Retail is dead: why Tesla will get more profit by closing stores
Elon Musk recently announced that Tesla will close 10-30% of retail stores with low efficiency and completely change its sales strategy. Some shareholders of the company have already expressed their skepticism about this, while others, on the contrary, are optimistic about the initiative of the management.
Musk believes that closing retail stores is the best solution to maintain the company’s profitability while reducing the price of Model 3 to the base $35,000. In General, the optimistic forecasts of analysts indicate 4 main reasons why the closing of showrooms is a profitable step for the company.
Lower prices will increase target market
Closing some stores Tesla reduces overhead, thereby reducing the price of Model 3 and expands the target market attracting potential customers. The base price of $35,000 opens for the company a market segment in which it has never worked — the mass market, and its largest and most active part. The average price of the purchased car in the US is $35 742, which fits perfectly into the concept of a budget electric car, which is positioned Model 3.
The consumer is focused on online sales
Closing several retail stores will not affect the company’s ability to sell electric cars, as the lion’s share of Tesla sales and so made through the Internet.
Closing showrooms can only spur the manufacturer to improve online services. Recent surveys show that the main target audience of the company is people aged 25 to 34 years, prefer to search for information about the product on the Internet than to communicate with the retail store Manager.
The only drawback, which is seen in the closure of retail departments, is the disappearance of the opportunity to test drive the car, which has always been a motivator in making a decision about the purchase. This may affect the company’s sales, but analysts already see a positive, estimating that about 42% of buyers will feel comfortable when buying a car without a test drive. In addition, Tesla reported that the sales experience without a test drive is huge, and the buyer has 7 days after the delivery of the electric car, during which he can run the car and decide whether he needs it. In fact, these 7 days to complete the transaction and replace the test drive.
Buying a car online is a more enjoyable experience
Many people experience pressure and discomfort in dealing with dealership managers, who often push them to buy when people are not quite sure of the choice. Buying on the Internet involves a different format, when a potential client will fish out information about the car, acting as he needs and interested in what he is interested in, without experiencing pressure from the seller.
According to recent studies, in this regard, Tesla also did not lose, because 87% of Americans do not like dealerships for at least one reason, calling among the main time that you need to spend on a trip to the salon and a conversation with the Manager, not to mention the registration of all papers and contracts.
Advanced car customization options
Greater emphasis on online purchase allows Tesla buyers to customize the cars with additional features, thereby increasing the average price per car. According to research, the customer is willing to pay 20% more of the total cost of the car to further customize their purchase. Tesla will be able to generate even more revenue by simply offering customers all the possible features for their electric cars.
Recall that the model of direct sales of electric vehicles Tesla inspires other automakers.