Warranties—The Enduring Profits of That Feel-Good Piece of Paper

Warranties—The Enduring Profits of That Feel-Good Piece of Paper

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To judge from the dealers I talked with for this roundtable session, a lot of folks out there are either banging their cameras around pretty good or dropping them all over the place (often into water); or they fear doing so sometime soon. Which is good news for retailers selling warranties.

The quartet kind enough to spend some time with me reported satisfying sales of warranties on a range of cameras. Most were for high-end DSLRs and sophisticated point-and-shoot models, but, surprise, some warranties were sold to insure what's left of the low-end point-and-shoot market. In all cases, the common denominator is a boost to the bottom line. One retailer I spoke with boosted his even higher by adopting a DIY warranty plan.

Pull up a chair, but don't set your camera too close to the edge of the table.

Mike Wilbur
Mike Crivello’s Cameras, Brookfield, Wisconsin

We offer the Mack Diamond warranty, which covers impact and moisture damage, and we use it as a sales tool. Sometimes people come in with a destroyed camera, and the price to repair it is beyond what it’s worth. Now, because they’ve encountered this problem—an accident that’s not their fault—they’re much more amenable to looking at a warranty with the purchase of a replacement camera. It’s a “Don’t take that chance a second time” kind of thing.

Do most of your warranties cover DSLRs?

As a rule we sell more warranties with DSLRs because of the price the customer puts into the purchase, but we do a fair amount of business even on less expensive point and shoots where they know their kid is going to be foolish and leave it out in the rain; or they’re going to do the same thing they just did to break it. In both cases, they just want to have that feel-good piece of paper that says if they do something goofy, it’ll be covered.

If they come in not to replace a camera, but buy one, what’s your approach to the warranty?

Once we’ve made the sale, we have add-ons that we talk about—filters, memory cards and other things they’d normally need—and it’s pretty logical to go from telling them about a filter to protect the end of their lens to a warranty that’s going to protect the rest of the camera from impact and moisture damage.

You build on the protection idea?

Right, that’s the approach we take now. For the holiday season we’re putting together a Mike Crivello camera care package that’s going to include the warranty with the filter and other things. Rather than customers having to cherry-pick things out of the store, there’s going to be a one-stop-shop discounted package.

And if they’re buying a camera as a gift, it’s nice to have this package of extras.

It’s something that will be very helpful for them. We find everybody has an opinion on extended warranties, whether it’s for a refrigerator or a camera. Some people are so opposed to them it doesn’t matter what you say, they’re not going to buy; they’re convinced they’re going to take good care of the camera.

How do you do with warranties for equipment other than cameras?

We sell some for the more expensive lenses. Also, if someone is buying a multiple lens package and they’re thinking of buying a warranty for the camera and the main lens, they may want to cover the specialty lens as well, especially if it’s a more expensive lens.

Warranties for point-and-shoot and mirrorless cameras?

The salespeople will offer the warranty option for mirrorless, but it’s not a big category for us. It was surprising, though, the number of warranties we sold for little point-and-shoot cameras, models under $200, even though overall the business [in that category] has taken a dip. On the other hand, my DSLR business has increased. Overall, the warranty adds to the bottom line, no doubt. We sell it as the warranty that covers what the manufacturer’s doesn’t. Generally a manufacturer’s problems with a camera will show up within their warranty period. It’s always the abuse, misuse or the accidents that create problems down the road.

Adam Carreras
Dodd Camera, Cleveland, Ohio

Warranties are definitely profitable and are a major part of our business. It’s not so much that something is wrong with the product, it’s that people drop the cameras or they fall in the water, and they get a replacement.

You’re able to sell warranties for all types of cameras and price ranges?

As the [lower end] point and shoots have sort of faded out, the average selling price is going up and people are more interested in that insurance policy. We’re selling them for DSLRs—and high-end DSLRs because as the selling price of DSLRs goes up, people are more inclined to spend a little extra money for that warranty coverage—and also for the higher end point and shoots. It’s really the selling price that helps boost the warranty sales, and they’re doing great for us.

For lenses, too?

Serious photographers are always looking for glass for their cameras, and we’re able to sell warranties on both those products. When we get a purchase on a high-end DSLR and a high-end lens, it’s usually two warranties going out the door.

Whose plan do you use?

Mack Diamond warranties—the drop-proofing, waterproofing warranty.

And the pitch?

We mention it toward the end of the sale. It’s sort of an awareness thing . . . people aren’t coming in asking for the warranty. We also have counter cards that describe the warranties we sell, but it’s always at the end of the sale where we say, “Since you’re spending this money on this camera or lens, you should consider this warranty, which is not your typical manufacturer warranty.”

Mike Woodland
Dan’s Camera City, Allentown, Pennsylvania

We’ve always been successful with them, and we’re as successful now as we were previously. Part of that is helped by the fact that people aren’t buying the very inexpensive cameras anymore—that’s all gone to the cellphone for the most part. So if someone’s making a fairly decent purchase, they’re probably more inclined to get some peace of mind to go with it. Our percentage of attachment—the percentage of purchases that add the warranty—is very high.

You’re talking high-end point and shoot—the long range zoom, big sensor camera?

