The Tough Get Tougher
DEALERSCOPE: How are sales of warranties and service protection plans been? Can you still make the same profit from them that you made last year?
n Baillio: I don’t see how any dealer in America can be in business and not sell them. It’s like not selling accessories. That’s a big one of the extras. It’s sometimes not pitched as much as we want it to be, but it’s a lot easier when a customer calls and says such-and-such broke - it’s not a problem and puts a good taste in their minds. It makes for a lot of good will. It’s a smart thing to sell them from the get-go. Our service contract business was up about 15 percent this year. We’re happy with them.
n Liddiard: It’s mandatory in our stores. We require our salespeople to sell a minimum percentage-to-gross sales of extended service plans. It is a must, it is conducive to employment in our stores. It is a culture in our store. We’ve done phenomenally well with appliance service plans so it was just a natural to sell electronics ESPs. When I say it is a “must,” and conducive to employment, people chuckle, but it’s the truth. They have certain quotas and if they don’t meet them they go on probation, and if it goes longer than 90 days, they don’t work here. We have to do it. That’s our most profitable deal in electronics right now. But it’s not just profitability; it’s also a service to the consumer. If we’re not offering that, we’re doing the consumer a great disservice. We need to give them the opportunity to purchase them.
n Lavine: They’re a good way to make some additional profit. The problem there is that if the product is under $1,000, for the manufacturers supplying the extended service plans, the pricing is proportionally out of line. For example, if a customer buys a $799 42-inch panel, and a three-year service plan is $499, proportionally, it doesn’t match. The service plan doesn’t cost $50. So as the pricing comes down on the product, manufacturers haven’t truly lowered the cost of the service plans to the retailer, so he still has to sell the plan for in some cases more than half the price of the set. The Consumer Reports criticism of warranties didn’t really hurt us last year. Then again, by that reasoning, you shouldn’t buy house insurance, because your house isn’t likely to burn down. But you’re more apt to have a problem with your electronics than you are with your house.