The new fantasy sales framework will fail

[zer0cool]

This new "all online" sales framework is pure fantasy and is doomed to fail.

Even with its stores and sales force, Tesla's sales department is widely seen as one of the worst in the car industry. Many buyers on this forum, myself included, have experienced significant frustration with Tesla's sales and delivery process. Now they plan to get rid of its sales force and stores and make all sales online. This is not only doomed to fail, but will also seriously damage Tesla's financial health and brand value.

I want to discuss two primary reasons. First, many have experience poor sales and delivery from Tesla. For example, it's difficult or impossible to actually get a hold of someone who can give you accurate information about an order or delivery. Moreover, there are frequent and significant delivery issues. Currently, at least you could get a hold of a real person at a store, and try to get some answers. Many have experienced that calls and emails just don't work because you either get slow responses or no responses at all; and even when you get them they may not actually answer your questions or resolve your problems. Without a dedicated sales force with real people that you can actually reach, there will be even greater issues around sales and delivery, increasing customer frustration, and decrease sales.

Second (the main issue), people actually want to test cars before just ordering one online... The car is a major purchase (like just after a house), and it feels ludicrous to just buy one without even testing to see if it fits one's needs. Also the experience of spending time in a store to hear about the car's features propels more to actually buy the car.

Yes there will be a 7-day return, but most people can't afford that. Honestly can you REALLY return a car after spending hours with a bank and completing lots of paperwork to get a loan and then what, just return the car and wait for Tesla to refund you the full amount hopefully quickly enough to pay off the bank before the next loan payment is due? Oh of course you ll need another loan like immediately afterwards since you ll still need a car; good luck explaining that to the bank...

Moreover for most people, a car purchase needs to be simultaneous with a car sale... many people use the money they get on their old cars for a down payment on the new car... like what are they going to do? Can people really afford to keep their old cars and just order the Tesla, and just test it for 7 days? In many cases they would have to have sold their old car when the Tesla arrives so really they wouldn't be able to return the car since they wouldn't have a car if they did... Moreover these transactions would not be simultaneous, creating HUGE hassle on the part of the buyer.

There are many other issues and problems with this new fantasy sales framework. It just wont work. This experiment will fail and Tesla will pay dearly for its failure (loss of sales + customer frustration+ loss of brand value + eventual costs to re-build sales functions and locations).

 

[zer0cool]

This new "all online" sales framework is pure fantasy and is doomed to fail.

Even with its stores and sales force, Tesla's sales department is widely seen as one of the worst in the car industry. Many buyers on this forum, myself included, have experienced significant frustration with Tesla's sales and delivery process. Now they plan to get rid of its sales force and stores and make all sales online. This is not only doomed to fail, but will also seriously damage Tesla's financial health and brand value.

I want to discuss two primary reasons. First, many have experience poor sales and delivery from Tesla. For example, it's difficult or impossible to actually get a hold of someone who can give you accurate information about an order or delivery. Moreover, there are frequent and significant delivery issues. Currently, at least you could get a hold of a real person at a store, and try to get some answers. Many have experienced that calls and emails just don't work because you either get slow responses or no responses at all; and even when you get them they may not actually answer your questions or resolve your problems. Without a dedicated sales force with real people that you can actually reach, there will be even greater issues around sales and delivery, increasing customer frustration, and decrease sales.

Second (the main issue), people actually want to test cars before just ordering one online... The car is a major purchase (like just after a house), and it feels ludicrous to just buy one without even testing to see if it fits one's needs. Also the experience of spending time in a store to hear about the car's features propels more to actually buy the car.

Yes there will be a 7-day return, but most people can't afford that. Honestly can you REALLY return a car after spending hours with a bank and completing lots of paperwork to get a loan and then what, just return the car and wait for Tesla to refund you the full amount hopefully quickly enough to pay off the bank before the next loan payment is due? Oh of course you ll need another loan like immediately afterwards since you ll still need a car; good luck explaining that to the bank...

