Starting an online appliance business with a difference

[Wantinglegaladvice]

Just looking for some feedback or validation for this idea.

The biggest issue with modern TVs and appliances is warranty concerns and breakdowns. What if an online retailer included say 5 years of breakdown cover with free replacement and factored it into the price but still made it cheaper than if you took a warranty out separately? Would you be more inclined to buy the appliance than if it just included the standard 12 months from a traditional retailer?

Good or stupid idea? We have a supplier lined up who carries major brands so we can offer an extensive range.

 

[Paul Norman]

I suspect that will prove a tough sell.

Which is not the same as saying no one will go for it.

My main challenge would be to the assumption that warranties and breakdowns are the biggest concern. Is there a statistic somewhere that says that? I find most modern appliances to break down infrequently, and to be cheap enough that it is not a massive issue if they do.

But if you are going for, say, top end TV's for a few grand, you will get a different response, I rather suspect.

 

[BusterBloodvessel]

I don't understand what you're offering that's "different". You're just including a warranty deal at slightly less than buying one separately (so how does that work for you?). But ultimately, your TV will appear more expensive than competitor sites and any customers (which I would guess is the majority of them) will shop elsewhere based on a cheaper price.

A 5 year warranty on electrical items isn't going to entice the majority of people to pay more for it. Especially when, more than ever, they are seen almost as disposable now.

 

[johndon68]

What if an online retailer included say 5 years of breakdown cover with free replacement and factored it into the price but still made it cheaper than if you took a warranty out separately?

When I bought my last TV from Richer Sounds about 8 years ago, they did exactly that...

 

[makeusvisible]

I think John Lewis already do this on most electrical appliances, including TVs, and they also price match.

 

[Wantinglegaladvice]

But ultimately, your TV will appear more expensive than competitor sites and any customers (which I would guess is the majority of them) will shop elsewhere based on a cheaper price.

Often, it’s around £20 added on the total price of the same appliance at Currys, based on our calculations so far, and you’d pay around £80 extra at Currys for a similar 5 year repair or replace warranty.

 

[Wantinglegaladvice]

When I bought my last TV from Richer Sounds about 8 years ago, they did exactly that...

And were you happy knowing they weren’t the cheapest?

 

[Wantinglegaladvice]

I suspect that will prove a tough sell.

Which is not the same as saying no one will go for it.

My main challenge would be to the assumption that warranties and breakdowns are the biggest concern. Is there a statistic somewhere that says that? I find most modern appliances to break down infrequently, and to be cheap enough that it is not a massive issue if they do.

But if you are going for, say, top end TV's for a few grand, you will get a different response, I rather suspect.

That’s the thought really, go for higher end appliances mainly such as Miele where it’s a higher value range offered and more to lose for the customer.

 

[johndon68]

And were you happy knowing they weren’t the cheapest?

How do you know they weren’t? I bought the TV on Boxing Day in the sale having done extensive research before hand and I was very happy with the price…

 

[Wantinglegaladvice]

How do you know they weren’t? I bought the TV on Boxing Day in the sale having done extensive research before hand and I was very happy with the price…

Shouldn’t have presumed they just sometimes are a little more expensive than elsewhere

 

[gpietersz]

Personally I would not pay much extra:

1. With electronics if it does not break in the first year it will probably be fine
2. With white goods if they do not last a reasonably long time I would rely on claiming they were not of satsifactory quality in the first place.

 

[Wantinglegaladvice]

Thanks for the replies.

With the pricing with have from our distributors we can probably work on the basis of matching or getting close competitors prices and including a 5 year warranty. I think from what others have said this could work out well

thanks

 

[WaveJumper]

Warranties, always bugs me when they try to sell you that extended 5-year warranty, you have three years, but we can give you five. When you get home an up pack your purchase, I would say in nearly all cases there’s a card in the box that say’s log on here (the brands on website) and you get it extended for free just by registering.

Goods these days seem to always last more than three years if they breakdown after that, unless a simple fix they are out the door and replaced by the latest.

 

[DontAsk]

Warranties of any type/duration are trumped by consumers' statutory rights and are a total waste of money.

