State of the Service Industry: 3 Causes for Increased Demand
Industry Information |October 5, 2020
This past summer we have seen an unprecedented demand for in-home service resulting in backlogs of service requests and long waits before service can be performed including appliance repair, air conditioning service, or even product replacements and installation.
All the OEM, extended warranty, whole home warranty, or service companies we have spoken with have similar stories describing the state of the in-home service industry. Record service volumes, historic demands, and service backlogs of two to three weeks as the norm and in some areas, five to six weeks. Manufacturers with normal peak service seasons in the summer have described the 2020 season as a “peak-upon-a-peak”.
This trend is not anticipated to taper off or return to any past volumes for months, if not years.
COVID-19 is driving a backlog of service
In the early months of the pandemic, the service industry and manufacturers were preparing for potential disastrous 2020 as the economy came to a virtual standstill and the pandemic’s shelter-in-place and stay-at-home orders emptied the stores, idled the workforce and stopped inventory flows around the world.
However, as the U.S. adapted to the new work-from-home norm, the service industry experienced a rapidly growing demand for in-home services; both in-warranty or out-of-warranty service. If the work-from-home would have only lasted a few weeks, then we may have not seen this demand for service. However, as offices, schools, and restaurants remained closed for weeks and then months, the household appliances which normally were idle during the day, were being used almost 24/7.
As early as June, call centers supporting the OEMs and warranty companies started seeing an increase in service requests. By July, many retailers and dealers were selling through their previously idled inventory of appliances. In August, demand for appliances outpaced the supply and replenishment of inventory. Each of these events started forming as the perfect storm which created the backlog of service.
“Repairing appliances is in high demand right now,” said Lance Kimball, owner of Appliance Repair Specialists in Tampa, Florida. “The largest competitor to an appliance repair company is an appliance replacement. Normally if an appliance repair company quotes a high repair price, the customer would replace the appliance over the repair. What is happening are appliance dealers do not have appliances to sell as the supply chain is broken due to COVID-19. In the early months [of the pandemic], consumers purchased appliances pulling sales from current inventory. When factories shut down due to COVID, product replenishment stopped, and parts produced in other countries needed to manufacture appliances or needed for service were not available. This shortage of parts is also causing a backlog of service.”
Three main causes for the current state of the in-home service industry:
Service Whiplash from the early COVID Shutdown
When the pandemic hit and the shelter-in-place orders started coming out, along with the economy, the service industry came to a standstill as everyone adjusted to being at home. Most consumers did not want anyone in their homes and many service company employees were fearful of providing service. However, appliances continued to need service, and this resulted in pent-up demand during April and May that was later felt in June and July.
High Product Usage = Higher Service
Appliances were getting far more use with everyone suddenly at home, the appliances are seeing higher usage rates and therefore higher service incidents. What was expected to be a “few weeks” has now extended over 6 months with no end in sight because many companies and employees have adjusted to a new work-from-home norm.
Every appliance OEM and Dealer we have spoken with are seeing record sales over the past few months and this demand is expected to continue well into 2021. The current backlog of product inventory is causing a high demand for out-of-warranty service and when the supply chain eventually catches up with consumer demand, the service industry will see an increase in in-warranty calls.
Other common factors have also played into the demand for service.
“We have had a record hot summer in most of the country that always bumps up business. I believe it will only pull back slightly for the fall and we will all have records again next summer if it continues to stay hot or appliances become scarcer to acquire,” said David Smith, owner of Dave Smith Appliance Services and Second Vice President of the United Appliance Servicers Association.
So, what is the outlook? In September, the service industry was still experiencing record demand for in-home service. As a result, service companies continue to see a backlog of service in most areas across the U.S. of two to three weeks and in some areas as far out as six weeks. The general expectation within the industry is that this trend will continue through the end of 2020 and possibly throughout 2021 as consumers and workforces adapt to the new work-from-home trends we have seen over the last six months.
The silver lining to the situation is there is increased demand for service personnel in an attractive and well-paying industry. As people look for new jobs in the post COVID economy, the appliance service industry is there.
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