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ESP Providers Mixed On Holiday Outlook

NEW YORK — Extended-service plan (ESP) providers and underwriters are of two minds on the fast-approaching fourth-quarter.

Some believe that pent-up demand, new product introductions and a slowly improving economy bode well for solid, if not stellar, growth this holiday season for CE and appliance retailers and manufacturers.

But their counterparts are projecting a range of slightly positive to slightly negative sales, citing lower TV pricing and soft majap demand that will offset gains in tablets, smartphones, e-readers and other growth categories.

Among those within the merrier-than-last-year Christmas camp is Sean Stapleton, CEO of Warrantech, a unit of AmTrust Financial Services. “We believe that consumers are becoming more confident about their future economic conditions,” he said. “The result is that consumers have started to increase their spending on both consumer electronics and major appliances. The sales growth we are witnessing certainly varies by region but the trend is clear, and we believe the growth will continue through the holiday season.”

Assurant Solutions’ Keith Meier, extended service senior VP and general manager, similarly believes the outlook for CE and majap sales this holiday season “remains mostly positive primarily due to a pent-up demand for the latest tech gadgets,” including phone and tablet upgrades to Windows 8 and Apple’s latest iPhone iteration.

The trend is promising for ESP providers, Meier said, citing a 2012 Assurant consumer survey in which nearly 50 percent of early tech adopters said they always purchase an extended warranty when offered.

Charles Pipia, president of Global Warranty Group, is also confident that innovations in next-generation technology such as smartphones and tablet PCs will continue to boost sector growth, and that TV will continue to be a popular holiday purchase while decreasing in price.

Jennifer Monasterio, president of Mack Worldwide Warranty, points to consumer demand that has been “consistently rising this year, especially during the summer months. With this trend, and the holiday shopping season spending, we fully expect to see major growth in the fourth quarter. New product releases and buying incentives will also play a major role in the consumer’s purchasing decisions.”

More guarded in his outlook is Michael Frosch, president of The Warranty Group’s North America consumer products division. “Sales in the U.S. will remain steady, up a couple of points, and I don’t see anything that will dramatically alter that,” he told TWICE. Consumers’ pent-up demand has been redirected to a wider array of product choices including tablets, e-readers and mobile, he said, leaving less on the table for core categories like TV, whose prices continue to decline.

Brett Menke, general manager at Bankers Warranty Group, echoed a tempered optimism for Q4. “We believe that sales of consumer electronics and major appliances will remain steady for the most part, possibly with a slight increase this holiday season,” he noted. “Consumer spending is closely tied to the state of the U.S. economy and the housing market, and hopefully they will continue to improve, increasing consumer confidence in 2013.”

But Chris Smith, president of Service Net, a unit of Chartis, believes softness in TV and white goods will render holiday sales flat or down slightly in the coming months, offsetting significant unit volume growth in mobile. “We expect that Apple, Amazon and Google will fuel this segment of the market with new product releases in the tablet and mobile phone categories,” he observed. “We are not as bullish on the outlook for televisions and major appliances, as these segments continue to be impacted by the economy and high rates of unemployment.”

Joe Romano, client services and business development senior VP at NEW Customer Service Companies, is also hedging his holiday bets. “If back-to-school spending is a predictor for holiday, one certainty we do know is holiday shoppers will continue to be judicious with their electronics purchases and in the mindset of looking for deals early and often. As a result,” he said, “retailers will be pulling out all the stops on promotions this year and have adopted a ‘less is more’ philosophy, keeping smart and balanced inventories to reduce excess merchandise post season.”

Like others, Romano believes the major pocket of opportunity for retailers this holiday season will be in the personal entertainment category, including smartphones, tablets, laptops, gaming and e-readers. “Early adopters will upgrade to the next generation, and the new lower-priced tablets will appeal to shoppers who have been holding out on purchasing these gadgets,” he said. In addition, key releases within these categories, such as the new Wii U, are “expected to drive excitement and push units.”

Meanwhile, NEW predicts that TV unit volume, like last year, will be driven by price but remain flat in dollars. Similarly, Romano anticipates “a slight bump” in major appliances over the holidays, depending on promotional offers, although the key selling seasons for white goods tend to peak in early winter and the summer months.

“Our overall prediction for holiday 2012: Even smarter retail prowess from both retailers and consumers alike. High unit sales, historically low price points,” he said.