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With all the talk of washing machines and other appliances becoming a disposable item what would really happen if this actually happened, especially at the lower end of the market? What would the effects be on the industry and society as a whole?
It could be argued and, doubtless will be by some, that none of this could ever come to pass. There's no danger at all of appliance service ever dying on the vine and that they'll be okay. I'd suspect that would be the view of many a manufacturer etc. and, in many ways, I'd say that was akin to the ostrich having its head firmly planted in the ground. I say this not because I think that everything that I will talk about here will happen, no, more because any part of it could happen and, in some areas of the industry already has happened.
How long will it be before the cancer spreads?
The Independent Appliance Repairer
Like it or not the independents have provided a huge number of service engineers into the appliance servicing industry. They are generally more skilled, have more experience across multiple brands and are generally better able to diagnose problems than manufacturer engineers who, often, become complacent and comfortable, little more than parts fitters. This is of course not true of all manufacturer engineers nor of independents, it would be both grossly unfair and untrue to state that this was the case, but experience shows this to be the case in many instances.
For example, even running a large service centre with an average of 20,000 service calls a year it was abundantly clear that some engineers were good, some bad. But the really telling factor was that those that worked on a single brand, in this case Zanussi or Candy, would often not wish to attend any other brand and, when forced to do so, invariably made a mess of it, I suspect at times on purpose so they didn't get sent outside their comfort zone again. That said, on products that they were familiar with the quality of fix, or first fix rate, massively increased so there is not just bad news either way.
Asked to do a product that they were unfamiliar with almost always met with a staunch resistance.
The true independents that repair multiple brands don't have that problem. We depend on the fact that we can adapt, learn and tackle any problem with any appliance and solve it at a reasonable cost. It's what we do and, contrary to popular belief, it is a very skilled job. The level of skill, intelligence and ingenuity to actually do this is poorly rewarded for the most part and goes by most people, including those in the industry, almost without notice. Nobody cares.
The poor level of reward and recognition is often what leads to these engineers moving on, they move to other industries as they can (remember they can adapt and are smart if they're any good), they migrate to the likes of British gas or perhaps even to a manufacturers own service department, or at least, those that are left. This leaves the little guy with the enviable task of training someone new, which costs a lot of money. Without the resources to train and carry the cost burden the engineers left simply stop training anyone as their businesses cannot sustain the costs to do so and, what's the point anyway as the reward for doing this is, at best, minimal.
So, the independents get fewer and, older.
Going back to the introduction, this can't happen people say?
It has happened already!
The average age of a service engineer in the UK lies between 52 and 54 years of age and the numbers have dwindled already from 4500 service businesses in 2004 to under 3000 in 2006.
We already see manufacturers forced to subcontract work out as they cannot find engineers to fulfil their field service requirements and we see work providers and insurers struggling to get cover in quite a number of areas, especially where specific skills are required. Largely the fact that there are few, if any independents training anyone at all is to blame for this, something we pointed out in 2005 to many manufacturers, work providers and insurers. None wished to do anything about it really, or certainly not anything that would have actually made any difference.
Of course volume levels on repairs have dropped as well, largely due to cheap appliances that break more but, instead of repairing these machines, people throw them away generally under the guise of it being perceived to be too expensive to repair or simply not worth the hassle. This doesn't help the situation one bit.
Spare Part Suppliers
Spares suppliers really do have a lot to worry about here, especially the trade spares suppliers. I mean, if there's no trade buying parts then who's going to keep them alive? Worse still, if there are no trade sales then no-one else is liable to be buying spares either and the market for parts will slowly shrink, never to return as we move toward throwaway appliances.
We already see that this is happening.
Trade sales volumes are dropping and some of the larger trade spare distributors have moved into the online retail arena in an attempt to compete there, were it not for the Internet they would not be able to do this at all. Trouble is of course that they quickly realise that they are selling at almost some of their trade account prices (depending on what prices you get) to be competitive online and, in turn, do their trade sales harm.
Should they choose to increase their prices they risk finding themselves being uncompetitive.
Should they undercut the manufacturer themselves they may find supplies dry up and, likewise is liable to happen if they are too expensive as a reputation for expensive parts is not what manufacturers want.
Being a trade supplier of spare parts right now is tough, very tough and it is walking a proverbial tightrope.
But people in the industry as well as outside it have to think, what happens if these people disappear?
Well for a start you will be at the mercy of the manufacturer when it comes to both pricing of spare parts as well as the availability of those spares. It will not be a free market, it will be a series of micro-monopolies and with certain manufacturers this is already the case, Miele and Baumatic to name two at opposite ends of the spectrum. And, if they can do this then why can't everyone else?
Manufacturers that place themselves in that position can charge what they like for spares and, the public and this industry are allowing them to do so. But, once they are in that position, there is little anyone can do about it without legislative powers that at present just do not exist. Or do they?
