The Big Business of Extended Warranties
We love our devices when they’re working, curse them when they’re misbehaving, and find ourselves hysterical when they’re breaking.
Smartphone owners know the pain when replacing a subsidized device with time left on a contract… ouch, $500 minimum for a new iPhone. It’s hard not being seduced by those special offers, but device romance is fleeting and totally constrained by the very fine print in that manufacturer’s warranty.
Think about how many times a retail salesperson really goes over the manufacturer warranty in detail, or even offers an extended third party warranty. It’s a conversation pretty much on the endangered species list. You’re a transaction, best processed quickly, and best forgotten about even more quickly.
Manufacturer warranties don’t cover any accidental damage, which is important for peace of mind for mobile and tablet users. It’s estimated that 30% of all products (not just mobile devices) require a repair three or four years into the product life – so an extended warranty provides that added peace of mind. Vancouver startup Warranty Life thinks of it not only as insurance, but also an extremely attractive business opportunity.
Warranty Life is still very much a startup. In particular, over the past year they’ve grown as a team, built key partnerships, forged new relationships, found a sharper focus, and are getting a stronger sense of market fit. CEO and Founder Richard Hui, is an experienced entrepreneur, with a long list of lessons learned, and customer conversations to help guide the team this far, with paying customers and inching closer to having a red ink free balance sheet.
Warranty Life’s goal is eliminating warranty related frustration by providing free instant online access to receipts, product registration, warranty claim information and even manuals in one central place. Making life easier for the consumer and creating a value added revenue stream from retailers is the mission.
Of course winning over retailers can be easier said than done and suggesting that some of brick and mortar crowd are ahead of the curve smacks of being deluded. Progress is being made, and some forward thinking companies are offering their customers the opportunity to store their purchase receipt for free with Warranty Life. For retailers they’re being offered a way to connect with customers after they leave the store and make post purchase warranty offers. Revenue sharing with retailer when an extended warranty is purchased is starting to resonate.
The extended warranty is typically the retailer’s best source of revenue and is a $25 billion industry. Many big box retailers generate more than half of their profits from extended warranties, balancing some of the razor-thin margins of the actual products. But as the old Dylan song goes, “the times be a-changin.”
With front line staff turnover, general business challenges, and more transactions happening online, it doesn’t take a rocket scientist to figure out that many traditional retailers need help. The old school needs to find new revenue sources and better margins. By offering customers extended service plans near when their manufacturer warranty is about to expire, Warranty Life can improve conversion rates for extended warranties, giving retailers another opportunity to sell warranties after they’ve left the store.
With their focus on helping retailers, this Vancouver startup will ultimately help the consumer experience less hysteria and enjoy a happier relationship with their seemingly indispensable tech toys.
