The Incredible Shrinking Supplier Warranty
Thin is in. And that’s not just for flat panels. It’s also true for the in-box warranties that accompany them. The trend emerged about 18 months ago when appliance manufacturers started offering shorter terms on warranties. CE manufacturers are now adopting the practice, which is helping retailers sell more margin-rich ESPs. Since the limited in-box warranties make one of the best tools for convincing customers they need an ESP, retail sales associates should keep up with the manufacturers’ terms for different brands in various categories, warranty providers said.
Kevin Rupkey, president and CEO at Bankers Warranty Group, pointed out that “the biggest change has been in the major appliance categories as the five-year warranty has been reduced to one year.” Similar decreases are beginning to percolate into the TV market, particularly with microdisplay warranties, which are shrinking from one year to between 30 and 90 days, said Keith Meier, senior vice president and general manager for extended service at Assurant Solutions. Smaller electronics, such as gaming devices, digital cameras, DVD players and secondary TV brands, are also being affected.
“If companies are competing on cost, they are taking a harder look at their warranty coverage,” Meier said. “It’s been a gradual process.” Rupkey and other providers agree. “Manufacturers continue to look for ways to take cost out of the product in the face of fierce competition and eroding margins. Most manufacturers view warranty and post-purchase support as a ‘cost to sales.’ Each product that is manufactured and sold contains a percentage of cost for warranty repairs, support and customer service,” he said. “Shortening the manufacturer’s liability for post-purchase support—warranty cost—reduces the amount of cost built into the product, therefore improving margins.”