Challenging times for after-sales service

  As they grapple with the conflicting priorities of keeping costs down and ensuring customer satisfaction, manufacturers and retailers cannot seem to agree who is responsible for providing repair logistics or who should pay for it. Meanwhile, smaller operators are feeling the pinch and even going out of business.

The national after-sales service market is currently undergoing structural change. The direction that it is taking and the role that creative providers have to play is already becoming clear. Over the years, manufacturers and retailers of household appliances as well as mobile phone companies have built up their own service structures. This has resulted in a proliferation of medium to small repair shops operating within a diverse and complex service landscape.  ”These firms are caught between a rock and a hard place,” explains Wolfgang Leuthner, Director of tectraxx High Tech Logistics. If a retailer includes services in the repair process that the manufacturer is supposed to pay for, or vice versa, the potential for dispute is not without consequence for the repair centre. And while the demands made upon them increase, their income remains static. Many service providers then feel justified in being slightly more ‘creative’ when invoicing their clients. In late 2009, the Telecoms Committee of the Austrian Chamber of Trade and Industry declared that retailers had a ”strong case against service hubs for overcharging”.

Major changes in service market

After-sales service in Austria can not survive in its current form. The entire market is in a state of upheaval. In 2005, for example, there were seven service centres across the country handling mobile phone repairs. ”The only one of these seven still in business is tectraxx,” reports Leuthner. All of the others, including successor companies, have since gone bankrupt. And it is the small owner-operated firms in particular that are on the brink of financial ruin. Keeping adequate stocks of spares or providing training to ensure that staff are up to speed with the latest hi-tech products creates huge gaps in an already overstretched budget. This is a familiar story across the sector. The demise of a major German-owned service centre after a relatively brief venture into the Austrian market certainly raised eyebrows some time back – especially as this particular insolvency also impacted on a global leader in brown and white goods and on an Austrian mobile phone provider. ”There are around twenty repair companies operating in the country,” says Leuthner. Experts are of the opinion that inadequate capital cover and lack of successors will finish most of them off. Industry insiders believe that the market can accommodate two or three larger companies at the most, and these would be specialist companies capable of providing manufacturers with a more or less all-inclusive service package.

Ensuring continuity and professionalism

There is certainly a call for specialists of this kind, because there has been a fall in the sales figures for the consumer and communications electronics segment. As manufacturers of branded goods and retailers resort to ever more desperate price-cutting tactics, it is only through quality of service that they can set themselves apart from the competition. It is an inexorable development that is creating new challenges for these companies. As is so often the case, the root cause is financial. Another reason is that, over the past few years, consumers have become more empowered, self-assertive and discerning. The modern end customer is far more aware of his or her rights under warranty. A solution that might formerly have been offered as a ‘goodwill gesture’ is nowregarded as an entitlement. The days when you would take your faulty TV to the workshop yourself – to the utter delight of everyone in the service chain – are long gone. And it is precisely here that Wolfgang Leuthner sees creative providers coming to the fore with sophisticated, viable logistic concepts for the B2C segment. ”Though in fact, you will find that very few of the providers claiming the capacity to fulfil all logistic requirements are actually able to do so,” adds the tectraxx director. The approach whereby logistic services to private customers are simply combined with standard B2B business is destined to fail amidst a flood of complaints from end customers. ”And one thing is absolutely clear: a poor standard of service will always come back to haunt retailer and manufacturer alike,” stresses Leuthner.

Hammering out a solution

That is why this hi-tech logistics expert also sees the current situation as offering a great opportunity – because the constant chopping and changing in the service market has so far made it impossible to establish any sort of collaborative continuity. At the same time, it is the factor of dependability that generally tips the scales when a company is trying to reconcile customer satisfaction with cost optimisation in after-sales: ”In future, the surviving service partners will be focusing more and more on designing standardised processes. On the one hand, these will replace the multiplicity of special arrangements and – much to the delight of manufacturers of electronic goods – will make repair logistics significantly cheaper.” According to Wolfgang Leuthner, there are two prerequisitesfor getting this process off the ground: ”On the one hand, the willingness of everyone involved to work towards a sensible and sustainable solution. On the other hand, a general realisation that efficient logistic processes play a decisive role, both in terms of customer satisfaction and cost optimisation.” Without doubt, complaints are the last thing that companies want to hear from their customers. However, they should not overlook the fact that prompt, unstinting and professional handling of customer complaints can also work to a company’s advantage. Because the consumer feels that he can rely on a brand even in ‘less felicitous circumstances’. By contrast, a tedious and costly journey along an overly complex service chain can leave a lasting bad impression. The message is coming over loud and clear – we have to abandon the low-price mentality, which sooner or later has an adverse effect on quality, and aim for long-term success instead of adopting the much-vaunted ‘quick wins’ strategy.