TechForward Inc., a Los Angeles startup pioneering a new wrinkle in consumer warranty services, has entered into a partnership that could be a major boon for the young company.
Under a contract signed last week, Vancouver-based W3 Solutions, North America’s largest provider of extended warranty plans, will offer TechForward’s “guaranteed buyback” plan along with W3’s product warranties. Amid a decline in the appeal of traditional warranties, the two companies hope this new service will catch fire with big-box retailers nationwide.
“We’re currently in talks with several big-box stores,” said Marc Lebovitz, co-founder and vice president of TechForward.
TechForward’s unusual service allows electronics consumers the right to sell a device back to TechForward. Typically, a consumer will buy a product, such as a digital music player or laptop computer, and pay a fee at the point of purchase often around $50 for the “guaranteed buyback” plan.
The consumer can opt to sell the device back for a predetermined amount that decreases over the next two years, or they could just keep the device, though the original fee is not refunded. TechForward then takes the product and resells it into a secondary market for a profit.
TechForward started in 2005 by Lebovitz and Chief Executive Jade Van Doren, but has had limited success, teaming mostly with small independent retailers around Los Angeles. This new agreement could prove lucrative since W3 has multiple retail partners, including Dell Inc., Yahoo Inc. and Hitachi Ltd.
What’s more, as traditional warranties decline in popularity, the companies see a new hole to be filled with big-box stores. Circuit City Stores Inc. just posted a $165 million first quarter loss, citing a slip in sales of profitable warranty and installation services.
Getting big-box stores to offer the buyback service, however, could prove difficult since it is inherently more speculative and risky than a warranty.
George Whalin, chief executive of Carlsbad-based Retail Management Consultants, said the model could collapse if the company is forced to buy a product that proves to be faulty or otherwise unattractive on the resale market.