Moreover for most people, a car purchase needs to be simultaneous with a car sale... many people use the money they get on their old cars for a down payment on the new car... like what are they going to do? Can people really afford to keep their old cars and just order the Tesla, and just test it for 7 days? In many cases they would have to have sold their old car when the Tesla arrives so really they wouldn't be able to return the car since they wouldn't have a car if they did... Moreover these transactions would not be simultaneous, creating HUGE hassle on the part of the buyer.

There are many other issues and problems with this new fantasy sales framework. It just wont work. This experiment will fail and Tesla will pay dearly for its failure (loss of sales + customer frustration+ loss of brand value + eventual costs to re-build sales functions and locations).

 

[Twiglett]

Ok, I’ll bite
I’m assuming that your basing your analysis on inside knowledge of how many people use the current B&M stores compared to ordering online and factoring how many have been on test drives just at those stores.
Conversely I’m also assuming Tesla are using the detailed information they have on all that data as well as factoring how many Model 3 were sold without even seeing a car let alone driving one.
Delivery is a service center deal and those options will be increasing - and Tesla are laser focused on improving the service experience.
Based on that I’d say their success chances are pretty high

 

[Joshan]

well said Twig. These "the sky is falling" people astound me. You do need to remember Elon made his money on internet only sales (PayPal), why would he move away from that now. He is forward thinking, not backwards.

 

[StealthP3D]

There are many other issues and problems with this new fantasy sales framework. It just wont work. This experiment will fail and Tesla will pay dearly for its failure (loss of sales + customer frustration+ loss of brand value + eventual costs to re-build sales functions and locations).

I suspect Musk understands his business pretty well by now and why they are doing what they are doing.

Over the years I've seen so many self-proclaimed "experts" predict things like:

The Model S will never clear regulatory hurdles.
The Model S will never make it to production.
There will be no demand for the Model S.
It's impossible to make a rocket that re-lands on a drone ship after boosting its payload towards space.
The Model 3 will never make it to production.
Demand for the Model 3 will never materialize.
Tesla will never be able to sell the Model 3 at a profit.
Tesla will go bankrupt before the year is over (2012, 2013, 2014, 2015, 2016, 2017, 2018 and, of course 2019)
The Model 3 will never get European regulatory approval.
There will never be a $35K Model 3.
Without Federal subsidies, nobody will buy electric cars.

I recommend that before making absolute predictions, always ask yourself "Do I have more or less knowledge with which to base my prediction on than the person(s) making the decision?" Who has a better track record of making money and running successful multi-billion dollar businesses?" Why do I think I'm a better businessman than one who is worth over 20 billion dollars?

Apologies in advance if you are a businessman with a net worth over 20 billion dollars.

 

[niray9]

Second (the main issue), people actually want to test cars before just ordering one online... The car is a major purchase (like just after a house), and it feels ludicrous to just buy one without even testing to see if it fits one's needs. Also the experience of spending time in a store to hear about the car's features propels more to actually buy the car.

Yes there will be a 7-day return, but most people can't afford that. Honestly can you REALLY return a car after spending hours with a bank and completing lots of paperwork to get a loan and then what, just return the car and wait for Tesla to refund you the full amount hopefully quickly enough to pay off the bank before the next loan payment is due? Oh of course you ll need another loan like immediately afterwards since you ll still need a car; good luck explaining that to the bank...

Moreover for most people, a car purchase needs to be simultaneous with a car sale... many people use the money they get on their old cars for a down payment on the new car... like what are they going to do? Can people really afford to keep their old cars and just order the Tesla, and just test it for 7 days? In many cases they would have to have sold their old car when the Tesla arrives so really they wouldn't be able to return the car since they wouldn't have a car if they did... Moreover these transactions would not be simultaneous, creating HUGE hassle on the part of the buyer.

Good post.

