Tesla surprised many by closing all of its retail stores in favor of an online-only sales model. As Bloomberg points out, consumers are already comfortable making major purchases from their smartphones — making the move a potentially fitting evolution of the dealership model.
Tesla could be setting a new precedent, despite a negative reaction reflected in the company’s stock price. It is a calculated risk that has allowed the company to achieve more accessible pricing, lowering the average price of a new Tesla Model S or X by 6% as well as enabling the company to deliver its $35,000 Model 3.
78% of Model 3’s were ordered online directly from Tesla’s web-site, so this won’t be a significant change to a model that was already focused primarily on online direct-to-consumer sales. Retail stores served as supplements to the order experience, allowing customers to experience Tesla firsthand without relying on a dealership model. With rules still in place in many states that prevent Tesla from operating directly without a franchised dealership, online sales bypass antiquated ways of thinking.
Showrooms made for Tesla’s primary form of marketing in high-profile areas when the Model S and X were launched as premium vehicles. Now that Tesla has brand recognition throughout the world, the company can continue relying on word of mouth and Model 3 reservation holders to drive demand throughout the rest of the quarter.
The fact is millennials typically know what they want, and are willing to make purchases sight unseen. Tesla offers a generous 7-day return period to counteract any potential concerns.
Ultimately Tesla’s shift in strategy is a bold move that modernizes the automotive sales model.
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