Tesla (TSLA) is currently implementing a major shift in its retail strategy, according to sources familiar with the matter.
The automaker will move away from showrooms in fancy malls, and instead it will focus on cheaper locations, remote managing of test drive fleet, and delivery centers.
Tesla’s confusing retail strategies
Since Tesla doesn’t use the franchise dealer model and instead owns all of its stores, it gives the automaker more leeway in managing its retail approach than most automakers.
But in many ways, Tesla is still trying to figure out what is the best approach.
The company had several shifts in retail strategy over the years.
In 2018, the automaker announced a focus on high foot-traffic retail locations in high-end malls.
A year later, CEO Elon Musk surprised everyone, including his own employees, when he announced that Tesla would be closing most retail stores, laying off retail employees, and focusing entirely on online orders.
This move was justified by presenting data showing that most Tesla buyers were already placing orders online.
However, we noted some issues with how Tesla presented the data that wasn’t necessarily representative of the actual Tesla buying experience.
A few weeks after announcing the changes, Tesla actually reversed course and confirmed that most stores will stay open.
Ultimately, a significant compensation cut for Tesla retail employees is what remained of that flip-flopping of retail strategy back in 2019.
We later learned that Tesla was under significant financial pressure during that period of time with the launch of the Model 3 in Europe, and the automaker was trying to save money.
Tesla’s new retail strategy
Now two years later, it looks like Tesla is implementing a more fully baked version of the 2019 plan.
According to sources familiar with the matter, Tesla will close some retail locations, but it will not result in a smaller retail workforce.
As we recently reported, Tesla is actually on a salesforce hiring spree right now.
The new strategy will see Tesla letting go of most of its high-rent locations in malls and shopping districts in favor of delivery centers.
Much like its 2019 plan to focus on online sales, Tesla plans to have a large part of its retail workforce work remotely with people placing orders online.
Currently, when someone places an order for a Tesla vehicle online, the customer is assigned a “Tesla Advisor” at their local store to help manage the process leading up to the delivery.
According to sources familiar with the matter, the automaker found no reason for those employees to work at a specific store.
Instead, some Tesla advisors will work out of a central virtual store, for lack of a better word, and assist online buyers in a specific market without being assigned a physical store.
But Tesla still plans to expand its physical presence.
However, instead of expensive spaces in malls and shopping districts, the automaker is looking to rent spaces in mall parking lots, warehouses, and other locations to manage test drive fleets and delivery centers.
Tesla employees working remotely will be able to guide buyers to go on test drives using vehicles from those locations, unlocking cars remotely, and letting them drive the cars.
In some cases where Tesla installed charging stations in malls’ parking lots, sources say that the automaker will try to work with the property owners to keep the parking spots for those reasons, but it will let go of the retail spaces inside the malls.
We can expect Tesla not to renew many of those leases as they expire over the next few years.
With the money it saves on those high-rent locations, Tesla will open more delivery centers in less expensive areas. Those delivery centers are sometimes combined with service centers and referred to as “Tesla Centers.”
To me, it sounds like a more fleshed-out version of the 2019 “we are closing all stores and laying off a lot of people” plan.
In hindsight, we now know that Tesla was under financial pressure at that time, and the move might have been initiated in panic.
Now Tesla is in a better financial situation, and it can implement a new retail strategy more efficiently without having to reduce its retail headcount, which actually needs to grow with the demand.
I am looking forward to seeing how it turns out, but I certainly have a much better feeling about it than I did about the 2019 strategy.
FTC: We use income earning auto affiliate links. More.
Subscribe to Electrek on YouTube for exclusive videos and subscribe to the podcast.