Tesla Expands Retail Outlets

Based on the décor and setup, it's hard not to compare a Tesla store to an Apple store.

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orget traditional dealership showrooms. Tesla is trying to change the car buying experience by using retail outlets to engage with customers.

Tesla is placing these stores in malls, replacing the typical dealership lot. The concept is that buyers will place orders at in-store kiosks, and pick their cars up later. Service will take place at either a customer's home or office, or a separate Tesla service center. There will be salespeople, but they will look and act more like retail associates at a clothing store or Apple store than the stereotypical car salesperson. The purpose of these stores is to introduce customers to the Tesla brand, as well as changing the car-buying experience, since consumers may be turned off by the traditional dealership model.

Inside the Tesla store at Old Orchard mall in suburban Chicago.

Tesla has opened two of these stores in the Chicago area (our home turf): one in Skokie, at Old Orchard mall, and one in Oak Brook in the Oakbrook Center mall. The idea here is that customers can go in and use computer kiosks to browse and build their cars before making a reservation to buy one. It's a model akin to an Apple store in some respects, but with test drives available. There is one key difference: Apple products can be taken home right away, but should you order a car from Tesla, it will be several months before you can park it in your driveway.

We visited the Old Orchard store this week, and we were immediately struck by how uncluttered and modern the design was. One Tesla Model S (currently the company's only model, as the Roadster has been retired and the Model X SUV has yet to be formally introduced) sport sedan stood on display, front and center, and the walls were adorned with photography of the car, t-shirt racks, and cutaway displays featuring exterior paint and interior décor samples. A long counter ran along each side wall, with shelves holding Tesla sweatshirts and coffee mugs (license plate frames were also on display) and wall-mounted interactive touch-screen displays allowed customers to build and customize their future rides.

We spoke with Dustin Krause, regional sales manager, about Tesla's unique approach to sales and service.

"I think it's really important that we stay inclusive as possible," Krause said. "We're trying to change the whole idea of what an electric car can be. Tesla is an electric car with no compromises." Well, perhaps no compromises except for price, as a Model S bases just shy of $50,000.

The small showroom isn't the only way that Tesla is changing the buying/owning experience from that of other car companies. Tesla is also offering to send the Tesla Rangers (roving technicians) to owners' homes and offices to perform repairs and maintenance, and for those who don't want that, cars can also be picked up by the company and dropped off at the service centers by customers who don't want to make the drive. There's a $100 fee for a Rangers visit. Tesla buyers can choose to pick their new car up at the company's Fremont, California factory, at their local service center, or have it delivered to their home or office.

T-shirts hang on the rack at a Tesla store in suburban Chicago.

"Our entire philosophy is trying to make everything as easy as possible for the customer," Krause said. He said Tesla has a goal of trying to make sure there is a service center within 50 miles of all customers who've made a reservation.

Krause acknowledges that not every customer who walks into the store will eventually have a Model S in their driveway. Krause said that part of the concept is to get customers to think long term.

"We get a lot of aspirational teenagers that come in the store," Krause said. He said plenty of folks purchase t-shirts instead of a car, but "the next time they do think about buying [a car], they'll think about Tesla."

Based on the décor and setup, it's hard not to compare a Tesla store to an Apple store, and Krause is cool with that. "If you think back 15 years, people wouldn't consider an Apple," he said. "They took over that process."

Tesla's move to this strategy could be risky, especially with so many car buyers weaned on traditional dealership experiences. We reached out to Ed Kim, vice president for industry analysis at AutoPacific, for his take on Tesla's unusual approach, and he said the Apple store comparison is spot on.

"With Tesla’s company-owned stores, the automaker can ensure a consistent experience and consistent message broadcast to its customers all the time—just like an Apple Store," Kim said. Kim points out that by using company-owned retail outlets, Tesla retains complete control over the brand's image, which means that not only will the stores have a consistent look and feel, but customers will be less likely to be turned off by a bad experience at one of the stores, as they might be after visiting a traditional dealership that doesn't represent its brand well.

Given that Tesla is relatively new to the market and that electric cars are still met with some skepticism, this approach could help Tesla establish its place in the market. Or it could fail, as consumers struggle to grapple with the concept of buying cars at the mall.

There is one way in which a Tesla store follows the model of a traditional dealership. Our visit to the Tesla store included a test drive in a Model S, which is for now is the only demo on premises. Krause said that not only is the car there for traditional test drives, but to give consumers faith in the product.

Large automakers will likely never move away from the typical showroom setup—it would be too difficult for full-line automakers to do, due to the space needed to sell and service full lines—but we could see retail outlets like Tesla's store being used to introduce folks to brands as they wander the mall.

For small makers that only sell one or two models, though, this concept could work well, and it would likely be more cost-effective. We don't think that car buying has been revolutionized, but for buyers burned out on the typical dealership experience, this type of experience will be preferable to standard car lots.