The new fantasy sales framework will fail

[PhilDavid]

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).

Before we had our Tesla, a friend of ours was just about to buy a BMW 5 series, as his son already drives a BMW and likes the brand. I've followed Tesla from the beginning and though we did not own a Tesla back then, I had test driven one and instantly fell in love with the Model S.

I took my friend to our local Tesla store for a test drive, and before the test drive was even over, she asked how soon can she have one delivered and ended up buying an inventory car. If Tesla had no stores, I may never have test driven a car to even be able to talk to my friend about buying a Model S.

As Tesla grows from enthusiasts to mainstream customers, not being able to test drive vehicles will likely not be helpful -- UNLESS they build bigger service services that also happen to have a Tesla showroom with test drives. Many customers would want to touch and feel a product before paying these prices.

 

[woodisgood]

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.

True, I was willing to buy without driving but my wife wanted to drive one juuuuuust to make sure, never having even driven an EV before. She wasn't sure if it (regen braking, no instrument cluster, etc.) would be so weird that she'd never be able to get used to it.

They were just starting test-drives for reservation holders so we got to check that box and feel a little more secure in the purchase. If a test-drive hadn't been available we still would have bought it, and the 7 day return window now really formalizes an out if the car really doesn't work for you for some reason. I think Tesla is correct in betting that very few people are going to return it.

 

[clyjr]

The only issue I see with online only ordering is trade ins. Most people still trade vehicles in... Of course this could just help carmax/carvana/etc...

 

[Striker3000s]

Did they say there would be no more test drives? There's no reason they can do test drives out of the service centers / delivery centers. Only the retail locations will close. Customers could set up test drives online before finalizing the order. They could even bring you a car to test drive right to you home. That would be amazing!!

I do agree that the return policy is not really ideal for a purchase like this. If I was that well off to purchase a car outright, I would have no problem returning it. For me, someone that needs a car loan, that would be a big hassle. Still it's nice that it's there in case you find out you made a big mistake. More then any other car dealer would do.

 

[Knightshade]

Did they say there would be no more test drives? There's no reason they can do test drives out of the service centers / delivery centers. Only the retail locations will close.

Yup. Since like 4/5 customers weren't making a purchase at the sales center anyway they lose very little (besides overhead costs) moving the test drives to the service centers- which they're opening more of going forward and which prep the actual deliveries anyway.

 

[iRia]

I went to a showroom the other day and while they had cars it was mostly empty. Most people order online anyway.

The online only sales model will work. It will have some growing pains but it will work.

My concern is used cars. How are they going to sell used cars without a store/dealership?

 

[zer0cool]

I agree that Tesla must have reviewed the data. However the data is heavily skewed. Many of us (current owners and people on this forum) bought the car sight unseen because most of us are Tesla or Elon fanboys/fangirls. We just love Tesla or Elon so much that we just took it as faith that the car will be good. Fortunately it is good. Moreover, we are, on average, almost certainly wealthier and more educated than the general public. Also because of our interest in Tesla, we probably watched tons of videos and read bunch of views on the Tesla cars before we bought them.

However the price drops clearly indicate a material demand challenge after the initial pent up demand has been filled. The fact is that the company will in the future face the general public. Most members of the general public do NOT go online and watch 20 videos about Model 3 or any car and read a bunch of reviews before buying one. Most people see some ad on TV, hear about some car from a friend, and then test them out at several different dealerships before buying a car.

I love cars and watch tons of videos on cars. But other than Tesla, I still go to dealerships to test them out and compare them in order to choose the right car. Also I generally have positive experience at dealerships.

The fact is, the general public does not know much about Tesla (they actually get lots of misinformation) and its cars and will need to be able to test the cars, and be informed of its features by a live person (most people have no interest in reading or watching lots of videos about a car), as they shop and compare with other choices. If they can't do that, they won't buy.

 

[Nocturnal]

80% of people bought without a test drive so far. I think your assertions are very flawed.

Test drives aren't all that useful in most cases and there will still be some way to actually test drive them, just may be more difficult.

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.

Good idea.

 

[PhilDavid]

The only issue I see with online only ordering is trade ins. Most people still trade vehicles in... Of course this could just help carmax/carvana/etc...

perhaps for the better... Have you seen the horrible mess with the CPO program?

 

[PhilDavid]

I went to a showroom the other day and while they had cars it was mostly empty. Most people order online anyway.

The online only sales model will work. It will have some growing pains but it will work.

My concern is used cars. How are they going to sell used cars without a store/dealership?

Have the customer trading in the vehicle drive it to the home of the person who just bought the car?

The customer buying the car will then do the inspection and charge the person turning in their car for all the damage...

 

[dww12]

I agree that Tesla must have reviewed the data. However the data is heavily skewed. Many of us (current owners and people on this forum) bought the car sight unseen because most of us are Tesla or Elon fanboys/fangirls. We just love Tesla or Elon so much that we just took it as faith that the car will be good. Fortunately it is good. Moreover, we are, on average, almost certainly wealthier and more educated than the general public. Also because of our interest in Tesla, we probably watched tons of videos and read bunch of views on the Tesla cars before we bought them.

