Boutique Showrooms Where Cars Can't Be Sold May be The Future of Car Sales

The allure of New York City burns the same for people that want to be part of the dense, stylish, hustle and bustle as it does for the brands that make it that way. It's a place to see and be seen, whether you're a person or a car.

Porsche is the latest brand to have a presence in the city that goes beyond a typical showroom. In December the company announced the grand opening of The Porsche Urban Store in Brooklyn, complete with musicians, local food and a party with more than 200 guests.

"Look no further than Porsche Brooklyn to see how we together with our dealers are developing new approaches to the future of automotive retail," says Kjell Gruner, President and CEO of Porsche Cars North America, Inc., in a press release. Gruner noted that the needs of people who live in the city are different from those who live in the suburbs.

The location features a 10,000-square-foot customer showroom and service reception area on the ground floor in a building that also houses the Brooklyn Nets Training Center. It has giant glass windows with the latest Porsche models looking through and features a Fitting Lounge where new owners can customize their new car. Coffee and pastries are available from the Porscheplatz.

A service and parts center is down the block.

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Porsche isn't the first to bring a smaller, more social showroom and customer location to NYC. In 2014 then Cadillac President Johan de Nysschen convinced General Motors to make the luxury brand a separate business unit and to create a new global HQ for it in SoHo. The plan for the Cadillac House included a multipurpose event space with modern loft offices, "located in the heart of a city renowned for establishing trends and setting standards for the global luxury market," Cadillac said at the time.

In 2018, only four years into a 10-year lease, Cadillac CEO Steve Carlisle told his team most if not all employees would be relocating back to GM's Detroit headquarters in Warren, Michigan.

"Marketers love these spaces because they get to hang out in the trendy part of town and invite the local influencers to fabulous parties. However, there's one glaring problem: dealer franchise laws prohibit nearly all automakers from selling directly to consumers, so these showrooms are ultimately just that --- for show," Tyson Jominy, Vice President of data and analytics at J.D. Power told Newsweek.

"These locations market the brand locally and sometimes are used in national campaigns. While that may be valuable, these centers with expensive locations are typically the first to go when priorities shift and budgets get tightened. There's an old saying in the auto industry that nothing happens until you sell a car. Since cars can't be sold from most of these boutiques, proving sales attribution from a boutique is extremely difficult, which is why so many are destined to fail," he said.

In the same year Cadillac shuttered its NYC location, luxury brand Lexus opened a space called Intersect by Lexus in the Meatpacking District joining similar hubs in Dubai and Tokyo. It featured a street level café area, a Public Gallery space with both product concepts to custom exhibitions. However, it did not feature a showroom. In January the location closed after five years in operation.

"Intersect by Lexus was intended to be a unique space where people can experience the ethos of the Lexus lifestyle without getting behind the steering wheel of one of our cars. It is a place for guests to be entertained, inspired and educated," a Lexus spokesperson told Newsweek. "With a series of programming in partnership with renowned brands and individuals, we are proud of what we have accomplished, and we consider Intersect by Lexus - NYC a great success.

"The closure was just a result of wanting to move to new areas with our marketing initiatives. We were starting the launches of exciting vehicles and wanted to make sure those vehicles were receiving the proper marketing plans," he said.

The Lexus representative also said that the brand will continue to develop innovative experiences like this for its customers going forward.

Just down the street from where Intersect by Lexus was located, Genesis has claimed a stake in the city. It opened Genesis House New York last November. The 46,000-square-foot space features a restaurant and a showroom, as well as a stage for product launches and other events. An on-site library, curated by Assouline and Arumjigi, has special edition books, luxury display items, and unique accessories. Visitors can also enjoy the 9,500-square-foot Terrace Garden, which features unobstructed views of the High Line and the Hudson River.

Genesis House is one of the success stories, though it's only been open for a year. It just celebrated its anniversary by entering a multiyear partnership with Friends of the High Line (FHL), helping create a Winter Lights installation in the elevated public park. FHL is the NYC Department of Parks and Recreation's non-profit partner working to ensure the park on the High Line is maintained.

Though Genesis House is a one-off, Volkswagen Group's boutique brand doesn't see their Destination Porsche locations that way.

"For Porsche it is important to be close to the customer, both in the digital and in the physical world. And especially in the physical world, there is no 'one size fits all' approach. To cater for different local needs, we have developed a variety of physical formats. We call them "Destination Porsche" to make clear that this is a place where you meet the brand and community," Gruner told Newsweek.

The new locations including Brooklyn, San Diego and Portland, come in different sizes, but all offer brand immersion in more comfortable spaces. Porsche has more plans for places like high-end boutiques, in addition to stand-alone service centers.

"Just this year, we've celebrated five grand openings besides Porsche Brooklyn of new or updated Porsche Centers – expanding to offer more cars and more service space, but also adding touches like coffee bars, lifestyle boutiques with Porsche apparel and accessories, custom fitting lounges and specialized floor space for e-mobility or Porsche Classic," Gruner said.

Jominy sees a possible hybrid model as the next step, with a central showroom combining these social features and a distant car lot with lots of stock.

"A dealership could be set up in an urban area with limited inventory and rely on rapid delivery to its consumers from a central distribution center far outside of town where land is cheap. In fact, many predict this type of hub-and-spoke model of small showcases with a large central inventory is the future of automotive retailing," said Jominy.

"While this works for mainstream models, EV sports car and other limited-edition models will still suffer from the same challenge as the current system in determining how to allocate scarce inventory. The future is likely to be solved by the ways of the past: previous year sales. It's a sales focused industry, even in these production constrained times and sales are still likely to determine allocation. Unless the influencers have a say first."