This might work till TESLA has the sole EV in that segment(sporty sedan with extensive network of public chargers) because people do not have any other options. Once, competition in this segment arrives things will change.

Maybe this model works for people who keep a car for 3 years or they lease. Personally(since I keep my cars for longer times), I wouldn't buy a car without extensive test drives.

 

[chronopc]

As someone who bought the car sight unseen I would have to disagree.

 

[Big Toys]

Unfortunately I think you are correct. Outside of the "enthusiast" niche, few customers with $40K will bother to jump through these hoops and call it a feature once other local options are available, and they are coming. However, there is a significant Apple-product demographic that is accustomed to being told what they want. So the bet is on those users who think hoop-jumping at 45 years old is hip.

 

[insaneoctane]

I think the decision was probably pretty data based. It might have been skewed by the recent pent up demand for the Model 3, but the operational cost of running the store presence model is EXPENSIVE. It would NOT surprise me to see serious NET loss from this. No doubt Tesla will lose some sales by closing down the store front. Will they lose enough to make it a bad decision? IMO, no way. As a matter of fact using the savings to build up service and delivery makes tons of sense for a company that does not have a demand problem at all. And with these new price reductions, I suspect that demand problems are not even detectable in the foreseeable future. Store fronts help build demand.

 

[StealthP3D]

Second (the main issue), people actually want to test cars before just ordering one online... The car is a major purchase (like just after a house), and it feels ludicrous to just buy one without even testing to see if it fits one's needs. Also the experience of spending time in a store to hear about the car's features propels more to actually buy the car.

I don't go to a showroom to learn about the new cars I buy (I really dislike car dealerships). I go online to educate myself, like 90% of people do these days.

I can tell which car is going to be suitable and agreeable to me by looking at photos and videos, comparing specs, and reading others impressions as they compare them to similar cars. I've bought three new cars without a test drive. It would be 5 cars were it not for the insistence of the dealership salesman on two cars that I take it for a spin before closing the deal. I have no idea why a salesman would insist on this but twice they did. Probably they thought they could get my excitement level high enough that when they started tacking on extra costs during closing I would be too excited to raise objections. But by the time I drove the cars I had already done all the research and knew which car I wanted and how much I was willing to pay. So the test drive was completely superfluous. Consumers are more educated now than ever.

 

[Trips]

Didn't 400,000+ people order a Model 3 this way? I see no reason that it would not work.

 

[mtndrew1]

I ordered my Tesla online and took delivery at a massive center without ever having seen the car beforehand. It was the most painless car buying experience of my life.

I’ve bought a lot of cars and I’ve helped a lot of people buy cars. Traditional dealers give most customers about three miles behind the wheel of whatever is on the lot that’s nearly out of gas and then tries to slam them into it for “HOW MUCH A MONTH TO GET YOU IN THIS CAR TODAY?!”

Provided the delivery and service mechanism is robust I think this will work fine. Someone should start a poll of how many Model 3 buyers (the best selling premium car in 2018) drove their car before buying it. I bet the number is less than 5%.

The dealer model is awful. This new online initiative could be a disaster but I seriously doubt it. It’s basically how most of us bought these cars anyway.

 

[dww12]

This new "all online" sales framework is pure fantasy and is doomed to fail.

Even with its stores and sales force, Tesla's sales department is widely seen as one of the worst in the car industry. Many buyers on this forum, myself included, have experienced significant frustration with Tesla's sales and delivery process. Now they plan to get rid of its sales force and stores and make all sales online. This is not only doomed to fail, but will also seriously damage Tesla's financial health and brand value.

I want to discuss two primary reasons. First, many have experience poor sales and delivery from Tesla. For example, it's difficult or impossible to actually get a hold of someone who can give you accurate information about an order or delivery. Moreover, there are frequent and significant delivery issues. Currently, at least you could get a hold of a real person at a store, and try to get some answers. Many have experienced that calls and emails just don't work because you either get slow responses or no responses at all; and even when you get them they may not actually answer your questions or resolve your problems. Without a dedicated sales force with real people that you can actually reach, there will be even greater issues around sales and delivery, increasing customer frustration, and decrease sales.

