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Disruptive Strategy: Tesla Motors direct sales model proves to be a winner [Video]
Posted on May 26, 2016 by Matt Pressman
Tesla Motors [NASDAQ: TSLA] went public in 2010 and became the first American car company to do so since Ford Motor Company in 1956. One of the distinguishing characteristics of Tesla's disruptive business strategy has been its approach to selling its all-electric automobiles. In an unusual move, Tesla located many of its "stores" inside of shopping malls. And CNBC reports, "The 24 malls that list Tesla as a tenant average $940 in sales per square foot, compared to $835 for those without the carmaker in their directory, according to research by Green Street Advisors. Tesla's correlation to high-performing malls mimics that of another star Silicon Valley tenant: Apple."
Furthermore, it's reported that, "Both Tesla and Apple sell in-demand products with high price tags, which helps drive their store productivity. As a result, the malls in which they reside experience similar success. However, it's worth noting that both retailers seek out locations in well-to-do centers and geographies, making it a bit of a 'chicken versus the egg' scenario. For instance, Tesla has locations in three of what Green Street has ranked as America's top 10 malls — The Village at Corte Madera and Century City, both in California, and Hawaii's Ala Moana Center."
To that end, Tesla is continuing to push its retail strategy further into popular high-end summer vacation locales. New York Post reports, "Just in time for summer, Tesla Motors, led by CEO Elon Musk, is tweaking its retail business plan and opening two stores at East Coast resorts — one in the Hamptons and another in Cape Cod... Slated to open Friday ahead of Memorial Day weekend, the stores will measure just over 1,500 square feet, on the small side for a Tesla store. Located at 50 Newton Lane in East Hampton and 11 Central Square in Cape Cod’s Mashpee Commons, the new shops are among the first in Tesla’s chain that will cater primarily to tourists."
However, in a handful of U.S. states, Tesla's direct sales strategy has met opposition from the franchise dealership lobby. Most recently, North Carolina has pushed back on Tesla opening a second sales location in the state. That said, Tesla is gaining traction in one of the key states that has proven difficult, Texas. It turns out that, "the carmaker won endorsement by state GOP convention delegates of letting consumers buy cars directly from manufacturers. It was an important victory for Elon Musk, Tesla’s chief executive, and one that showed there may be a weak link in the seemingly impenetrable army of auto dealers that has kept the California company from making major inroads in Texas. Nearly 90 percent of the more than 8,000 delegates supported the Tesla-backed language in the party platform."
Above: Professional racecar driver and Tesla owner, Leilani Münter, pictured with her Model S has been fighting in her home state of North Carolina for Tesla's right to open stores (Source: Autoblog)
Regardless, Tesla's retail model has proven both innovative and successful considering the rapid growth of the company. In fact, certain Tesla competitors have already begun to test a similar sales model themselves. Looking ahead, to support the Model 3, Tesla plans to double the number of stores it has worldwide to 441 by the end of next year. So we'll be sure to keep you updated on progress with Tesla's game-changing direct sales model.