A new third-party operator claims resellers have traditionally been short-changed when it comes to warranties. But the new offering has met with skepticism among channel players.
Central Processing Unit (CPU) director, Stuart Turner, said he had launched an extended warranty administration company in Australia because the market was under-serviced.
“There are no companies offering independent resellers warranties,” he said. “What we’re doing is offering a range that’s open to the big guys and the small guys.”
CPU, which originated in the UK, will offer resellers third-party upgrades to vendor warranties as well as accidental damage and theft insurance.
It signed its first Australian distributor, the Office National Group, six weeks ago.
But managing director of Synnex, Frank Sheu, said the majority of his tier-one vendors already provided extended warranty arrangements.
“It’s quite common now that they have their own extended warranties” he said.
“At the reseller level, there are a lot of options – two, three or five years.”
Sheu said many smaller resellers did not carry extended warranties, but this was because vendor and OEM warranties were usually considered sufficient for customer needs.
Turner said his 12 years of experience in the warranty industry had shown him that his business model, which was based on an online partnership, would work.
“If I can get enough small dealers to join with me, suddenly I’ll have the critical mass to go and negotiate a good rate with insurers,” he said.
Under the model, resellers would earn 33 per cent commission per sale, while CPU drew on an administration fee in order to remain independent of insurance companies, Turner said.
Managing director of education and government reseller Microbits, Max Mentiplay, said selling extended warranties would be problematic for resellers.
“We have been involved with the extended warranty insurance industry in the past and it proved to be an utter disaster,” he said.
“The record keeping and paperwork required to make claims added an administrative burden we did not anticipate and meant many smaller claims cost us more in administrative staff wages than we got back.
“Many small resellers will also end up giving back the 33 per cent to the customer as a discount [in order to close the sale].”
Mainstream resellers, and education specialists, in particular, were being targeted by CPU for development and growth, Turner said.
Executive director of education reseller Channel Connect, Peter Low, said vendors already provided adequate warranty services.
“Even for small deals, vendors will come to the party,” he said. “Everyone wants to make a buck.”
Turner said the potential margin gains extended warranties could add to reseller business.
“Everyone knows how tight margins are in the industry,” he said. “Hopefully, I’m giving them something at no cost that will add to their bottom line.”
While Low said any additional revenue opportunities would be welcomed by resellers, he said credibility was also an issue.
If the claim was a painful process then the customer would blame the reseller and not the insurer.
Sheu said he had not seen any company offering independent warranties for resellers that had experienced significant success or gained channel trust.
“Any that are successful are at the manufacturer level,” he said.
Sheu claimed he had seen many third-party warranty providers go broke during his 15 years in business.