Second (the main issue), people actually want to test cars before just ordering one online... The car is a major purchase (like just after a house), and it feels ludicrous to just buy one without even testing to see if it fits one's needs. Also the experience of spending time in a store to hear about the car's features propels more to actually buy the car.

Yes there will be a 7-day return, but most people can't afford that. Honestly can you REALLY return a car after spending hours with a bank and completing lots of paperwork to get a loan and then what, just return the car and wait for Tesla to refund you the full amount hopefully quickly enough to pay off the bank before the next loan payment is due? Oh of course you ll need another loan like immediately afterwards since you ll still need a car; good luck explaining that to the bank...

Moreover for most people, a car purchase needs to be simultaneous with a car sale... many people use the money they get on their old cars for a down payment on the new car... like what are they going to do? Can people really afford to keep their old cars and just order the Tesla, and just test it for 7 days? In many cases they would have to have sold their old car when the Tesla arrives so really they wouldn't be able to return the car since they wouldn't have a car if they did... Moreover these transactions would not be simultaneous, creating HUGE hassle on the part of the buyer.

There are many other issues and problems with this new fantasy sales framework. It just wont work. This experiment will fail and Tesla will pay dearly for its failure (loss of sales + customer frustration+ loss of brand value + eventual costs to re-build sales functions and locations).

For many it will work. If it’s 6% cheaper, that helps out more for the next leg than test drives. By the time those who require a test drive are ready they can try out their neighbors after they drop the DVD off at Redbox.

 

[StealthP3D]

For many it will work. If it’s 6% cheaper, that helps out more for the next leg than test drives. By the time those who require a test drive are ready they can try out their neighbors after they drop the DVD off at Redbox.

Except nobody watches DVD's anymore. Unless you live somewhere without high-speed streaming of HD movies.

 

[Joshan]

Except nobody watches DVD's anymore. Unless you live somewhere without high-speed streaming of HD movies.

I think you missed his sarcasm....

 

[StealthP3D]

I think you missed his sarcasm....

Haha! You're right. That was actually pretty clever!

 

[woodisgood]

Yes, the Tesla sales experience was kind of frustrating, in the way that the Apple store can be kind of frustrating or sometimes dealing with Amazon or Home Depot or whatever online retail customer service is annoying. All of this was still FAR AND AWAY a million times better than the traditional car-buying experience. I'd choose it over and over and over and over even its currently frustrating form.

The traditional car dealership offers someone like me absolutely nothing except spending time with people who, by the time I'm ready to buy, know less about their product than I do and constantly rack up lies and mistruths the longer I'm there. Dealership experience was good for folks like my 80yo parents who will be happy as long as someone talks to them sweetly and fetches them a cup of tea.

The Tesla experience, for me, with its flaws, far outweighed the traditional dealership experience. I imagine that's true for a lot of Tesla buyers.

And Tesla will get better at improving the areas that actually matter - like service and pre-delivery communication. The research and the sale should be easy and completely customer-driven.

 

[StealthP3D]

Dealership experience was good for folks like my 80yo parents who will be happy as long as someone talks to them sweetly and fetches them a cup of tea.

Perfectly summed up. In a nutshell!

Most expensive cup of tea they ever had!

 

[PWlakewood]

....and just like all the nay sayers in the beginning that said Tesla would never make it, blah blah blah. They will be fine going online only.

 

[Soda Popinski]

This may work for the short term, while there's going to be a ton of demand for the SR and SR+. A lot of people, myself included wanted to see and sit in the car before pulling the trigger. I did test drive an S to get a feeling of a Tesla.

I'm guessing we'll see something like the mobile service become mobile sales. You request a test drive, a sales adviser shows up to your door, and you can do a test drive then. You forfeit the 7 day return policy.