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Smartphones and gadgets have become an integral part of everyday life in an exceedingly connected world. This has created a need for protecting one’s electronic products against damage and extending the lifetime value of a device or a home appliance. Alongside the rising penetration in the electronics industry in India, this new consumer need has become a significant growth driver in the industry for value-added service offerings.
An ‘extended warranty’ is a service agreement that replicates manufacturer warranty for an extended period of time. Simply put, if the standard warranty offered by the manufacturer on a new smartphone is 1 year, one can opt to extend this by another year by purchasing an extended warranty plan. Extended warranties are offered by service providers and are often given the option to include the additional coverage, either at the time of purchase or when the standard warranty is approaching its end date. The plan can be useful for those who want an uncomplicated usage experience and a longer life of their device.
The manufacturer does not cover incidental or accidental damages to devices like smartphones, cameras and laptops. ‘Damage protection’ plans from service providers protect consumers from such problems, helping them save thousands on repair costs. Screen and display are fragile components of each device and are always prone to physical and liquid damage. Repair costs of such damage can cost up to 40% of the device price, and so more expensive the device the bigger will be the repair bill.
The market for after-sales services will grow phenomenally alongside the boom being witnessed in the demand for electronics. While the overall consumer device protection market size is expected to touch $1.1 Bn in FY 24, other growth drivers will be on-demand repair services estimated to be worth $1 Bn, home protection & AMC services estimated to be worth $1.2 Bn and Brand warranty and installation services worth $2 Bn. That makes the overall after-sales services market worth $5.3 Bn in FY 24 in India, that’s 8 times the market size in FY 18.
As our dependence on smartphones increases, the market for repair services is going to grow at a faster rate than the base industry itself. The smartphone protection market is expected to rise sevenfold from $72 Mn in FY 19 to $528 Mn in FY 24 in India. The on-demand repair services market is expected to grow at the same rate and touch nearly 69 Mn repair requests by FY 24, the size of the market being $600 Mn. So the overall after-sales services market size is projected to cross $1.1 Bn for smartphones by FY 24, accounting for almost 20% of the entire market covering all electronic categories.
The growing need and awareness about after-sales services have led to a ‘right to repair’ movement in western countries. Both US and EU are passing legislations that make it easier for replacement parts to be easily available across local repair shops for up to 10 years from manufacture, making self-repair possible. The movement encourages energy-efficiency and a significant reduction in environmental waste.
Service providers make people’s lives better by providing quick doorstep repairs, creating long term value with their promise to customers. Brands and retailers should evaluate a provider’s service proposition, geographical coverage, tech capabilities, service TATs and customer satisfaction scores before entering into a partnership. The leaders in this industry differentiate on service quality, instead of price and have built their competitive advantage on technology and automation.