItsNotAboutTheMoney said:
Exactly. Tesla will not use franchise dealerships for Model 3 because of the laws. Change laws to allow manufacturers freedom to use any model and you still wouldn't see sales at Costco because there'd really be no benefit.

If Costco isn't selling directly, then it doesn't change anything. It is just an additional gallery, not a dealership. I'd hardly call several hundred new places for people to see the Model 3 to be no benefit.

ItsNotAboutTheMoney · Jun 8, 2015

gregincal said:
If Costco isn't selling directly, then it doesn't change anything. It is just an additional gallery, not a dealership. I'd hardly call several hundred new places for people to see the Model 3 to be no benefit.

Are they going to offer test drives at Costco? Are Costco shoppers going to be interested in test driving a Tesla when they have a ton of items that they need to get home? Costco sells cars with no-haggle and a discount. Is there any point when Tesla doesn't haggle, doesn't offer discounts and they can buy online?

As I see it, a lower-priced model is going to gather awareness very quickly. Modern car shopping is checking online, take test drives and then buy. Tesla needs places where people can go and take test drives and where have time to spare to check things out. That's why they've started in malls.

Red Sage · Jun 10, 2015

God. No. Not again.

~*sigh*~

No. Tesla Motors will not be selling their cars through big box stores. There is no additional benefit to be had by using someone else's distribution infrastructure. Especially when they have already shown a willingness to sell petroleum based fuels.

MassModel3 · Jun 11, 2015

Red Sage said:
Tesla Motors will not be selling their cars through big box stores. There is no additional benefit to be had by using someone else's distribution infrastructure. Especially when they have already shown a willingness to sell petroleum based fuels.

They may, they may not. I'm guessing not. But it's not an awful question to have asked. Costco would be a great way to get the name out there, but I don't think Tesla would be willing to pay Costco to be a middle man for a product that's easily available online. Plus, there's already thousands of people who will flock to Model 3 initially and for at least a while, that will keep the production lines very busy.

But I disagree with some of your reasoning. I don't think the fact that Costco sells ICE's would have any bearing on whether Tesla sells through them. Big deal. That's the whole 'cutting off your nose to spite your face' analogy. Tesla will do what makes sense for the business model. They won't reject sales outlets just because the outlet also sells ICE vehicles. In fact, selling a Tesla side by side with an ICE, in direct competition, is something that should be disconcerting to ICE manufacturers, not Tesla. When all the facts are laid out in direct comparison, Tesla is going to win.

vinnie97 · Jun 11, 2015

Yep, sounds like an inquisition by suggesting selling ICE vehicles is some kind of disqualification to conduct business with Tesla.

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