Yes, and DSLRs and lenses, though on lenses we generally don’t add it on the $200 second kit-lens kind of thing. We’re selling a decent amount of warranties on higher end, enthusiast-grade glass because the warranty we offer is full damage protection coverage, not just mechanical defect; it also covers accidental damage.

Who do you deal with for warranties?

We self-insure them. We’ve been doing it for at least four years. Previously, we were using Mack—they were great, no complaints. But we realized we were sending half the pie out to them, and seeing how minimal the repairs were, we thought it would be in our better interest to self-insure, and it certainly has been.

Did you model the plan on Mack’s or other companies’ as well?

We looked at all the different options out there for that type of protection. We looked at what we wanted to offer customers and what had been successful to be sure it was viable in the marketplace. It was something we had to do a lot of research on and check with our lawyers and accountants, because different states have different laws regarding it.

Who does the repairs for you?

Generally that depends on the item. The first year is under the manufacturer, so year one we’re not really exposed unless it’s some type of accidental damage, but in most cases we send the items back to the manufacturers. There are some that we’ll send out to one or two other service centers, and we still use Mack for some items. The young lady who coordinates all our repairs has her go-to list depending on the item and the problem. She’s learned who the best centers are for those scenarios. She’s our designated person who coordinates all the comings and goings of the repairs, so there’s somebody who’s aware of what’s going on and who knows the best place to send items depending on the situation.

Are there benefits other than profits to having your own program?

When we send to the manufacturers for repairs, the nice thing is we don’t have to be concerned there’ll be a delay we might have had [with a] third-party company because a lot of the manufacturers are making it very difficult for third-party centers to acquire parts. So sometimes a repair center was delayed because they couldn’t source the part that was needed.

And if there’s accidental damage within the one-year manufacturer warranty period?

Then that’s one we have to cover. We will probably still send it back to the manufacturer to keep it on a speedy turnaround. Years ago, the third-party repair centers were every bit as reliable as the manufacturers, and often faster and a little percentage less expensive. But as the manufacturers have really tightened down on parts availability, they’ve done a pretty successful job for themselves of better controlling the repair market. Part of it is that they want to ensure a level of service to the consumer, but it has reduced the options for consumers when it comes to where they can get a repair done.

Your customers are pretty satisfied with your warranty and service?

For the most part. Every now and then we’ll have a parts delay, and a customer is without [the camera] longer than they want to be. For people who enjoy using a camera, it’s something they want to have on hand. Often life events are coming along or there are trips planned.

You offer a rental service, so do you ever recommend it if a camera can’t be turned around within the time a customer might need it?

Absolutely. That’s certainly been a nice source for us in terms of making sure there’s an option for a customer. Previously a lot of people would be expecting a free loaner, but now we can say, “If the camera isn’t back in time, we do have this rental pool.” And if it’s a camera that was purchased from us recently, we have the discretion to see if we want to reduce the rental cost.

Do you make this part of the pitch—like, “This warranty plan is our plan, and we stand behind it the way we stand behind everything we sell”?

We mention that, and we also have some perks that go along with the warranty. So there’s a little bit of an incentive for people to keep coming back in. One of the things we’ll do is offer a memory card recovery service. It’s something people may need at some point, and it costs us very little to actually include; it’s a little bit of labor and no hard materials cost. It goes back to adding that peace of mind thing: you’re going to get the photos you’re hoping to get. 

Howard Scheyer
Bernie's Photo Center, Pittsburgh, Pennsylvania

The conversation begins when the customer comes in and says, “The camera dropped and it broke.” Then we sell him a new one and say, “By the way, this warranty is great.”

Let me guess: you sell the Mack Diamond warranty?

We do.

For a variety of cameras?

Typically point-and-shoot cameras are under $250, so for $39.95 I can offer the customer a three-year warranty that will cover the camera if it malfunctions [because] it’s been dropped off a table, down a flight of steps or water got into it. Then I do the math for them: “For less than 12 bucks a year you’ve got peace of mind.” It’s normally a no-brainer, and I can sell a lot of those because they’ve already experienced the pain and are now buying a replacement.

How does it go for selling DSLR warranties?

When you start to get into cameras that are 2,000 or 2,500 bucks, people look at a $250 warranty, and it’s “Nah . . .” Those are a lot harder to sell—but, typically, under a thousand bucks, those warranties sell.

Do you offer warranties as part of accessory packages?

No. The problem with packages is that people are looking at the bottom line, and it doesn’t work for us. I’d rather have people come in for the best possible price on the camera and then go to the [warranty] spiel. And, remember, we offer the warranty after we’ve sold them everything else we can: lenses, straps, cases.

How about warranties on lenses, flash units, other gear?

Every once in a while I can sell the whole deal, but mostly we’re successful on basics, the essentials they want right now; then we can touch on others things. I’ll show them what their next lens will be and put a little thought in their heads: “When you’re done experimenting and learning with this, and you want to step up . . .” And, “This is the kit lens you get. It’s okay, but you really want to step up to something like this . . .”

So warranties are worth the effort? Still profitable?

Whatever the warranty brings—$20, $30—it’s more than I had before. I also look at it as telling the customer, especially with a point and shoot, “Stuff happens. It’s really worth the $39.95, because if you drop it . . .”