The Pleasures and Pitfalls of Selling Warranties
There are yin-yang factors in every appliance and CE retail transaction. The same is true for extended warranties, say the dealers who make it a policy to include these plans in their product portfolio.
The biggest upside: 40- or 50-point average margins on what is essentially a short-term insurance policy that may never be cashed in. The downside: unpredictability pegged to product margin volatility and shorter product lifecycles.
“Throughout the industry, it seems the warranty companies weren’t as quick to react to flat-panel pricing compression in the last six to 12 months to restructure their pricing to make it more palatable to the consumer,” said Roland Hiemer, vice president of merchandising for New York City’s Harvey Home Entertainment. “When flat-panel prices tumbled 30 to 40 percent, warranty prices didn’t follow in the same fashion. So it became more difficult to achieve the same attachment rates as I was able to in, say, ’05 versus ’06.”