The electricals sector is changing as retailers branch out into offering technical support services. But, as Liz Morrell finds out, this new territory brings a host of fresh challenges

Electricals retailers used to be renowned for pushy sales people who would ram costly warranty agreements down customers’ throats the moment they agreed to a new purchase.

These days, they are focusing on winning back consumer trust through new service-based offers that not only provide a valuable revenue stream, but the chance to build a longer-lasting relationship with the customer. The advantage of this channel for the shopper is that they don’t even have to be a customer – they can buy their goods from the electrical retailer itself, or any one of its rivals.

It is a market in which electricals specialists are expanding fast, but retailers should exercise a degree of caution. A service proposition is very different from a store-based operation offering product and they need to ensure core brand values are communicated. As Pali International retail analyst Nick Bubb says: “Bad service will rebound on you, so it is a bit of a double-edged sword.”

Panmure Gordon analyst Christian Koefoed-Nielsen agrees. “You risk your brand being compromised by people not following the course and alienating the consumer,” he says. “There is a lot of investment and training required and a lot of management time needed to keep it on track.”

Complexity of technology also brings challenges. “This is not as simple as saying: ‘We’ve brought you a new washing machine and will take out the old one and fit the new one’,” says Koefoed-Nielsen. Instead, incompatibility problems between hardware and software of different ages could mean retailers are caught out by offering such services – especially as many are operating on a no-fix, no-fee basis.

DSGi launched its Tech Guys service in September last year, using much of the infrastructure it had in place already for its Mastercare warranty-support business. The new service was capable of supporting 16,000 home visits a week and involved 3,000 experienced advisors answering customer queries.

At launch, the retailer unveiled a£50 million five-year investment plan for Tech Guys, with ambitions to open 200 standalone service locations in the UK and service points at 150 PC World stores, as well as a number of concessions. Tech Guys commercial and marketing director David Bugg says: “We saw a classic opportunity of a real customer need and no channel serving it.”

A year on and there are Tech Guys concessions in all 162 PC World stores, which comprise a branded desk and workshop and at least three Tech Guys. In addition, there is a telesales centre that customers can call for over-the-phone technical support and engineers who visit customers’ homes. DSGi is also piloting eight standalone Tech Guys stores and is considering establishing them in Currys, with a two-store trial under way in the Northwest. The launch of a franchise operation is also under discussion.

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Like most of its competitors, Tech Guys’ offer is broad and comprises phone support, home visits or a monthly subscription-based support service. “A lot of what we do is wireless installations, setting up kit for people, installing all the software, connecting to printers and so on, as well as wall-mounting and setting up TVs and connecting laptops to TVs,” says Bugg.

While Tech Guys is 100 per cent owned and operated by DSGi, Carphone Warehouse chose to launch a comparable offer through a partnership with US mobile phone retailer Best Buy. In the US, Best Buy owns a 12-year-old business called Geek Squad, which offers similar services to Tech Guys. Through the joint venture with Carphone, the pair launched Geek Squad in the UK last year.

Its British expansion has been slower than that of Tech Guys, because the company claims it is stricter on the quality of its staff, but it has the advantage of being able to draw on US experience. Geek Squad head of marketing Will Lever says: “At the moment, we are national by remote call, but our agents are London-centric.” However, a Manchester base for the operation is about to launch.

Unlike Tech Guys, Geek Squad’s service is focused purely on PCs. “These guys are skilled PC operators who understand technology. They are not about screwing TV units onto walls,” says Lever. The service has brought a valuable brand extension for Carphone Warehouse. As Koefoed-Nielsen says: “It enables you to sell products with more confidence, or sell products that you couldn’t have sold before if you didn’t have the service back-up.”

The branding of such services has varied. Best Buy and DSGi chose to keep it separate. DSGi says this allows them to appear independent of the retail offer and less like they are simply trying to achieve another add-on sale. “Customers have no idea we are part of the group,” says Bugg. “As far as they know, Tech Guys is a genuine concession within DSGi. In time, I’m hoping the stores will have their own character,” he says.

However, Comet chose to market its technical support offer under the Comet brand because it believes this tactic strengthens, rather than weakens, the offer. It has now brought its extended warranty-repair service in-house and launched its own technical support service, branded Comet On Call. Head of services Stuart Lacey says: “Given that we want to be the UK’s most trusted expert, we would rather build the trust with the Comet name.”

The service launched in May last year. Blister packs promoting the various services that customers can buy in-store are available in 250 outlets. Its home visit service operates on a national basis, but the company has yet to launch a nationwide in-store service. Comet On Call operates in 14 stores – elsewhere, customers have to drop off their products for a send-away service. The retailer hopes to roll out a national service by next summer.

The speed of expansion has also varied between retailers, with some taking their time and others racing to get market advantage. Each tactic runs its own risks. DSGi may have the scale, but has had to resort to outsourcing for adequate engineer expertise – a tactic that could mean that such staff won’t have the same customer understanding.

Toby Strauss, executive chairman of IT services company Order Work, provides overflow engineer cover for DSGi, as well as technical support for e-tailer Ebuyer. He provides suppliers with information about each retailer he works with. “We produce training guides that explain the processes and how to present themselves to each retailer. We can also produce retailer-specific photo ID and rate engineers after every job,” he says.

Positive customer response to the launch of such services can also cause its own problems. Bubb says he has witnessed problems with PC World’s in-store service. “There is a lot of queuing going on, which is blocking customers from doing other things and causing frustration all round,” he says. Bugg admits: “A lot of it is about consistency. We scaled the operation quite quickly and getting the consistency has been challenging.”

Lever says Geek Squad decided on slower expansion because it wanted to deliver a premium service with staff of the highest quality. But this means its service has nowhere near the coverage of Tech Guys. “We are fanatical about the people we employ,” says Lever. Lacey says the same is true at Comet On Call. “We have been extremely strict about the technology, the level of expertise and the type of person we take on,” he says.

Another challenging area has been trying to work out what services are the most useful to customers and how they are sold. “A common pitfall can be the way they are packaged. It’s about your shopfloor staff getting comfortable talking about services and being able to explain the scope of the service to the customer,” says Strauss. This means that the proposition has to be clearly specified. “One example we had was where a customer bought a computer and a desk and thought the installation service included constructing the desk,” he explains.

In Comet’s case, bundling such services with product sales or as blister packs also makes it easier on sales staff. “When designing services, the extent to which they can be packaged up makes it easier for the way that staff are used to selling,” says Strauss.

Electricals retailers insist there is huge potential in the technical support market and it is possible more retailers could enter. Argos is piloting a sound and vision installation service in 60 stores, but this does not extend to PC support. Bugg says: “It’s definitely going to be a big market, but the key thing is going to be the proposition.”

Lever points to the size of the US market, which comprises about 12,000 Geek Squad agents alone. “As technology continues to develop, there is more and more need for such services. I don’t think there will ever be a day where it’s as simple as pressing one button,” he says.

Koefoed-Nielsen believes retailers have been forced to enter the market because of technology complexity. “The first feedback doesn’t go to the manufacturer if something doesn’t work – it goes to the retailer the customer bought it from,” he says.

The electricals retail sector is changing. Retailers have to consider services as an addition to their proposition – or risk losing customers to the competition. Strauss says: “Any retailer selling PCs should be in the services market, because the margins are tight on product. On services the margins are very attractive and, if you get it right, you can end up with a much more loyal customer.”

However, warns Koefoed-Nielsen, offering a fantastic service infrastructure could result in customers buying their goods from cheaper competitors or the internet and then using the major retailers for technical support. The electricals sector is undergoing something of a transformation. And getting it right is going to be a tricky process.