How Many Times Warranty Tool to get What you Paid For?

[YoshiMoshi3]

When tool companies that offer "Limited LIfetime Warranty" on their tools, how many times do they calculate in their equation that you will warranty the tool for? Not sure if there's a general rule of thumb?

Price of Tool to Customer = Base Price of Tool to Manufacturer * X

What is X? Meaning how many times do you have to warranty the tool, where the manufacturer is actually loosing money on the sale of the tool because: Price of Tool to Customer < Base Price of Tool to Manufacturer * X

I was thinking around 3 times or so? Where the initial price of the tool is basically 3 times the actual cost of the tool to the manufacturer?

I heard car insurance companies, when they go to figure out how much to charge you, charge you under the assumption that you will use your insurance at least once every 7 years or so. Wondering if there is something like this for tools. Where they estimate that you will warranty the tool at least three times or so (?) when they determine the sale price of the tool?

 

[M635_Guy]

It depends a lot on the use case and target market. If they're doing it right they're investing pennies up front on quality to avoid warranty claims. I spend almost 15 years in the tech industry working closely with that group in my (now former) company, and it was fascinating to see how hard they worked to reduce warranty costs. But there was a highly structured process to bring ideas like that forward and estimate/track the potential benefits. Nearly always there needed to be a financial win there, but things came through that were specifically to improve customer experience/customer sat. It's the single-biggest controllable cost after the hardware itself.

All that said, the process and estimates were really different for commercial vs. consumer. Warranty rates were actually pretty similar, but for commercial things had to be far more rugged/durable because the end users didn't spend their own money on the tech so they weren't as careful. And there were some customers who required higher durability - schools, the military, etc. The warranty support window extended seven years from the time a product was withdrawn, so a lot of calculation was done on claim rates, especially for key components mapped against the trends of customers cycling out the devices to replace them with new ones. Consumer was a simpler thing in general. Customers generally paid their own money, so they took care of things better. They didn't move around/travel as much. Customers didn't keep them as long and didn't expect parts to be available for 84 months after the thing is withdrawn. For all that stuff there's a final order of stuff meant to support however long the availability window is. They're usually on the money but occasionally something weird happens that wipes out warranty stock early.

All of that in my company was calculated to what we called a Service Cost Estimate. Since there was so much focus across the company to drive down warranty costs (beyond just the cost of parts, they're expensive for human touches, phone calls and the dang shipping), it's less than you probably expect - often a single-digit percentage of the cost, and that includes the cost of the bits themselves.

I think it's more complicated than the actuarial stuff insurance companies use, but the general idea is similar.

For tool companies, I think hand tools are probably done mainly on what I'd call a replenishment basis - they stock service parts a bit high early and watch how they're drawn down and map out the orders to keep enough to support claims. When they replace or kill it, they probably do a last-time buy and then switch to a like-for-like policy. Power tools are more-similar to what I describe above. Anyone like Milwaukee or HF with their Hercules line (and of course others) that have 5 year warranty on the tools have huge incentive to keep their claim rate low. There are trade-offs invoved - I'd guess Milwaukee will put in extra cost for extra performance without making their warranty claims worse, where HF is more often probably solving for price/value.

I'll shut up now.

 

[badmatt]

If I never have to warranty it, it paid for itself.

 

[Leaflessshadetree]

If a tool fails due to a manufacturing defect I'll use the warranty. If a tool fails because of abuse that's on me. If a tool fails under normal conditions I replace it with a better quality tool.
If the manufacturer expects it to fail once in the warranty period (lifetime?) that is 1 failure too many.

 

[finn]

If I’m typical, most people rarely, if ever have a warranty claiming can count on my fingers how many claims I’ve made since I got my first tools sixty years ago.

Most recently a Karcher pressure washer, a Matco ratchet, a SnapOn ratchet plus a couple of kits, a couple of Craftsman RP ratchets, maybe three Craftsman screwdrivers, a socket, and a couple of junk tools I returned for a refund at HF.

I’ve got thousands of tools, so that is a pretty low percentage. Maybe three hundred dollars worth out of tens of thousands purchased.

I don’t typically return worn out tools. I keep them for lighter, more infrequent work in remote areas.

