Subs exclusive: Mall stores are the new car showrooms

Westfield’s giant new Mall of the Netherlands near the Hague only opened in March last year but already there’s a sizeable hole where once sat a Volkswagen store. The showroom/shop hybrid located in malls or city shopping streets is becoming more and more popular as car makers look to engage with customers away from industrial-estate dealerships. Brands such as Tesla, Genesis, Lotus, Nio, Xpeng, MG, Porsche, Polestar and others are increasingly seeing the mall store as a key element of the sales process as they look to either establish themselves or rebrand for the electric era. But you have to get it right. It’s not clear why the Volkswagen store in the Dutch Westfield failed to take off, but Martin Sewell, managing director of UK mall store pioneer Rockar, can guess at the reason: they were trying to sell cars. “Pre-Covid, a lot of brands would set up a local dealer in a mall, then scratch their heads as to why they weren't selling any cars,” he said. “The first mistake is that people weren’t arriving to buy cars in the first place. The second one is putting in car salesmen.” Call it a Store, a House, a Club, a Space, a Hub, a Studio, a Gallery (all names used by car companies): just don’t call it a dealership. Mall stores shouldn’t be seen as a sales opportunity but rather a gentle bit of brand education. “We present our brand to people in their leisure time when they least expect it,” said Andrew Pilkington, managing director of Genesis UK, which has a ‘Studio’ in Westfield White City in west London and is eying up more as it looks to grow the premium brand. “The evidence over a number of years, brands and markets is that mall outlets are not effective as an alternative to traditional dealerships in terms of making actual sales,” said Steve Young, managing director of automotive retail analyst company ICDP. “The economics only work if there is significant manufacturer support, on the basis that the outlet is part of their broader marketing effort.” Measured against the dealership in the industrial estate, mall stores are high-cost. The rent is high, the staffing costs are sizeable given the need to have a larger team to cover the long hours malls are open (even if most don’t work on a commission basis), and there’s the added complication of running a test-drive fleet out of a multi-storey car park. Viewed through the marketing lens however, it looks cheap. Sewell at Rockar makes the comparison with TV advertising, which might cost £60-70 million for a two- to three-month campaign. “It’s a fraction of that to represent yourself in a mall store, with the added benefit that customers can touch, sniff and interact with the cars,” he said. “A store would probably see more potential customers in a day than most dealers would see in a month.” The mall or high street store is the chosen route of challenger brands looking to make an impact without big investments into a dealer network. Those automotive brands persisting in the Mall of the Netherlands Westfield, even as VW’s local dealer bailed, include Chinese players MG, Xpeng and Polestar. Xpeng’s Experience Store there opened with the start-up’s prototype flying car to pull in eyeballs and the brand, which has yet to begin sales in the country, is doing six to seven test drives a day out of the store. A rack of branded clothing and other kit is its only method of generating revenue right now. “We’re looking for a brand experience. We’re not looking to sell,” Isaac Yeo, MD of Xpeng Netherlands, said. The company said in its recent annual report it wanted to locate a “substantial majority” of its stores in shopping malls as it grows. The twin influences of course are Apple and Tesla. Apple’s slick, brand-enhancing stores with their minimalist interiors and enticing tech can be seen across designs adopted by the car brands, while Tesla’s objective, once it had piqued customer interest, was to steer them to its online ordering system. The key for that to work is the direct sales model. This is where the brand-controlled ‘omni-channel’ sales process either lives or dies. If the whole e-commerce side works well, then the ordering system and price is the same in-store as it is on the website and the app. The brief interaction at the store then becomes the catalyst for the whole process, or so the theory goes. Geely-owned Lynk&Co claims that almost all its customers for its plug-in hybrid 01 SUV, the brand’s only model so far in Europe, transact online. That allows it to focus on a store-based network. “We will never go to a regular dealer model, never,” Alain Visser, head of Lynk&Co’s operations outside China, said. Instead, the brand operates what it calls ‘Clubs’ in street locations in the major cities across Europe, with eight in operation so far. These are critical, despite the brand’s high online purchasing. “I always say you can build a business online, but you can't build a brand online. So that's what we try to do in the Clubs,” Visser said. Visser prefers high-footfall city streets in trendy areas of Hamburg, Berlin, Rome, Stockholm and other European cities (but not, so far, any in the UK). “For us, it’s a bit more on-brand compared to malls. That may sound a bit blah blah, but that's really how it is,” Visser said. The Lynk Clubs are “places you’d like to hang out”, offering coffee and areas to sit and chat. “We see them more as the physical evidence of what the brand is rather than a place where we try to sell,” Visser said. This encouragement to linger is taken to the extreme with Chinese brand Nio’s ‘Houses’. These vast spaces are the premium electric start-up’s promise of what life could be like as a Nio owner. The first European House is a 2100-square-metre double-deck facility in Oslo, Norway, sandwiched between the Norwegian parliament building and the Royal Palace. Prime real estate, essentially. It has a library, a fireplace, a kids’ play area and a design that uses plenty of blond wood sculpted to remind visitors of fjords. It’s not a new concept – witness Samsung’s experience centre near Kings Cross in London for a similar sort of hang-out zone – but it is as far as cars are concerned. Visitors are encouraged to engage with Nio’s app, even if they’re not actually owners of their electric cars, for which they’re rewarded with access to VIP areas or activities – for example, baking lessons. Lotus meanwhile is aiming for a similar sort of immersive experience at its first ‘global store’ at 73 Piccadilly opposite the Ritz hotel in London, The ‘brand beacon’ space is smaller than Nio’s palace at 450 square metres, but when finished it’ll feature two floors, including space for Lotus merch and a VIP lounge for visiting customers “existing or future”. Lotus’s store will open just down the road from where a Metro Bank brand occupies Audi’s former London brand experience centre, but while Audi has bailed, established companies are still keen on the store idea. Porsche, for example, opened its City Life Store in Milan, Italy, in 2020, with help from the UK’s Rockar. The idea for this store was to introduce the brand to those who aren’t big car nuts “but are attracted by other aspects of our brand, such as design, technology, and sustainability”, Pietro Innocenti, CEO of Porsche Italia, said at the time. The industrial estate dealer hasn’t had their chips just yet, but the online evolution will allow the more relaxed mall store experience to play a greater role in the buying process, even if they don’t actually sell you a car. What are the essential ingredients for the successful mall store? Rockar established a healthy blueprint when it opened a Hyundai outlet in Bluewater in 2014 and refined the product over the years with stores for Ford and Mitsubishi, which focused on both the physical concept and the e-commerce digital side. It now operates a store for Jaguar Land Rover in Canary Wharf. Martin Sewell, Rockar’s managing director, has this advice. Keep the size manageable. ”Brands tend to want to recreate the car showroom in the mall. It should be a retail store. If it’s a big imposing-looking brand statement, people won’t want to cross the threshold.” Keep products to a minimum. “It should be a true retail outlet, not a car showroom. Don’t think you need all the products. You just need enough to attract those 10-second eyeballs. Offering test drives cover off cars you can’t display.” Spec them in bright colours. “You want nice show cars, not the black and grey stuff that everybody orders, something to attract people in.” Don’t employ sales people. “You really need highly trained product specialists, good at delivering immersive brand experiences.” Provide a great configurator on the latest touchscreens. “You really need strong digital point-of-sale and a good e-commerce platform.” Don’t bother with lots of fabric or paint swatches. “In our first JLR store in Westfield, we went big on actual paint swatches and fabric. Well, that was a waste of time, given the amount of times they came out. Now we’ve got big, high-res tablets.”