A three-year product repair plan is available for products priced at $200 and up, which will include parts and labour, power surge protection, a “no-lemon” guarantee, and 24-hour call centre assistance. The plan is transferable, which means it can be included as part of a gift, or given/sold to someone else. For products under $200, Wal-Mart will offer the option for a two-year replacement play that offers new or refurbished products of “like kind and quality” if the original fails. Pricing for the plans will vary based on the item and its retail pricing.
Whereas even the largest CE retailers often farm out their warranties to 3-rd party warranty companies, Wal-mart has both the scale of business and the infrastructure to be able to profitably offer in-house extended warranties on their goods. The emphasis there is "profit."
When you look at the margin opportunity that warranty sales offer, combined with Wal-mart's existing margin strategies in CE, if I were the category buyer for any national retailer with a strong CE presence, I would do two things: 1) shudder, and 2) strongly recommend to the senior operations execs that they turn up the heat on warranty sales in our own company. If you have to compete with Wal-mart on price in commodity businesses, you'd better be maximizing your add-on sales opportunities.
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1 comment:
Also one has to consider that Walmart has enormous pushback power to the OEM to warrant their equipment to Walmart should it fail in the field.
It is a great high margin plan. Walmart sells me a HDTV for say $1500 and an additional extended warranty for $250 for 3 years. They source it from OEM X for $1000 and should my TV go bad within 3 years -- they will debit their vendor, OEM X for the replacement or repair cost.
Walmart pockets my cash at a retail level and makes the OEM eat the fix at a wholesale level.
BRILLIANT!
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