 

[IanSuth]

I use costco on items other than TV's & Computers they have an unlimited returns policy. I saw a women come in with a battered industrial sized tumble dryer on a flat trolley obviously spoiling for a fight with customer service - it went something like

"I bought this here and it is broken"
"Yes"
"So i want a refund like your guarantee says"
"ok"
"I don't have the receipt"
"Ok do you have your membership card"
"no i am not a member anymore - i take that means you wont give me a refund then - some use humph"
"Not at all, can I have your name and address please, I will just have to reduce the refund by the amount of a years membership which will be valid from today"

She then looked up the purchase (7 years previous) on the system, saw it had been purchased for cash and refunded the customer in cash for the original purchase price less 1 years membership, all took under 5 minutes

At that point i decided to always purchase from them something if it was the model i wanted and not vastly cheaper elsewhere

 

[OldWelshGuy]

Asda have 3 and 5 year warranties on their TV's.

 

[fisicx]

https://www.gov.uk/accepting-returns-and-giving-refunds

Customers can make a claim up to 6 years after purchase. No need for an extended warranty.

 

[UKsouthwest]

Hello. I have been in the consumer electronics business for over 30 years. I worked for Samsung for many years selling brown goods into retail.. I ran an online retail business for many years. There is loads of stuff that I know nothing about. I do though understand this business.

My comments are based around simply trying to do you a favour and save you both time and money.

There is no margin in the goods. You will not be able to buy goods at low enough prices. There are hefty delivery costs. The Sale of Goods act 2015 gives customers all the power. You will lose money hand over fist if you try and do this. Please stop now.

 

[Wantinglegaladvice]

Hello. I have been in the consumer electronics business for over 30 years. I worked for Samsung for many years selling brown goods into retail.. I ran an online retail business for many years. There is loads of stuff that I know nothing about. I do though understand this business.

My comments are based around simply trying to do you a favour and save you both time and money.

There is no margin in the goods. You will not be able to buy goods at low enough prices. There are hefty delivery costs. The Sale of Goods act 2015 gives customers all the power. You will lose money hand over fist if you try and do this. Please stop now.

Thanks for your reply.

On average, per appliance we can make around 15% profit margin with our current distributor.

Our market research has shown that customers do what the assurance of a warranty but I’m happy to be corrected. So if a fridge freezer in Currys has a price of £529 and we offer it at £549 with a 5 year warranty with unlimited repairs, that same deal at Currys comes in at over £140 more with their extended warranty.

Obviously they’d be cheaper if you didn’t care about warranties, unless we price matched and still included a warranty.

Do you think the idea is a non starter? I do think it has a draw…

 

[Mark T Jones]

Our market research has shown t…

The detail of that will provide most of the answers.

Market research is a broad term, ranging from business owners asking questions designed to get the answer they want, to proper, targeted, in-depth research to dig into what will actually happen.

 

[fisicx]

Curries offer the warranty because they know most appliances are reliable. The number who need a repair is tiny compared to the number sold.

I’d take my chances and get the cheaper deal. If it goes wrong within 5 years my consumer rights means I could probably get a replacement anyway.

 

[BusterBloodvessel]

I hate to say it but it sounds like you're falling into the classic UKBF trap of asking for opinions but only wanting to hear the ones that agree with yours.

The following is purely conjecture but I think pretty accurate.....the majority of extended warranties are sold to either (A) the inexperienced (young people buying their first big purchases) and (B) the elderly..... in both cases helped by the sales patter of the guy on the shop floor who wants his commission and after seducing them with his sales pitch will fill their head with all the disastrous things that could happen and all the bills they might face if things go wrong. It's an on the spot pressure sell that people will get sucked into.

To try and get people to make that decision in advance.....well you're just pushing water uphill IMO. It doesn't matter if Currys is £529 and you can sell it for £549 with the warranty as oppose to £600+ at currys....because they don't want the warranty in the first place! Nobody shops around and considers the cost of the extended warranty as they do it. Whether yours includes the warranty for an extra £20, £40, £10, whatever...most people won't want it or care about it so they'll go to Currys instead.

 

[The Byre]

The biggest issue with modern TVs and appliances is warranty concerns and breakdowns.

That is news to me!

Curries offer the warranty because they know most appliances are reliable. The number who need a repair is tiny compared to the number sold.

People are replacing old equipment not because it has broken, but because the new stuff is far better. We have replaced almost every item in our house in the past ten years and nothing old was bust. It was just old technology and therefore close to worthless. Nobody wants an SD TV set, a halogen cooker, a Windows 95 PC, or a car that does not do 50mpg. In ten years' time, the current generation of electric cars will all be scrapped because they do not have a 1,000 miles range or run on hydrogen and your smartphone will be worthless because it does not access satellites.

I hate to say it but it sounds like you're falling into the classic UKBF trap of asking for opinions but only wanting to hear the ones that agree with yours.

It sounds that way to me too!

