The Supply Side: Payment for ‘free’ tech experts debated

Some suppliers for Sam’s Club now have told retail consultants they are being charged for a “Tech Experts” help line launched by Sam’s Club in April of last year. A major complaint is that the suppliers were not consulted before the charge was deducted.

There is no shortage of so-called experts available to help consumers with tech-related issues on their iPhones, televisions, or other electronic gadgets sold at U.S. retailers. The post-purchase layer of service is drawing attention from suppliers, consumers and retail insiders. A Google search for reviews on these help lines brings up thousands of complaints compared to a smattering of satisfied consumers.

Electronics product suppliers recently began being charged by Sam’s Club, noting “Tech Expert” support costs, according to at least two local supplier consultants speaking to The City Wire on condition of anonymity.

Sam’s Club spokeswoman Tara Raddohl said the retailer does not discuss who is covering the cost of the free support, but did say there is no charge for members who purchase electronics at Sam’s Club.

The tech expert help line is provided by Irvine, Calif.,-based Alorica, which works in sync with SquareTrade the seller of the extended warranties, which are sold by the retailer and paid for by consumers.

Sam’s Club may have followed the lead of its largest competitor, Costco, who has offered a version of tech support for at least eight years. Alorica also handles calls for the Costco Concierge tech support line.

The margin structure at wholesale clubs is much slimmer than traditional retail suppliers in order to offer value pricing that justifies the annual membership costs. Analysts are not surprised to see wholesale clubs offer the “free” tech support line which in one way differentiates them from other competitors.

A similar service is available at Walmart.com, but consumers are asked to bear the costs. A one-time tech support session costs $79, while a one-year subscription is $129. Wal-Mart’s tech support is provided by Asurion, who also services the extended warranty programs sold by the retailer at the time of purchase. Likewise, consumers don’t expect the Geek Squad at Best Buy to work for free, which raises the question of who should be paying for the service.

“I understand why a retailer would want to differentiate themselves, or keep up with competitors, by offering ‘free’ tech service. The challenge of course is if it’s the supplier paying for the service they will eventually need to recoup that cost which will likely lead to higher retail prices or lower quality thereby negating the retailers competitive advantage in the long run,” said Jason Long, CEO of Shift Marketing Group.

Carol Spieckerman, CEO of newmarketbuilders in Bentonville, said tech support is becoming a world of overlapping and in some cases duplicative solutions, just as warranties have been for quite some time. She said all major technology companies offer some form of tech support; however, not all customers feel comfortable accessing it.

“Consumers can be more open to personally-delivered service pitches that are offered at the point-of-sale, even though some or all of the solutions provided may already be covered by the supplier,” Spieckerman said.

“Suppliers need to do a better job of getting credit for the tech support they already provide, and making tech-challenged customers comfortable accessing it, particularly since it is factored into pricing anyway,” she added.

Under the present system, Spieckerman said third-party service providers are banking on the fact that the majority of customers who sign up for their services aren’t digital natives.

“Their customers are stepping into new technologies with trepidation and therefore, the tech support solutions provided can be fairly rudimentary and predictable. Predictability and scalability are key for these models. Few of the budget services are geared toward hard-core techies or customers who are buying complex, connected solutions,” she said.


Ron Johnson, former CEO of J.C. Penney and and former Apple executive, has delved into this space with his new venture Enjoy. Johnson’s Enjoy venture is a warehouse business that sells tech products, delivers them free to your home and will help you set them up and learn how to use them. He told USA Today that Enjoy could be next paradigm shift in shopping. 

“I like what I’ve seen so far from Enjoy. It’s a slow rollout and won’t touch most consumers for awhile. Their selection leans toward more specialty which is a good approach,” Long said.

“Most consumers have purchased an electronics product that has them saying ‘now what’ when they open the box so this is a great way to address that problem.” Long added.

Long said Johnson’s idea opens up for supplier an entirely new market of consumers — those who wouldn’t buy a product because they didn’t want to deal with the struggle of setting it up.

Spieckerman agreed that Johnson’s new venture steps out a bit further.

“In order to be profitable, Enjoy would also seem to rely on fairly predictable service scenarios that are limited by the brand relationships it has forged,” she said.

She believes Enjoy is setting the stage for what must come next, “service providers that possess deep and brand-agnostic knowledge of connected devices, smart home solutions and particularly, multi-brand solution scenarios.

“Third party providers that can incorporate these criteria will be a world apart from the “cheap and deep” crowd,” Spieckerman said.
 
She adds that retailers can get in on the game by building out “good, better, best” service offerings rather than racing to the bottom on price and relying too heavily on predictability.