Sunday, March 3, 2019

[UPDATE] Tesla to Close "Most" of its Retail Stores

In an effort to remain "financially stable," electric automaker Tesla announced plans Thursday to close "most" of their retail stores over "the next few months."   The announcement, which coincided with the release of updated information and pricing of the Model 3, sent shock-waves throughout many industries, among them, mall operators, many of whom have Tesla stores and galleries in their "A" malls.
Tesla announced that it will offer a $35,000 version of the Model 3, which will have a 220 mile range and reach a top speed of 130 miles per hour.  The cost savings of reducing both their retail footprint and retail staff reportedly allowed the company to achieve the necessary savings to bring down the price of the Model 3.  

Elon Musk, co-founder and CEO of Tesla, didn't comment on when exactly the store closures would be announced.

The Tesla store in Atlanta opened in the first floor of the Luxury Wing at Simon Property Group's Lenox Square in late 2014.  The store, about 3,200 square feet, is located just outside Neiman Marcus and has a presence both from in the mall and from the outside, where the company has a number of chargers.  At about the same time as the Buckhead store debut, the company also opened an 18,000 square foot service center and showroom in an old Isuzu/Subaru dealership on Church Street near Decatur.

The Buckhead store and Decatur service centers followed the first Tesla presence in the area, a service center on South Marietta Parkway in Marietta, which had opened earlier in 2014.  

The company subsequently added two other outposts in metro Atlanta, a third service center and showroom in Roswell, in a former Kia dealership, and a second store/gallery, in the second phase of Avalon in Alpharetta.  

There are currently about 100 Tesla stores and galleries in the U.S. plus other stores in about 30 foreign countries

Tesla indicated that only a small number of stores in “high-traffic locations” will remain open as galleries, showcases and Tesla information centers where customers can learn about the company and buy merchandise.  Given the company was rather selective in where they opened stores in the first place --- no Tesla store ever opened in Northlake Mall, for example --- one has to wonder how the company will determine which stores to keep open.  Metro Atlanta is reportedly one of the automaker's top markets but is still behind larger markets like California, New York and Florida, among others, in overall sales.

While the company has yet to lay off employees, industry website Electrek reported that Tesla has eliminated all bonuses for its retail staff.  "According to some Tesla employees talking to Electrek, those bonuses represented the majority of the overall compensation of many retail workers."  With Tesla transitioning to online only sales, the company's removal of all commissions for retail employees is a bit odd as they are seemingly still going to handle sales throughout the transition period.  Some employees told Electrek that they believe Tesla is slashing their compensation in an attempt to force them out [during the transition] before layoffs to avoid having to pay severance.  


If Tesla at Lenox Square does close, it would open a prized first level space in the Luxury Wing that could be appealing to retailers already in the market but in inferior locations [The Shops Buckhead Atlanta] or those not yet there but looking to enter [Chanel?].  Hermes, which opened in the mall in 1998 and left in early 2009 for what would become a six year odyssey, could return to its former home, but it's unlikely.  When Hermes left the mall in 2009, it was to be part of The Streets of Buckhead.  The financial crisis and other delays led Hermes to operate from a converted space next to Fado Irish Pub for over five years before they finally opened in 2014 at what was by then known as Buckhead Atlanta, later The Shops Buckhead Atlanta.  

Real estate sources close to the luxury retailer indicate that they are currently receiving significant rent concessions at The Shops and therefore it is unlikely they would elect to return to Lenox Square, even if they wanted to.  That said, Tom Ford, which reportedly received a significant TIA (tenant improvement allowance)  from The Shops Buckhead Atlanta for their boutique, is leaving the development for a new space in Simon's Phipps Plaza.  ToNeTo Atlanta exclusively reportedly this relocation in January.  

Are you surprised to see Tesla close its retail stores?  Do you now or do you plan in the future to purchase a Tesla?  If Tesla does close at Lenox Square, what would you like to see open in its place?

Please share your thoughts below  

3 comments:

Ham said...

Seems like this is just another example of "green" industries getting ahead of technology/demand and expanding too fast. No doubt electric cars are the future, but there are still some kinks to work out.

Anonymous said...

To remain financially stable! Hahahahaha! Yeah, that'll help closing the place where you actually go to see the product, drive it, and buy it! Just a matter of time now...

Anonymous said...

Too much green and it COSTS ... too much green!

The Green New Deal is going to be $$$$$$$$$$$$

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