Apple’s has had great success with the AppleCare program, offering consumers a fairly low cost plan, backed by superior instant walk in service. I know many people who were “wowed” by getting a replacement phone right on the spot when they encountered problems. Apple has been able to provide top customer service while at the same time able to make a positive impact on the bottom line.
Recently, Apple raised their deductible rates from $50 to $79 and has given hints that they are going to be able to execute repairs in store in the near future. This move will help provide even more efficiencies and cost savings, while opening up a new revenue stream for consumers who are out of warranty and need repairs. Since Apple controls the part market very tightly, third party repair shops can’t buy parts direct from Apple which allows them to control the parts market. This has set the stage for their next move.
Because Apple has not provided direct repair services to consumers out of warranty, the after repair market has exploded. Estimated to be in the tens of billions, third party repair providers capture good margins as customers need to get their phones fixed when they break. Consumers have had really nowhere else to go.
Third party companies that do repair are left to acquire aftermarket parts which often vary in quality or rely on parts stripped from devices not working. Sometimes, the grey market is also able to produce supply.
Up to now, Apple has not supported repairs other than under its AppleCare program, and even then, they replaced the consumers device with a stand by refurbished one (an expensive proposition). The defective device would then go back for an in house repair/refurbishment and then put back on the shelf for the next warranty replacement incident.
It looks like that is about to change. Rumour has it Apple will be offering repair services in store in the near future.
Apple will be able to reduce their costs by having on site repair technicians fix products under AppleCare protection while opening up the aftermarket repair business for them.
Pricing competitively against third party repair shops will capture the majority of business back to Apple while putting the third party repair business in jeopardy. It remains to be seen if Apple will make customers wait while their devices get fixed or will they continue to provide refurbished units and fix defective ones on site. Our guess is Apple will fix customer devices where possible and replace them with refurbished ones if the required repair is extensive. We believe many customers are still attached to their own personal property and are willing to wait if they delay is not long.
Further compunding the risk, Samsung is also rumoured to be considering a protection plan of their own.
If repair shops are to survive, they’ll need to respond by offering concierge service and by locking down corporate accounts, things Apple won’t likely provide in the near future. Diversifying into other brand services and adding capabilities like trade, marketing, replacement products or other complimentary products and services will also be key.
Establishing a base of customers by selling aftermarket protection warranties is also a way of securing business for the future.