RL Magazine
Edition 44
Technical Trends: Build Profit by Narrowing your Focus
by L. Bryant Underwood

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Previously I outlined my observation that the RL bulk repair business is at a cross-roads of profitability. Most of the current bulk repair models are not generating enough profit margins proportional to the risks incurred. This is a trend that has been long lived and I see no real exit path anytime soon. There is too much fear in the global market for business liquidity to increase enough to provide improvement opportunities. My basic advice to those I speak with continues to be this; leverage current technology to get closer to the market and look for ways to generate recurring revenue. There are multiple paths in which current technology can deliver a subscription model to allow an RL solution to Go-Retail. Recently Squaretrade published research that supports the idea that getting closer to the market is THE way to generate real profit from RL solutions. Let me share a couple of these data points for just the iPhone repair market:

  • The total spending above warranty costs for all iPhone repairs since introduction in 2007 is a staggering $5.9B!!! If anyone just had a few percent of the market for this single phone, they would be doing very well indeed.
  • In the past year 30% of all iPhone owners report damaging their phone.
  • The majority of the damage is from dropping.
    • Just losing grip on the phone (30%)
    • Fall from someone’s lap (13%)
    • Knocked off a table (11%).
  • Then there is water damage from immersion (18%) or from a spill (9%).
  • The report also noted that 11% of iPhone users have a phone in service with a cracked screen. This is a telling metric for two reasons;
    • First for a device marketed with a story of quality and prestige the user would clearly prefer a repaired product and should be able to pay for the repair.
    • Second, my guess is that if you asked these folks, they are not sure where to go to get a repair they can trust. So there is clearly upside to the $5.9B number when 11% of the failures are still not addressed.

So where are all these repairs going? I believe the plurality of iPhone repairs are being addressed by some type of insured coverage from the carrier or from a third party. These insurance type plans work from a single fee in advance or from recurring subscription charges. As big as the iPhone business is these numbers are just too high for some type of insurance coverage to account for all the revenue, there must be other players in this market that we need to understand. With two kids attending college with one a recent graduate, I suggest that the average university campus is a good area start. There you will find the iPhone is king and on most every university there is a thriving dorm industry of iPhone repair. Typically some engineering of hacker students will order some parts from ebay or direct from China and setup a cash repair business. There are quite a few articles in the news of late that outline this tend and how student are even paying for their education using these ‘informal’ business arraignments.



All of this is well and good and clearly interesting. But the key factor that is missing in all this entrepreneurship is a trusted repair. Sure you can have a guy down the dorm hall repair your phone, but is there a warranty? Will they compromise my data and post it on Facebook? Sure you could send your phone off for repair, but the fact is that most would rather use a phone with a cracked screen than to send it off, even for a couple of days. So how to address this market, provide financing and influence the need for trust? My approach would be a variant of how another very personal item used cars, are sometimes sold; “tote-the-note”. Why not partner with a big-box retailer and offer in-store repair or like-unit exchange if the unit is too badly damaged. But rather than take cash payment, pay for the service with financing generated from a monthly recurring charge. This allows you to provide service near to the customer, providing them with a level of trust and the subscription model has built-in financing and will generate residual income. It is also an approach that can defeat the insurance model or at least cut into their market share. Again, the market is large and growing for the service of these very personal devices. Narrow your focus, get an app, go local, generate profits and repeat.

RLM

Bryant Underwood manages Public Safety Sourcing for Cassidian Communications, an EADS North America Company in Frisco Texas.

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