 

[Deleted member 59730]

Often, it’s around £20 added on the total price of the same appliance at Currys, based on our calculations so far, and you’d pay around £80 extra at Currys for a similar 5 year repair or replace warranty.

Currys make a huge profit from their warranties because appliances don't break down as much as they persuade people to think. I have saved a small fortune over the years by never buying the extra cover.

 

[UKsouthwest]

To quote the old gag "you could make a small fortune by going ahead with this but only if you start with a large one".

There is a company that do actually offer improved warranty on electrical goods. That is John Lewis. John Lewis can do this as they have a very loyal and very affluent, generally older customer base. They also have excellent service and generations of trust built up with their customers.

Anyone who is focused on warranty would pay the "full" price and buy the TV from John Lewis with a 5 year warranty from a company they trust.

You then have Currys and AO slogging it out in the middle ground along with what is left of the UK independent trade (which is not much).

You then have online discounters who will cut the price to the bone to move product.

People will buy from a discounter they have never heard of as lots of people search about for the lowest price and some of them don't care about the reputation of who they are buying from as long as it is cheap.

The customer who is concerned about warranty is a different beast altogether. Risk averse and considered their purchasing. They research, they subscribe to which etc. They would not be willing to buy from an unknown and to take a chance. They already have John Lewis who they trust.

What possible reason can you give this risk averse, cautious and considered customer to buy from you, a complete unknown?

Many years ago when Amazon was just a minor irritant I tried to launch an online business selling electrical goods that was not based around price. At the time we had the backing from most of the major electrical brands who helped to fund this new initiative based around the fact that margins were being badly eroded and they were happy to help anyone who could try and offer any way of stemming this margin erosion. My plan was to sell at the "retail" price but allow the customer to pay in 10 monthly instalments (not an increased price, but matching the Currys retail price). So a £500 retail item could be bought for £50 a month for 10 months. No interest charges. Everyone who we talked to said it was a brilliant idea including Samsung, Panasonic, Sony, Hitachi, LG, Toshiba, Hotpoint, JVC, etc etc etc.

The same item was available at say £450 online from discounters / amazon.

We had the backing of manufacturers who gave us special deals and pricing and "marketing" funding to promote this. We advertised heavily in the national press (the Sun and Daily Mail etc) as well and throwing money at online advertising.

We fell completely flat on our asses. It went down like a lead balloon. It was a bust. We blew piles of cash. Nobody cared about ten interest free payments. They cared about the lowest price.

I know this as the company that I was working for was also running a "discount" website selling the same products. We were still merrily flogging the TV for £450 quid and making a tiny margin. No one bought it at £500 and paid in 10 easy payments.


I know a bit about this industry and what you are looking to do will fail. Stop now whilst you still can.

 

[MBE2017]

Several misconceptions IMO, few on the forum can begin to imagine the sheer size of the companies you will be against. Curry’s for instance is almost certainly buying cheaper than your distributor, they probably get 12 months free credit, whilst you would be on 30/60 days.

I will tell you a few reasons why this is unlikely to work.

Let’s say you offer a tv with warranty for £20 more than curry’s, most people will buy from curry’s on price. If they want a warranty, most will buy from curry’s, because they will have more coverage, more stock to draw down on, more adverts, they will have the clients. If someone made it to your site, they are just as likely to go onto curry’s and ask for a price match. Curry’s will match you.

The reason they will is simple, to be stocked by any large retailer most get a promise not to be undercut, and if they are, they price match, and bill the difference to the manufacturer. So if you sell a tv for £300 with warranty and curry’s is £500, they sell it for £300 and still get the £500 overall. Imagine how many years you need to operate before you get this sort of muscle in the marketplace.

Of course, we haven’t even mentioned returns. You will get back many damaged sets, the couriers will most likely not cover your losses. Curry’s could send back anything in any condition and most will be credited in full. Trust me, you cannot win this game, it is fixed in the major retailers favour.

 

[garyk]

Just looking for some feedback or validation for this idea.

The biggest issue with modern TVs and appliances is warranty concerns and breakdowns. What if an online retailer included say 5 years of breakdown cover with free replacement and factored it into the price but still made it cheaper than if you took a warranty out separately? Would you be more inclined to buy the appliance than if it just included the standard 12 months from a traditional retailer?

Good or stupid idea? We have a supplier lined up who carries major brands so we can offer an extensive range.

John Lewis and Costco already do this.

Next.

 

[Mark T Jones]

Next.

5 year warranty on Jeans?

There's a thought!