 

[mikey03]

Honestly man the only person that knows that are the CEOs in the bored rooms.

If I has to guess they lose money on YOU if YOU warranty the tool a single time.

Because I’d have to guess the break even is based on something like 5% or 10% warranty claims total. So if YOU are the 1 in 20 people warrantying it then your the one they lost money on.

A brand like Snap On charges more expecting higher warranty rate. Since users are pros and they literally send a truck to make free warranties easy.

Harbor Freight I mean how much effort you going to put in to warranty a $2 chinese socket? I’d leave it on my coffee table for a month waiting for the next time I’d go and then realize I left an oil stain on the table. Honestly easier to throw it out.

Everybody here has been to harbor freight at least a few times. How many customers you seent in line buying stuff total over all the times you been there? Now divide by how many times you seent anyone doing a warranty? I seent maybe 100 customers in HF over my times being there in line in front of me and 0 did a warranty.

So to say they can afford you to warranty a tool 4 times before they break even, nah bro. I bet they factor in 5% or even 2% warranty claims in HF. But for snap on maybe they factor in 25% depending on the tool.

You figure 10mm sockets probably got a 400% warranty rate like each tech will warranty them 4 times in their lives. But 11mm and 9mm got a near zero warranty rate and snap on sells alot of sets. So accounting for high volume use tools in the set it’s maybe 25% overall lifetime idk but no where near 4x man that’s nuts

 

[NUTTSGT]

Honestly man the only person that knows that are the CEOs in the bored rooms.

If I has to guess they lose money on YOU if YOU warranty the tool a single time.

Because I’d have to guess the break even is based on something like 5% or 10% warranty claims total. So if YOU are the 1 in 20 people warrantying it then your the one they lost money on.
......

I see where you are coming from but on the flip side of that thought....lose a very tiny amount on the warranty claim and get a repeat customer, possibly for life.


How many here bought Craftsman years ago, when they were young, when money was tight, before they got in the trades and before they found GJ.

You could buy decent tools for a decent price with a lifetime warranty. Those tools, which probably rarely failed without abuse are still being used today. If Sears/ Craftsman were still a thing, like days of old, most of us would still be buying them to use, for truck boxes or for our kids, son in laws and grandkids as they are starting out.


All because they took a little loss on a warranty claim.

 

[finn]

Honestly man the only person that knows that are the CEOs in the bored rooms.

If I has to guess they lose money on YOU if YOU warranty the tool a single time.

Because I’d have to guess the break even is based on something like 5% or 10% warranty claims total. So if YOU are the 1 in 20 people warrantying it then your the one they lost money on.

A brand like Snap On charges more expecting higher warranty rate. Since users are pros and they literally send a truck to make free warranties easy.

Harbor Freight I mean how much effort you going to put in to warranty a $2 chinese socket? I’d leave it on my coffee table for a month waiting for the next time I’d go and then realize I left an oil stain on the table. Honestly easier to throw it out.

Everybody here has been to harbor freight at least a few times. How many customers you seent in line buying stuff total over all the times you been there? Now divide by how many times you seent anyone doing a warranty? I seent maybe 100 customers in HF over my times being there in line in front of me and 0 did a warranty.

So to say they can afford you to warranty a tool 4 times before they break even, nah bro. I bet they factor in 5% or even 2% warranty claims in HF. But for snap on maybe they factor in 25% depending on the tool.

You figure 10mm sockets probably got a 400% warranty rate like each tech will warranty them 4 times in their lives. But 11mm and 9mm got a near zero warranty rate and snap on sells alot of sets. So accounting for high volume use tools in the set it’s maybe 25% overall lifetime idk but no where near 4x man that’s nuts

In my former business life, a 2% warranty rate was a disaster.

A lot of manufacturing businesses operate on a few percent profit margin when you consider long term economic swings, and other operating expenses.

 

[zendriver]

I’ve been shopping at Harbor Freight for 25 years

I’ll bet I have not “ warrantied” a half a dozen items.

Their tools are mass produce at a low price so I doubt any type of warranty returns really have much of effect on them.

