Retail Observer

RETAILOBSERVER.COM APRIL 2022 60 M any retailers get into appliance repair out of frustration and desperation over the lack of warranty repair services to support the customers who buy new appliances. But warranty fulfillment alone is absolutely the wrong reason to provide appliance repairs in the after-sale market, because it's doomed from the outset. Sales of any product or service must generate sustainable profits, or it's not a sound business strategy. Many retailers fall into the trap of believing they have to support their customers even at a loss to protect their market share and assure future repeat buyers. Sadly, they become comfortable losing money in service when they don't have to. Appliance repair service can be lucrative when it's executed and evaluated as a profit center, as in any business. THE GOOD There is plenty of good in providing warranty service if you look at it holistically. A dealer that offers appliance repair services differentiates itself from the big-box competition which cannot provide it. Being warranty-authorized by the manufacturer also gives dealers access to new model training, service literature, and a 1-800 tech helpline. It also allows the store to flag its vendor affiliation to bolster business and attract brand-specific customers. Moreover, having a service department provides a complete end- to-end purchase experience for your customers, and when executed well, it will keep them coming back. THE BAD This element of warranty service speaks to its inefficiency. The more efficient a service operation, the more profits it will enjoy. Efficiency is directly tied to billable hours in service. But warranty service is neither easy or straightforward. Most warranty calls require a second trip to complete once the diagnosis determines the necessary parts. However, second or third trips to complete a repair are detrimental to the flat rates paid by manufacturers. What's more, warranty claims involve submitting a claim, getting paid for labor, and securing credit for the parts used in a repair. Reimbursement can be, and often is, a frustrating process. Every manufacturer has a different approach and policy to reimburse for warranty service. Each claim has to be authorized and submitted through any one of numerous online portals. (If you're looking for help with processing warranty claims, check out BrandSource's newest service partner, JustPressOne, who've started to employ cutting-edge machine learning algorithms that use predictive data analytics to power the next generation of claims processing.) THE UGLY The ugly truth about warranty service is that your profits will decrease as the warranty rate increases. Suppose you have a separate parts department with employees, inventory and over-the-counter sales. In that case, you should not expect your labor revenue to pay for the entire overhead of your service company, including the overhead for your parts operation. Doing so would place an unreasonable burden on your labor customers and their price for service. There should be sufficient margin on warranty parts to meet all warranty parts costs, including operating expenses. I recommend recording C.O.D., warranty, extended warranty labor and parts revenues separately on your financials. Doing so can provide management with a clear understanding of where revenues are coming from, and from which manufacturer. A healthy goal in service revenues is 70/30, C.O.D. to warranty. Paul MacDonald Service Trends THE GOOD, THE BAD AND THE UGLY No, not the movie – warranty service! RO BrandSource service consultant Paul MacDonald ran his own 38-tech service business and is a past president of the UASA. He currently operates the Expert Service Program, which helps servicers run their operations more efficiently and profitably. Contact Paul at Coach@ExpertServiceProgram.com.

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