We’ve all experienced it – that dreaded moment when a new appliance suddenly stops working. And rather than giving you comfort, the idea that it is still under warranty gives your stomach muscles a twist. Where is the receipt – is it in the trusty old box labelled “receipts & other stuff” in the study; or in the pile of to-be-filed papers collecting on the dining-room table? And if you are lucky enough to find it, will it be readable or has the ink melted away into the thermal paper.
In this post, I evaluate the concept and technology being developed by a team of South African entrepreneurs to digitise warrantees. By further unlocking the use of block-chain technology (Van Rooyen, 2017), key role players in the day-to-day transaction cycle will be connected to streamline the warranty and warranty-claims processes and eliminate the need for paper-based warrantees.
What is a digital warranty?
The concept is for manufacturers to create product information, which include the warranty parameters, in an Ethereum blockchain at the point of manufacture. Retailers will augment this information in the chain with the sales information when the item is sold to the consumer, thereby creating the warranty information. The consumer will then use an app to add their details to the chain which completes the digitised warranty.
How would it work?
Figure 1 shows how a manufacturer would create its finished goods in the chain, including product information (for example, make, model, serial number, etc) and the warranty parameters (for example, term/period, type of warranty – repair only, replace only, repair or replace, service only). The manufacturer will also record when the item is sold to a retailer or distributor to allow for the tracking of items (weather it is in transit, on-floor or with the consumer).
An additional feature for manufacturers would be product placement in the app, once the consumer has completed the steps illustrated in Figure 2 below, using code from one of the readily available open-source recommendation agents. For example, a customer that registers a new 50″ TV can be sent a notification, or shown in the app, what other customers bought in addition to the TV – for example, a sound-bar. Also, on expiry of a client’s warranty, manufacturers can push replacement products to consumers or give the consumer the option of buying an extended warranty.
Figure 2 illustrates the process flow once the consumer has purchased the product which, in most cases, is when the warranty is activated. Participating retailers will add a QR code to the printed receipt which the consumer will scan with their smartphones, directing them to the digital warranty app. It is anticipated that large contracted-in retailers will require only a unique code from the customer – their warranty wallet number – to have the purchase sent to their digital warranty wallet, eliminating the need for a printed receipt altogether. Registering on the app can be done through an email & password combination or using an existing social media account. A broadly similar workflow, with different interfaces, will exist for consumers that want to register and manage their warrantees online instead of on the app. Once registered, they can add new warrantees, create an asset register or manage their warrantees – for example, take out extended warrantees – directly on the app or online. Opt-in notifications will send consumers an alert when an item’s warranty is about to expire and offer extended warrantees where these are available as well as advertisements from manufacturers.
Most importantly, because the information in the chain is immutable, consumers no longer need a physical receipt and any claim they make against the warranty will automatically be validated through the entry in the chain. By placing the customer at the centre, various add-on services can be created to manage the claim process on behalf of the manufacturer – for example, courier services to move items to and from the service centre or providing loan items for critical appliances.
Why would people use this?
For the consumer
- Easy access: Purchase information is stored in one place, making it easy to reference and access when needed in a fast and efficient manner.
- Durability: Unlike paper receipts that are often printed on thermal paper, a record created in a blockchain is immutable and permanent.
- Acceptance: The decentralised nature of blockchain technology means that the warranty is automatically validated in the chain in the event the consumer needs to make a claim.
- Free storage: e-slips eliminates the needfor space-consuming and complex filing systems.
- Information security: Personal information is stored only once in the app rather than with multiple retailers, which reduces it’s susceptibility to malicious or accidental disclosure.
For the wholesaler or manufacturer and the retailer
- Customer loyalty: Completing forms, collecting data and hard copy documents are a thing of the past which is likely to improve brand loyalty & increased repeat sales.
- Reduction in fraudulent claims: As the authenticity of the warranty is no longer paper-based and dependent on human error, it is expected that the cost of fraudulent claims will reduce. Claims for “fake” or counterfeit products will no longer be an issue as the manufacturer or retailer can track the chain of custody of each product.
- Increased sales: Product placement and recommendations within the app or making extended warrantees available can generate revenue.
- Cost reduction: Efficiency in the sales and warranty claims process. Printing and printer maintenance cost will reduce.
- Reduced carbon footprint: Consumers respond positively and reward retailers with loyalty when the retailer demonstrates awareness of and a reduction in its carbon footprint.
What are the challenges and how will the entrepeneurs respond?
- Monetising the service: The reality is that, whilst consumers may crave the simplicity of the service, not many will be willing to pay for it. Revenue streams would need to come from manufacturers and retailers who may not see the immediate benefit to them. Emphasis should, therefore, be on creating the ability to track inventory through the entire value chain, quick validation of warrantees when claims are made and increased sales from product placements. An additional consideration is to let consumers experience the service and then implement a pay-as-you-want pricing model for people to contribute toward the service.
- Scale of the ecosystem: There are many role-players in the value chain which complicates negotiations and, due to the highly competitive nature of the consumer goods market, open discussions are tricky to navigate. Seeking out an advisory board for the initiative that is credible in the retail sector and can offer good connections is imperative, as is an experienced negotiator.
- Lack of trust leading to low uptake: Whilst consumers, retailers and manufacturers would all appreciate the convenience, online trust is a subjective emotion that is hard to establish for new providers. This is especially the case where a recommendation agent recommend additional products, sponsored by the manufacturer, to consumers. All sponsorships will be disclosed in addition to comments as to why the specific product is being displayed. The choice of initial partners – retailers and manufacturers – is crucial to creating trust and credibility for the service. In addition, electronic word-of-mouth references from retail-industry influencers/stalwarts will increase adoption.
- Funding: Like all start-ups, the team are looking at different funding options for their business. One of these options is crowdfunding to see if that attracts a suitable investment without having to give up too much of the company’s equity.
The portability of the information collected through this process to other organisations – like short-term insurers and financial institutions – and the actual service to other industries – like motor-vehicle warrantees – are wide-reaching. Whilst there are many and seemingly sizeable challenges to overcome, the benefits throughout the entire value chain and the rather simplistic technical solution to realise these benefits, makes this a no-brainer.
The team of entrepreneurs in South Africa are excited to deal with the challenges and are confident that the various role-players will come together, putting the consumer at the centre, to make this possible. Look out for your electronic warrantee coming soon.
Kulkarni, A. (2018). What else could blockchain be used for? Quora. Retrieved from https://www.quora.com/What-else-could-blockchain-technology-be-used-for/answer/Ajit-Kulkarni-4 on 22 February 2019.
Van Rooyen, J. (2017). Real-world applications of blockchain-enabled supply chains. Resolve SP. Retrieved from http://pressoffice.itweb.co.za/resolvesp/PressRelease.php?StoryID=275840 on 22 February 2019.