Article Written By: David Oliva, RD Appliance Service, Corp.
A popular topic of conversation among the owners and managers of independent appliance service companies is what the future will bring for us. What might happen to the service side of the industry and what trends can we observe in order to better prepare for those possibilities? Successful service companies have generally always had more work to do than people to do it, but the last two years have seen enormous pressure put on us and this has led, in many cases, to rapid growth and expansion. However, this short term trend seems to be settling into a less aggressive growth. As the backlog of new appliance availability starts to get cleared up what can we expect going forward? What other, long and short term, trends can we observe and how should we react to these?
Over the past couple of decades we’ve seen new appliance prices on a downward trend in relation to median income. The consumer price index (CPI) for major appliances has been consistently below the baseline set in 1997, with the exception of 2012 and 2013. This means that although incomes are rising, and the price of new appliances is rising, when adjusted to take into account all the current data and real world costs, new appliances are less expensive now than they were in 1997. This downward trend is having the effect of making lower end products throw away machines instead of repairable machines. There simply isn’t a profitable way to service a machine that can be replaced for less than what it would cost for a professional service company to repair it.
However, this trend has begun to reverse over the last two years as the CPI of major appliances is on an upward swing. There are many and varied reasons for this which are outside of the scope of this article. But is this trend a permanent reversal? It seems unlikely. And this trend may also be skewed by the flood of ultra high end products that sell for a hefty premium, causing an upward swing in the data that may not be representative to the industry as a whole. Is appliance service doomed to go the way of television repair? Sure, there are some big box stores that will repair a high end television, and there are service companies that will repair a television in warranty. But how many independent TV repair companies are left that do out of warranty service for a wide range of televisions? The answer is not many.
So what can independent service companies do to position themselves for a future where many machines are not repairable in practical terms? As expenses rise and employees demand well deserved higher wages and benefits, the cost to repair appliances rises right along with it, pricing many lower tier products right into the landfill instead of the shop. Independent companies need to consider how to plan for this. Maybe this means partnership with manufacturers, maybe this means developing a niche or specializing in certain types of products or repairs that are of above average profitability. Maybe this means some companies don’t survive, or some markets simply become unviable for profitable out of warranty repairs.
Whatever the outcome, now is the time for service companies to take a look at the data and the trends and begin to plan for how to deal with what might happen. Independent service companies have an advantage of being able to pivot more quickly than some of the larger, national or multinational corporations that also provide service. We have a very up close understanding of our markets, what works and what doesn’t. We have a strong grasp of how new product pricing affects service profitability, and indeed what it actually costs to run a professional, independent service company. We cannot simply assume that things will continue as they have for the past half a century. With new national competition getting into the market we need to consider, in depth, not only what we have to do to remain successful, but what we want to do as well.