However the price drops clearly indicate a material demand challenge after the initial pent up demand has been filled. The fact is that the company will in the future face the general public. Most members of the general public do NOT go online and watch 20 videos about Model 3 or any car and read a bunch of reviews before buying one. Most people see some ad on TV, hear about some car from a friend, and then test them out at several different dealerships before buying a car.

I love cars and watch tons of videos on cars. But other than Tesla, I still go to dealerships to test them out and compare them in order to choose the right car. Also I generally have positive experience at dealerships.

The fact is, the general public does not know much about Tesla (they actually get lots of misinformation) and its cars and will need to be able to test the cars, and be informed of its features by a live person (most people have no interest in reading or watching lots of videos about a car), as they shop and compare with other choices. If they can't do that, they won't buy.

They are not ALL going away are they? Won’t major cities still have at least one service center with a “showroom” to sit in a car. I did not test drive but I did sit in one and that helped me decide I would not miss not getting an S.

 

[MarcusMaximus]

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).

The first issue seems dramatically improved with this move. They’re closing the *stores* but increasing service and delivery locations and personnel.

For test drives, it’s still unclear what’s going to happen. They never said they’re ending all test drives(and you can still request one on the site).

It’s certainly different from what others are doing, but no where near enough info to say it won’t work.

 

[beantownrich]

For what it's worth, I was one of the first 18,00 people to buy the car and test drives weren't available. I still bought the car. I don't regret one bit.

Yes, a test drive can tell you a lot about a car, but that's only if you can take it out by yourself. Riding along with a salesperson along a pre-determined route that limits their liability will never tell me what I really need to know about a vehicle.

I think it is unfortunate that there will be layoffs and I do hope they can redeploy staff. However, buying my Model 3 online (by simply converting my registration) was the easiest car transaction I ever had. I didn't have to go sit and wait for a manager, I didn't have to wait for a finance person to sell me paint protection and gap insurance. It took 5 minutes. Then maybe another 5 minutes once a week until my car came just checking up on the status. My longest interaction in the car buying process was waiting for them to detail it and my walk around. If this is the future, sign me up. If the future is the car coming to me, even better.

 

[angelman]

Tesla has always relied on powerful word of mouth (possibly the most effective and cost effective way of selling anything). As more and more people get the cars, and their friends get driven in those cars and experience the future, it's easy for a ride in a Tesla to ruin driving or even being in another car. Just the acceleration alone will sell the car. Tesla hasn't even needed any kind of marketing budget at this point and that's a huge expense for any company. That said it's true that now the true fans demand is more or less satisfied then the subsequent sales maybe a little tougher.

 

[mikevbf]

The way I think of it is which generates more demand for Teslas? Showrooms or significantly cheaper prices. Tesla has placed their bet on data we do not have access to. My gut says they chose right.

I get how having to go through the whole financial part of buying a vehicle to test drive it could be off putting for many. But, one, this eliminates the tire kicking crowd and two, (more importantly) Teslas are so different than ice cars many will really need to drive it for two days or more to really understand it (I did). I love that the test drive is a full 7 days so people can even test out the supercharger network. People will just not get it until they have tried it. All in all, I think Tesla has made really bold and smart move. We will see ...

 

[SageBrush]

If test drives becomes a sticky point then Tesla can arrange rentals one way or another.

 

[MorrisonHiker]

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.

We have several Teslas in the garage but still use Redbox. Why pay $5 for a movie if I can use Redbox BOGO coupons and points to pay less than a dollar per movie? There's a reason we were able to buy multiple Teslas. We're cheapskates everywhere else!

BTW, we ordered 7 out of 8 of our Teslas online. The last one, we could've ordered online but wanted to order in person from the employee who's helped us out so much over the past 3 years.

 

[woodisgood]

If test drives becomes a sticky point then Tesla can arrange rentals one way or another.

I really don’t think test-driving a Model 3 could be that hard in most areas. They also have a loyal customer base that COULD creatively be tapped into for this purpose if they wanted to spare their service centers or other employees from having to deal with it.

 

[mattjs33]

So how are they going to handle trade-ins?

Or do they just expect everyone to go to CarMax?

I didn't give this any thought last night, genuinely curious.

 

[pdxrajiv]

1. Is it possible that Tesla knows something? Maybe they have been watching the rate at which online orders come in, vs the ones that come via sales people and decided that the cost was not worth it.
2. I presume that service centers could adequately provide test drives, possibly via the newish loaners they maintain in their fleet.
3. Admittedly a sample of one experience, because maybe I am just not picky enough about my cars: I bought the last two cars online, without test drives.

When I was shopping for a hybrid, the only two choices were Prius and Insight. I read expert test drive descriptions and knew I did not want the insight. What would a test drive achieve, except confirmation? And I already possess enough confirmation bias.
When I was considering switching to a BEV, Model S was the only one with enough range to allow me to get to my day-hiking trailheads and back. What would a test drive achieve?
Also, I sold the Prius via a Craigslist ad. The purchaser did not need a test drive.

Mileages vary.