Places like snap on sells one wrench for $45. They’re probably good too, if they have to warranty one

 

[Nobody-named-Olli]

If you did want to do a meaningful deep dive on this, you’d need to factor in everything else. The tool (and its base cost) is only a single factor out of many. It’s the “value” of the whole warranty process that you would need to price to get an accurate understanding/figure.

Cost will vary between different methods of execution of warranty as well.

Kind regards,
Olli

 

[ecotec]

I don’t even see how you could easily do the math. They are not going to release those numbers to the public. While you can break any tool, the same few tools are probably the majority of tools that get replaced on warranty.

I would probably be safe to say that ratchet internals, bit sockets, and screwdrivers are among the most often warranted tools.

 

[four.cycle]

When tool companies that offer "Limited LIfetime Warranty" on their tools, how many times do they calculate in their equation that you will warranty the tool for? Not sure if there's a general rule of thumb?

I read your question three times.
You're asking a question to which no answer exists due to the infinite number of variables.

Generally speaking, of all of the vendors I dealt with in the past (several hundred manufacturers from whom we purchased directly), they figured if they kept their warranty return rate below 3% of net sales they were doing okay.
Less than 3% of net sales was a gravy deal - those are the Sylvanias and Westinghouses and GEs (headlights and such) or blue-chip stuff (Fel-Pro, Cloyes Gear.)
Remanufactured electrical (starters/alternators) - we figured we were okay if "warranty" returns were less than 5% of net purchases. (Pretty much the same number on most reman stuff: water pumps, carburetors, distributors, brake shoes.)
When "warranty" returns started to exceed 5% of net purchases, we'd give consideration to finding an alternate vendor. (Starters and alternators, in particular.)

But as far as "how many free wrenches does a manufacturer expect to give you?" - I can't even see that question going through the mind of a sales manager or a production manager in a manufacturing facility.

 

[four.cycle]

^ The exceptions to that were the schlock lines: Hollywood Accessories, Cal Custom, Mr. Gasket, Car Freshner Corp. - all "doo-dad" garbage that people would buy to gussy up their beaters trying to be cool.
On that garbage we paid no mind to "warranty" return rates - just give the guy a new one and say "Thank you," because the sales reps were always more than happy to write up "warranty" stuff - and pad the numbers - on gravy lines where their commission base was 5% of net sales. So much profit involved at every level that "warranty" becomes a non-issue.

The "Buffalo Brand" 40-piece socket sets from Taiwan would be an excellent example:

Net cost (freight prepaid from Los Angeles) $1.63 (minimum order 1000 sets) (sales rep was paid 5% of the net invoice on the sale)
From warehouse to stores: $2.17 (25% net margin)
Retail every day $8.88 (76% net margin)
Sale price $4.99 (57% net margin)
Big Blow-out Sale price $3.99 (46% net margin)

(* for reference, "hard parts" (water pumps, clutches, etc.) generally only netted about a 30% - 40% net margin at the retail store level)

Even at $4 bucks out the door, we were almost doubling our money. "Warranty" became a non-issue. Just give the guy a whole new set when he comes back with the 1/2" and 9/16" sockets all rounded out. No problem.

Same with all that stuff comin' over on the boat across the Pacific. Same/same. Everybody's makin' money.

Only difference is that fewer people are making the money because those old "traditional" distribution chains no longer exist - stuff goes direct from manufacturer to retailer now, cutting out two or three levels of "middlemen"

 

[finn]

^ The exceptions to that were the schlock lines: Hollywood Accessories, Cal Custom, Mr. Gasket, Car Freshner Corp. - all "doo-dad" garbage that people would buy to gussy up their beaters trying to be cool.
On that garbage we paid no mind to "warranty" return rates - just give the guy a new one and say "Thank you," because the sales reps were always more than happy to write up "warranty" stuff - and pad the numbers - on gravy lines where their commission base was 5% of net sales. So much profit involved at every level that "warranty" becomes a non-issue.

The "Buffalo Brand" 40-piece socket sets from Taiwan would be an excellent example:

Net cost (freight prepaid from Los Angeles) $1.63 (minimum order 1000 sets) (sales rep was paid 5% of the net invoice on the sale)
From warehouse to stores: $2.17 (25% net margin)
Retail every day $8.88 (76% net margin)
Sale price $4.99 (57% net margin)
Big Blow-out Sale price $3.99 (46% net margin)

(* for reference, "hard parts" (water pumps, clutches, etc.) generally only netted about a 30% - 40% net margin at the retail store level)

Even at $4 bucks out the door, we were almost doubling our money. "Warranty" became a non-issue. Just give the guy a whole new set when he comes back with the 1/2" and 9/16" sockets all rounded out. No problem.

