The comely castaways of ABC's "Lost" aren't the only ones who are lost when it comes to television. When the television breaks -- or the computer, or any other hi-tech item in the house -- where do Americans turn?
My firm, The NPD Group, has done research that examines how consumers buy warranties, installation services and technical support. We found that many Americans opt to bypass such services offered by major technology retailers and instead turn to independent installers and manufacturers. In many instances, the Goliaths are struggling to compete with the Davids.
Major consumer technology retailers have turned to services as a source of revenue growth and diversification. These include Best Buy with its short-sleeved "Geek Squad," Circuit City and its "Firedog" services group, and CompUSA with its "Techknowledgist" initiatives. Staples, the world's largest office products chain, has tied its service branding into its "That was easy" slogan with "EasyTech," which its Web site promotes as offering "salvation from PC frustration."
Little Beats Big
However, despite heavy in-store promotion and in some cases trademark fleets of vehicles, 23 percent of those surveyed who required technical support in the past year got it from local providers --the proverbial mom-and-pop operation. Only 12 percent had turned to major electronics retailers for such services. Manufacturers were the other leading providers.
What makes retailers think they can crack the tech-support market is the fact that they've actually been in it for years. They've been offering extended warranties for almost anything that has a replaceable part.
These warranties have proven extremely profitable for retailers, which, like insurance companies, play the odds. They count on products not to break, or at least not break in a way covered by the extended warranties.
Despite frequent advice from consumer advocates to pass on extended warranties, big-box retailers sell more of them than any other source, according to NPD's survey. This is true even for PCs. The stores captured about 40 percent of extended PC warranties sold, but major retailers sold significantly fewer PCs than the manufacturers.
The relatively low percentage of PCs sold through major retailers might help explain why consumers have not yet turned to them for repair services -- but what about the audiovisual equipment that is the heart of their consumer electronics offerings?
Indeed, major retailers have performed better here, edging out independent installers for flat-panel TV installations. But even here independent installers fared well, capturing more than a quarter of profitable home theater installations.
The silver lining for retailers is that the consumers overall are warming to such services. As technology grows more complex and yet compelling, achieving one's ideal digital lifestyle may increasingly require a digital life coach. Retailers hope that, in a twist on the old Yakov Smirnoff punch line, in America, the store will come to you.
Ross Rubin is director of industry analysis for consumer technology at the NPD Group, a leading market research firm.