CUSTOMERS BUYING a big-ticket item such as a household appliance or an electronic device know they won't leave the store without fielding the pitches of a slick salesperson. But before they get to walk out the door, they'll be hit with another pitch: to buy an extended warranty.
The after-sales pitch for an extended warranty -- the service agreement that covers goods after the manufacturers' warranties have expired -- is a common, potentially lucrative episode in the world of brick-and-mortar retail. To date, however, it's been the exception rather than the rule in e-tailing.
Now several Web-based services are emerging that claim to make it easier for e-tailers -- and the IT staffs that serve them -- to peddle extended warranties for a wide variety of goods. They'll also help consumers buy, track, and take advantage of the agreements online.
These up-and-coming electronic businesses -- including How2.com, in Dallas; RevBox and WarrantyNow, both in San Francisco; and, to an extent, WarrantyNet.com, in Ottawa and Boston -- all seek to become the "e-warranty" intermediary, although their approaches differ.
On the surface, these sites act as middlemen between consumers, e-tailers, and established third-party, extended-warranty service providers who have traditionally served brick-and-mortar stores with legacy systems. And to varying degrees, the Web intermediaries also handle behind-the-scenes chores such as managing warranty data for thousands of items and providing access to it via a Web interface.
For electronic merchants and their IT staffs, these fledgling services could provide an edge in the increasingly competitive electronic-commerce landscape and generate incremental revenues -- if they work as smoothly as promised.
After initially focusing on driving customers to their sites, e-tailers are turning their attention to after-sales services, says Ron Goedendorp, CEO of WarrantyNow.
"The last Christmas season has demonstrated that customer support is the key differentiator," Goedendorp says.
The extended warranty service "gives customers added value and more confidence at the point of purchases," says Jim Birdsong, CEO of Wristwatch.com, a Houston-based e-tailer that works with WarrantyNow. "It sets us apart from [other] start-up companies."
WarrantyNow customized Wristwatch .com's electronic shopping cart so that customers can buy extended warranties without leaving the online store. After selecting a watch, a customer is presented with options to buy an extended warranty. When selecting a warranty, the customer seamlessly taps into WarrantyNow's servers. WarrantyNow forwards the purchase information to the appropriate third-party service provider and submits the purchase information into a tracking system for Wristwatch.com.
After the transaction, customers can then enter the password-protected section of WarrantyNow's site to keep a log of the product and its warranty. When it's time to file a claim or have a product repaired, the customer can call WarranyNow's toll-free telephone line or go online to select one of 52,000 authorized service centers for assistance.
The approach of each service varies significantly. How2.com focuses on one major extended-warranty service provider and hopes to stand out by proving several services, such as letting consumers track rebates online and peruse manuals and "how-to" product information, says Ken Johnsen, president of How2.com.
WarrantyNow acts as a sort of clearinghouse, aggregating extended-service contracts from several third-party service providers. WarrantyNet.com offers a reverse auction to allow consumers to accept competing bids for extended warranties. The RevBox site emphasizes helping the consumer manage extended warranties and an extensive reference library of product manuals.
"We're the safety net for the consumer after the transaction," says James Wu, founder and CEO of RevBox.
The intermediaries offer their services to consumers and, in some cases, to e-tailers, for free. They make their money on commission from third-party extended-warranty providers. Some also sell collected warranty data to manufacturers.
At the very least, selling extended warranties is "a capability that extends the online experience and makes it commensurate with a regular experience in a brick-and-mortar solution," says Chris Martins, a senior analyst at the Aberdeen Group, in Boston.