Amazon might enjoy only very thin to nonexistent margins on its Kindle hardware, according to most industry watchers, but it looks to be cooking up a plan to extend device sales revenue thanks to extended warranties. That’s according to trademark filings uncovered by GigaOM in a new report today. The wording of the application suggests Amazon is following Apple’s lead, hoping to replicate the Mac maker’s success with its AppleCare extended hardware protection plans.
GigaOM notes that Amazon’s patent is almost identical to Apple’s but it would apply to “Kindle” products, and goods and services associated with that name. The trademark would cover “maintenance, repair, updating and installation services,” as well as troubleshooting services, and a second trademark filing associated with the first extends to “insurance and warranty services.”
In the consumer electronics space, extended warranties are big business. As a former employee of Best Buy myself, I can tell you that margins on big-ticket items like PCs were razor-thin, and that the Product Service Plans (PSP) we were encouraged to shill were the real moneymakers, along with accessories. Best Buy has never been very open about how much of its bottom line comes from the PSPs it pushes, but they’re clearly of key value to the retailer’s bottom line, given how hard they push them, And of questionable value to consumers given that nowadays, merely telling a Best Buy employee that I used to be one when they launch into their PSP pitch is almost always enough to get them to stop.
Apple has done a better job of making its own AppleCare service appeal to consumers, and many disinterested third-parties will actually recommend picking them up. The company has faced legal challenges in Europe around AppleCare and how it works with EU regulations guaranteeing consumers two years of basic protection on consumer electronics purchases, but Apple is resolving those issues and continuing to offer its extended warranties in affected countries, albeit differently than they’re sold in the U.S. and other locations.
Amazon partners with a third-party provider, Service Net, to provide Kindle extended warranties, but in doing so, it’s leaving money on the table long-term. An AmazonCare (they won’t be so brazen as to actually call it that) offering would help it add revenue to device sales with relatively little cost. That’s something which would provide a lot of upside for a gadget-maker that now needs to compete with Google on pricing, a company which is arguably more willing and able to ignore profit margins on hardware in pursuit of getting its devices into more hands.