But the same thing happens if the trade fail to use multiple spares suppliers. Use one big one and, we all know who I'm talking about here, and you may as well hand them the keys to the castle as they have an effective monopoly as they do on some products right now. They can charge what they like and no-one can do squat about it. When people ask how this came to pass there's two reasons, one, they are very good at what they do and, two, people in the trade are inherently lazy and fail to look at other suppliers. That's it, we did this to ourselves.
If you want choice and fair prices you must have competition. With competition stifled or non-existent the one or ones left hold a monopoly. Simple laziness and apathy can easily lead to this.
There is what is known as a "Block Exemption" in EU law which states that car manufacturers must, legally, supply spare parts as well as make technical information and diagnostic equipment available to any party within the industry that has an interest in having it. So far, no-one has taken the appliance manufacturers to task on this, I doubt anyone has as yet even approached the EU parliament about it but, there will come a time when this does happen as it is, in short, a restraint of trade and restrictive practise to not allow free access to this information and equipment.
The reason that it will happen is that, as more manufacturers try to go down the Miele route just as Indesit are doing now, more people will get affected by it and ultimately someone, somewhere, be it an insurance company or the likes of British Gas, will take one or two of them to an EU court and get a ruling. That could be very dangerous and very expensive for the manufacturers should they lose and, since the president is already in place, there's not much point in fighting it as they will almost certainly lose that fight.
But in the meantime the manufacturer's coffers are swelled or their own service arrangements propped up by being able to charge over the top prices for service to both the insurance companies and their actual customers. Indesit is a classic example of this, £180 to buy a machine, £90 to have a repair done... half the cost of a replacement, how can that be?
It gets still worse when you know, as I do, that the average repair cost by an independent is £65 including spares and margin inclusive. The manufacturer buys his own spares for considerably less and so, is making a lot more out of this that the independents are. The manufacturer also has the volume and scale to get cheaper vans, discounted fuel, funky computerised call planning and a host of other costs reduced, so why are they so expensive?
The independents have a lower cost to consumers, more skilled and more efficient yet get paid less for insurance and warranty work. Strange thing that.
Why Are Spare Parts So Expensive?
It's really rather simple and very logical when you stop and think about it.
Insurance business is the mainstay of all this, either through internal chargebacks or to a third party insurer. All prices are discounted from SRP, so the insurer might expect a whopping 50% discount due to the volume that they submit but accept that they may only get say, 20% off the labour fee or inclusive price.
Of course the manufacturer is way out in front on this deal and its good business for them. As I said in The Great Washing Machine Swindle, the insurers are being robbed blind by policies like this but, where like Miele or Indesit there is no technical information available outside those companies, they have little option but to pay the ransom fee.
Insure This Risk
This in turn pushes up the fees charge to consumers by the insurers. It has to.
It massively limits the insurer's freedom of choice and is not representative of a free market in any way, shape or form. It is closed and monopolised. It's just all done quietly, in the dark, behind closed doors as no-one needs to know.
The bone that's then thrown to the likes of Domestic & General is that they get the shot at annual renewals, literature in the box and so on.
But it's okay, the customers will pay for all this and, they do as the call centre staff read the script placing the fear of God, or at least a scary repair bill, into customer's heads.
But if the independent repairers start to disappear then the insurance companies have a bit of a problem, especially on low volume machines. Who's going to repair them?
If there's nobody to repair these products or, if the manufacturer can't get to a call for a couple of weeks, what will the insurer do, simply replace all the machines? What effect will that have and how much will it all cost? At the very least, will customers put up with this?
Can the insurers get cover for this risk? In a word, no.
Of course a lot of insurers and smaller manufacturers do rely heavily on third party networks to solve their service problems but if there were no repairers out there these networks would just cease to exist. Overnight insurers and small manufacturers would have nowhere to go to get service cover.
Now for the big five (or six) this doesn't represent any immediate problem as they are all nice, cosy and safe with their own employed engineers or virtually dedicated service networks. But even they are aging and won't be around forever. They won't escape, they just stave off the evil day that little longer before they have to pay the price for lack of investment into their own service infrastructure and, the supply of engineers from the independents that they once had is no longer there so they have to start training programs and, that's going cost a lot of money.
As for the smaller manufacturers who simply cannot afford to employ a small troop of engineers due to low sales volumes well, they're really scuppered. No networks, no repairers and so the only option is to go cap in hand to one of the big boys in the hope that they can perhaps see their way to helping out their competition.
Really, what do you think will happen there?
Would an insurer use manufacturer A to service manufacturer B's products? On very small volume perhaps the answer there is actually yes, but beyond that I'd doubt it. In any event it certainly wouldn't be cheap and the insurer or manufacturer will have no, or little, control over service at all.