Same with all that stuff comin' over on the boat across the Pacific. Same/same. Everybody's makin' money.

Only difference is that fewer people are making the money because those old "traditional" distribution chains no longer exist - stuff goes direct from manufacturer to retailer now, cutting out two or three levels of "middlemen"

You’re looking at it from a retailer perspective. Your replacement costs are covered by the manufacturer in those examples, so warranty is no skin off your back.

It’s really the manufacturer who has to have a handle on warranty returns, as that’s where the buck stops.

 

[four.cycle]

^ Correct, but in that particular scenario - the Buffalo socket set we brought in for $1.63 - what do you suppose the net cost was to the distributor in Los Angeles?
We were buying from "Buffalo Brand Inc." out of Ft. Worth. Ultimately the charge-back for "warranty" would have gone back to them, but that's not really how it worked for us on that line:
We would go upstairs, grab the cardboard box full of "Buffalo" warranty returns, bring it down, write it all up on an invoice, have one of the girls in the office price out and extend the invoice and come up a dollar amount, and the sales rep would go out and pull out of the trunk of his car enough to offset that amount.
The Distributor ("Buffalo") nor the manufacturer in Taiwan ever had anything to do with it. The sales rep (Cal Stiner) was working on at least a 5% (or possibly higher) commission base - that gave him a lot of wiggle room. (Plus we were buying 20 other products lines from him.)

For that matter, Don Lindquist (factory rep) did the same thing with Fel-Pro. He always carried around "salesman samples" in the trunk of his Buick. The "defective" gaskets went into the dumpster, and he'd hand us a dozen valve cover sets or a head gasket set to offset it. And that money would have been on a write-off line on the P&L for "advertising and promotion".

Other lines were a major hassle. Carter Carburetor Division being the absolute worst. If I had to do it all over, I'd have told them to take a flying leap. Never did understand why we put up with their ****.
McQuay-Norris was another one: just bastards to deal with.

 

[dcg9381]

When tool companies that offer "Limited LIfetime Warranty" on their tools, how many times do they calculate in their equation that you will warranty the tool for?

Unsure, but Sears/Craftsman clearly miscalculated.

I think one huge factor is going to be "how hard is it to warranty" (for the consumer).

 

[HannibalLecter]

I don’t even see how you could easily do the math. They are not going to release those numbers to the public. While you can break any tool, the same few tools are probably the majority of tools that get replaced on warranty.

I would probably be safe to say that ratchet internals, bit sockets, and screwdrivers are among the most often warranted tools.

Easily not. But it is statistics and they have heaps of data

 

[ecotec]

Easily not. But it is statistics and they have heaps of data

They know down to the fraction of a penny, but they wouldn’t it to be public knowledge.

 

[four.cycle]

^ They're most likely giving the buyer an off-invoice discount rather than deal with "warranty".
That's how bulb manufacturers did it: Sylvania, GE, Westinghouse.
They just took 3% off the bottom line of the invoice and called it "warranty allowance".

Can you imagine the logistical nightmare of trying to return "warranty" hand tools to mainland China or Taiwan?

 

[bwringer]

@four.cycle , I'm greatly enjoying the tales of the old days behind the scenes of the parts biz!

 

[MJK]

Lifetime warranties offered by manufacturers are treated as marketing expenses that are accrued for at time of sale. As an example, perhaps a 2% set aside. Does the promise of this warranty lift sales such that is net profitable to do so? Is it a cost of entry because all the competitors do? Its all part of the math.

This isn't necessarily applicable to something like Sears Craftsman where the brand was not the manufacturer. They'll pass that expense (and any other they can they can think of) to the manufacturer. Any manufacturer with lick of common sense will say, "we can't / won't support this forever in an environment where the business is re-auctioned every couple years. But, we can offer a X% discount to cover your expense which is in line with our traditional return rate." And if you own the brand, and collect that from every vendor along the way it sort of works like Social Security. Which is to say it does as long as everything is healthy and growing, and if the business is collapsing then you have bigger problems anyways. And of course that burden is liability when/if the brand is sold, thus discounting it to the eventual buyer. No question SBD discounted for that when purchasing Craftsman from Sears.

