Dixons boss defends extended warranties
Public enquiry told electrical retailer ‘proud’ of customer service record
April 25 2003
Dixons chief executive John Clare has told a public hearing that the UK’s largest electrical retailer is “very proud” of its after sales support operations.
Clare used the meeting, convened by the Office of Fair Trading as part of its enquiry into the UK market for extended warranties, to mount a robust defence of Dixons’ approach.
The company, which operates the brands Dixons, Currys, PC World and The Link, has faced accusations of sharp practice and pressure selling from the Consumers’ Association, which has co-ordinated a campaign against warranties.
Dixons operates the UK’s largest service operation carrying out over 2m repairs each and employing over 3,000 qualified engineers. Clare stressed that extended warranties fit within the integrated business proposition of the business, complementing both products and the wider customer support package.
He said: “We believe that much of the debate about extended warranties has become stuck in a time warp. The concept of the simple “repair it if it breaks down extended warranty” as defined by the inquiry’s terms of reference has become outmoded over time.”
The offer has expanded to accidental damage cover, theft insurance, telephone diagnostics and helplines as well as “above all, cover for so called no fault found claims or, in the industry’s jargon, non technical faults which, from the customer’s viewpoint, are often indistinguishable from technical faults.”
As technology advances, the need for such comprehensive after sales support can only increase, believes Clare. “There is, in the complex technological world in which we all live, a rapidly growing need for help and assurance to be available to customers to keep their inter-connected products operating at a satisfactory level.”
An NOP poll commissioned by the OFT supported Dixons own consumer research which shows:
* there is a high awareness of alternatives to contracts available from retailers at the point of sale, in particular the Extended Warranties offered by manufacturers.
*customers are satisfied with their contracts and very rarely consider cancelling them. Many will repurchase
* the contract offering is well understood and documents are clear and comprehensive
On the issue of pressure selling, Clare said: “I do not glean from any of the independent research any reliable evidence of widespread pressure selling. Dixons view is firmly that customers will be less inclined to purchase a contract or indeed any product if they feel under pressure. We are in the long term loyalty business and have no wish to damage our franchise by forcing upon our customers things they neither want nor value.”
The Dixons boss said the margins made on extended warranties were not unreasonable. “I would give my eye teeth to make some of the gross margins which colleagues in the supermarket sector achieve on some of their fresh food product lines – and they are increasingly competitors on low priced electricals.”
The overall return on sales for the business is just under 6 per cent. “This is a modest level in retailing terms whether national or global. Whether the individual consumer perceives a service contract as offering value for money is very much a personal decision.”
