NEW YORK – While extended-service contracts remain a high-margin cornerstone of CE retail, the companies that underwrite and administer these programs are finding themselves under increased pressure.
At issue is disruption, which is coming in many forms: Competition from new, non-traditional players; the shift to online and mobile shopping, with its lower attachment rates; pricing pressures that could lead to a diminished customer experience; and an increasingly sophisticated and cynical shopper who’s been told for years by Consumer Reports and other buying guides to bypass the extended warranty.
Indeed, no less than Best Buy president/CEO Hubert Joly last month cited “declining demand for extended warranties” as a symptom of the “structural industry changes” that are disrupting traditional CE retail and its suppliers.
But as Bankers Warranty Group president Dawn Morris observed, “With every challenge comes an opportunity,” and for extended-service providers (ESPs), the knock on the door is deafening as mobile-dependent millennials and an increasingly complex matrix of interconnected consumer products cry out for third-party support.
In the following virtual roundtable, leading service plan underwriters and administrators outline their immediate challenges, which also often represent their greatest opportunities, and provide their top takeaways from last month’s International CES.