Merchants Can Mitigate Supply Chain Woes With Extended Warranties? Clyde CEO Says Yes

When thinking about supply chain issues, extended warranties are probably not the first thing to come to mind — in fact, the two subjects seem to have little correlation. But Brandon Gell, CEO and co-founder of Clyde, said supply chains actually play “a serious role with what we do, [even though] we didn’t start the business knowing that.”

“We work with hundreds of merchants that are dealing with all sorts of problems at any given moment, and a core theme over the past year and a half, two years has been supply chain,” he said in an interview with PYMNTS.

Clyde has built internal systems to ensure a warranty doesn’t start until the consumer actually receives the product, which requires the company to be looped into shipping updates, webhooks and other digital information sources. “That’s sort of been Pandora’s box for us into how we can help in other ways with supply chain issues,” Gell said.

Repairing Over Replacing

When it comes to warranties, he said, communication doesn’t stop when the product is delivered — brands need to be ready to address problems that arise during the consumer experience.

Previously, most brands would replace a broken or defective product with a new one, Gell said, but “that world doesn’t exist anymore” as companies focus on fulfilling orders for new customers. An alternative, he said, is repairing the product, either in-house or through Clyde’s network of providers.

“We own the ability to actually make the resolution, whatever it needs to be,” Gell said.

In some cases, he noted, Clyde actually has a stronger repair network for a company’s individual products than the brand itself. And while ultimately the decision to either repair or replace an item lies in the hands of the merchant based on what customers expect, Gell said Clyde strives to make the consumer whole again as quickly as possible.

“It might be more expensive for us but doing what’s right for a consumer in the long term is going to be beneficial for us as a business, it’s beneficial for them, and it’s beneficial for the original merchant that they bought it from,” he said.

Warranties as Add-ons

Clyde also works with merchants to give them the ability to offer a free warranty as a way to compensate customers for shipping delays or other mishaps, that are again often tied back to supply chain issues.

“The warranty’s not the first thing that comes to mind … when you think about decreasing your CAC [customer acquisition cost], but it’s that additional margin that [retailers] receive from Clyde that actually gives you the ability to say, ‘I can actually pay more for this consumer now,’” Gell said.

Though the merchant still has to pay to offer a free warranty to the consumer, “in some cases that’s better than having that customer cancel their order or decide they’re going to write a bad review.”

The CEO hinted that Clyde is finalizing plans to release several new products in the coming months that will also reflect the impact of supply chain issues.

Still, Gell said the most important piece of advice that Clyde gives to businesses it works with is communicating with consumers upfront, “really just telling the customer immediately that there’s going to be an issue.”

He pointed to Peloton, which in November had to apologize for not delivering products on time because of fulfillment and shipping issues, which led to customer complaints and defections to competing connected fitness companies.

Read more: Peloton Records First $1 Billion Quarter; Allocates $100 Million For Delivery Issues

“The best thing that you can do is just be proactive and transparent about your communication,” Gell said.

A Clear Value Proposition

Clyde uses proprietary information to generate pricing for its warranties, taking into account the type of product and its price tag, with the actual cost of the warranty very dependent on the merchant itself.

Gell said this approach creates “really clear, simple and transparent terms and conditions and value props for an individual consumer that are specific to the product that they’re buying instead of clearly being generalized for millions of different types of products.”

Related: ‘Smart Math’ Key To Tailored Product Protection Programs For Merchants, Consumers

Whatever Clyde is doing to differentiate its offering appears to be working as it has an 18% attachment rate, compared to an industry average of 4%.

“Your journey with Clyde usually starts below that and usually can end above it if you’re willing to commit to getting there with us,” Gell said.

He added that it remains to be seen how inflation and rising prices affect future purchasing but said that during the pandemic, the company has seen an increase in the share of customers who bought Clyde’s protection.

“That is maybe in part correlated to the number of people that are buying online versus buying in-store,” Gell said. “Maybe it’s correlated to the number of people who are buying direct versus through third parties.”

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