Warranty inquiry lets retailers off the hook

More competition = fewer customers?

By Drew Cullen • Get more from this author

Posted in Channel, 19th December 2003 09:28 GMT

Free research: Application platforms, the state of play

The UK's extended warranties market is to be opened to competition, with retailers forced to promote offerings from third parties as well as their own.
This conclusion of a Competition Commission investigation into extended warranties was accepted yesterday by the government, so the likes of Dixons and Comet may breathe a small sigh of relief.

The big retailers are off the hook, in that no price regulation has been put in place. With the opening up of electrical warranties to competition, prices will probably fall, but the retailer occupies the commanding heights - the point of sale, even if it must tell its customers that they don’t have to buy straight away.

But remember the last time the government opened a consumer market to competition? Yes, that’s right, Directory Enquiries. In the confusion that followed the move from 192 to 118 ***, calls fell by a third. And not only because of the inept service of many of the new entrants. The publicity surrounding the move made people aware exactly how much they had been paying for DQ. So many explored different options, such as free enquiries on the Internet.

Back to electrical goods warranties. Few compos mentis adults in the UK can now be unaware of the huge mark-ups charged for this service. Typically, the big chains make more profit on selling extended warranties than they do on the actual goods. Customers get peace of mind, but pay through the nose. We suspect that many more will now ignore the extended warranty pitch for that £11 toaster. ®

Free research: Application platforms, the state of play