A while ago I wrote about Tesla’s different approach to sales and distribution of their cars, employing online direct sales for a customer experience from build to customer service. For their new S90 flagship model, Volvo has gotten some inspiration from this direct-to-customer approach.
Volvo has a new system in place for the launch of its flagship S90 sedan that kind of mimics that experience: you can spec out the exact car you want online, then submit it to a “Volvo Concierge” who will finalize the order for you within a day or two.
The Verge – Ordering Volvo’s new flagship sedan is a little like ordering a Tesla
The order process looks indeed similar, however you still are not buying your Volvo directly from Volvo. A Volvo dealer is handling the fulfillment and delivering the car to you. The full Tesla sales and distribution process (and thus cutting out the dealer) is very difficult to imitate for a “classic” OE such as Volvo, as they have legacy structure of existing dealerships and service locations to maintain.
Have you bought a Tesla car yet? If not – which is actually quite a high probability given the car price – you haven’t seen how easy it is to buy a car with just a few clicks.
You go to Tesla’s site and click the prominent red order button. It is directly on the frontage:
You get some options in the design studio for configuration, but basically you can as well just simply click on order…
… and the only thing you do is to pay the 2,500 USD (for the Model S) down payment. You can even do that by paypal! Your car will then be delivered to your door later this year.
(By the way: their process is standardized world wide. So if you are in China and want to order your Tesla, it looks and feels the same. You can simply 订购 and get your car delivered. Of course Alipay is supported as well.)
Sounds and looks familiar? Looks like online shopping for books or DVDs? Exactly! Tesla is a car manufacturer, but in its processes it incorporates a lot of ideas from the tech industry. It is not just for the order process, though. There whole sales and distribution is optimized to be different from classic car OEMs. This is partly due to their (still) low volume of car production, which makes it difficult to attract dealers without getting lost and compete in a sea of gasoline cars around them.
A more important aspect for Tesla is to be able to control the product experience from build to customer service. Elon Musk, Tesla’s Chairman, wrote a blog post a while ago on this topic. They want to educate customers about the product and use outlets such as own stores and gallery locations with high foot traffic for that. The product specialists at those outlets are not on commission though, and thus will never have to pressure for customers for sales. As Elon wrote: “Their goal and the sole metric of their success is to have you enjoy the experience of visiting so much that you look forward to returning again”.
With their “build-to-order” approach they enjoy advantages such as low inventories and being able to build the right product-market-fit close to their customers. With their order-and-pre-payment model they generate additional cashflow from the deposits they get from the customers several months in advance before delivering (or even building) the car. Their tight control of the service chain allows them to offer compelling after-sales packages for customers for more customer retention. In fact, they even integrate loyalty / affiliate programs such as the newly announced referral program. “For every referral that current owners generate, they’ll get $1,000 — and the new buyers will get $1,000 off their purchase. (…) The referrals will be made through a custom link offered to current owners, which makes it sound a lot like any other referral program on the internet”.
However, Tesla does have to battle other challenges in their existing model, especially if their car volumes are continuing to grow. They have to deal with a potential logistics nightmare of direct selling and delivering more and more cars to end consumers, they still have to invest in their showrooms and outlets, and they still have to provide service for the cars somewhere. For customers it means that they cannot simply walk into a Tesla outfit and buy one on the spot, which might harm their sales in markets, such as China, which appreciate the instant availability.
Time will tell how much benefit Tesla and their customers will get. One thing is for sure: for Tesla those different approaches to sales and distribution could be a long-term differentiator to other “classic” OEMs, as a lot the things Tesla does you can only do if you do not have a legacy structure of existing dealerships and service locations.