But of course the networks will always survive won't they?
Well no, not if there's not any repairers to actually do the work they won't. Without the repairers the networks don't exist as all they are really is an administrative function, no more, they have no ability to actually go out and repair. Without repairers to prop them up they have no business.
And, even if they did decide to employ engineers they would quickly find that, just as the repairers that have left realised, it isn't cost effective. Asides from which where would the engineers required come from?
Whilst many will sit back and say that this doesn't affect them and the networks will always be there, I'm all right Jack as I'll always have work just think about gas.
Not one of the major networks has 100% mainland UK cover by appliance repairers for natural gas. It doesn't exist, it's a myth. Sure, some of them will tell you that they do and then subsequently sub-contract gas work to plumbers in some areas as they don't have cover and, for that, they will happily pay a premium of up to 100% over what they would pay an appliance repairer to do the same work, in the same area.
So, if the plumber is worth £100 to do the job why is the appliance repairer only worth £50?
I can actually explain that quite simply. When push comes to shove and there is no option but to pay the fee to get the work done they will, be it manufacturer or third party provider because they have no choice. So long as repairers are stupid enough to undervalue their services then they will be taken advantage of.
This is borne out with LPG fuelled appliances. Unless there is a lot of caravans in the area then LPG cover is nigh on impossible to find and, even outside the appliance repair industry solely because there's not enough volume on it and the rewards are too low to be bothering with it.
If anyone thinks that repair skills won't or can't disappear then they are deluding themselves, they can and gas proves it. All we need is similar legislation for refrigeration, which is coming and then on cooking and laundry and it's bye, bye repairers.
Where Does This Leave Consumers?
Well it leaves consumers in a very poor situation with being unable to find someone to repair a product they have to buy a new one. Hardly cost-effective or environmentally friendly. Of course manufacturers, as they are doing, will tell customers it's okay as the new machines are so much more efficient and that customers will save a fortune on running costs if they buy the all new whizz bang machine. Only, it isn't true, it's merely marketing hype and spin.
In warranty there may be little choice but to have a machine swapped out which really, isn't so great in many cases as it is expensive and also very wasteful.
Think about it, the normal warranty failure rate for most volume manufacturers lies between 8 and 10% in the first twelve months. So in addition to the 2.6 million washing machines we scrap a year now we'd have at least another potential 140,000 being scrapped every single year. That's a lot of machines and that's just washing machines that could be scrapped even if it's a simple installation fault.
Meanwhile we have the manufacturers saying, "what environmental issue, all our machines are eco-friendly and energy efficient", the fact that they only last a couple of years before needing replaced doesn't seem to factor in. And, consumers obsessed by lower prices continue to feed the destructive cycle by buying into this.
Of course it isn't cheaper for consumers, quite the reverse actually, it costs a load more as instead of shelling out a reasonable amount for a washing machine or any other appliance in the first place and have it last a decade or more, they simply pay more over the same term by constantly replacing the machines. Yet, at the same time, they feel "green" as they buy a new appliance that's "blah" more efficient than the old one.
But the swindle continues as, whilst manufacturers publish things like a "30% less energy use" what they don'¢t tell you is that they compared it against an old Hoover Logic from 1985 that used more water and electricity than any machine in the past decade!
Take an ISE10, it costs £900 and will last about 20 years in normal use, so £45 a year or less than £1 per week. Of course it might need a repair in that time, a pump or carbons or something like that but that's not expensive.
Now look at a £200 whatever (we'll avoid the names) washing machine that breaks every 18 months to 3 years. Let's assume a 3 year replacement cycle and, even at that, it's going to cost the customer £1330 over the same period and, that'¢s optimistic. Over £500 more over the period plus all the hassles of breakdowns, getting a new one, that waste and all the rest of it. This can hardly be described cheap and trouble free.
But think what happens if this applies to your washer, dishwasher, fridge freezer and other appliances. It's not £500 of a difference, it's thousands!
Yet, if there are no repairers what choice do people have?
None, they're governed by the same closed markets and monopolies.
Can The Rot Be Stopped?
Yes, I think so.
However whether people in the industry have the will is an entirely different question with many paths down which to seek an answer. But while some have their heads in the sand, some don't care and all are too interested in their own agenda then no, things will continue as is.
One thing is for sure, if we let it happen, it will happen.
In The End
If repairers are forced out of business or seriously diminished then the effects on the appliance industry will be markedly profound.
It will mean less choice for consumers.
It will mean that certain manufacturers will hold true monopolies.
It will mean that engineers will often take weeks to see a product.
It will mean increased costs for manufacturers, insurers and consumers.
It will mean less spares available from fewer suppliers.
It will mean massively more environmental damage.
Not the consumer, the manufacturers, retailers, insurers or the environment.
But it can't happen here... can it?