Limited Lifetime is just an attempt to cap expense to manufacturing defects, to the original owner, to exclude 'normal wear and tear', etc. If you bought it at a garage sale, ran over it with a truck, stored it in the ocean, or used it outside its intended purpose, then that is on you.

I once worked for a major tool company, and during a returns teardown we found a dead fish inside a reciprocating saw (Sawzall). Came from Texas after a hurricane. Wonder why it wasn't working? We honored it anyways. Another employer got a 45 year controller back - returned in its replacement's box. Also honored. But stuff like this is what makes "Limited Lifetime" look attractive.

Can you imagine the logistical nightmare of trying to return "warranty" hand tools to mainland China or Taiwan?

Dollars to donuts they aren't. Freight alone is more than the value of it. These are typically destroyed in the field and credit issued. The only exception is if the manufacturer has a reason to be curious about it. E.g. a huge return rate on a specific SKU or at an individual point of sale. Then they may require them to be returned to evaluate the products and/or understand what is different at that point of sale.

Once we had a store in SoCal that had a return rate 10x that of any other similar store. Upon some further digging an employee had a scam going where he had a crew of folks buying and returning products in unopened boxes. Normally these would be restocked, but in his position he claimed they were unfit for sale. So, destroy in field. Or in his case, place in dumpster, retrieve after shift, and sell on EBay.

 

[Twisted Sid]

Unsure, but Sears/Craftsman clearly miscalculated.

I think one huge factor is going to be "how hard is it to warranty" (for the consumer).

How did they miscalculate? As far as I've ever heard or read, it wasnt the craftsman line that brought down sears. It was the fundamentally fucked up and greedy CEO Eddie Lampert that did them in.

 

[Firebrick43]

When tool companies that offer "Limited LIfetime Warranty" on their tools, how many times do they calculate in their equation that you will warranty the tool for? Not sure if there's a general rule of thumb?

Price of Tool to Customer = Base Price of Tool to Manufacturer * X

What is X? Meaning how many times do you have to warranty the tool, where the manufacturer is actually loosing money on the sale of the tool because: Price of Tool to Customer < Base Price of Tool to Manufacturer * X

I was thinking around 3 times or so? Where the initial price of the tool is basically 3 times the actual cost of the tool to the manufacturer?

I heard car insurance companies, when they go to figure out how much to charge you, charge you under the assumption that you will use your insurance at least once every 7 years or so. Wondering if there is something like this for tools. Where they estimate that you will warranty the tool at least three times or so (?) when they determine the sale price of the tool?

If I have to return a tool for warranty repair I didn't get my moneys worth.

How on earth do you have the logical thought process that you need to spend additional time, and possibly fuel or shipping to to "get your money's worth"?


A broken tool is a tool not making me money, or fixing things that would cost me money to have someone else fix, and is a liability till its fixed. Good tools don't break under normal usage.

One the the best things I stopped doing was buying craftsman tools, especially their extremely crappy pear head ratchets and screwdrivers, And from that point on, I wasn't wasting my weekends driving to sears for replacements.

Other than ratchet repair kits, if something doesn't last, another brand is found that will.

 

[four.cycle]

@four.cycle , I'm greatly enjoying the tales of the old days behind the scenes of the parts biz!

Well... it is considerably different today. The "factory reps" were eliminated. Independent sales agents (what I did for a spell) were eliminated. Additionally, as I noted: the entire automotive aftermarket parts industry underwent a huge change beginning in the late 1970s/early 1980s, when we started bringing stuff in directly from mainland China that was going directly into retail brick and mortar outlets. (Along the same lines as how Harbor Freight got started.)

Today those distribution levels have pretty much been eliminated: the "warehouse distributor" and the "jobber" who sold only to parts stores.
Same thing happened in the tool and hardware industry. I'm amazed that Harry Epstein manages to stay afloat in today's market, but he's an innovator catering to a niche market - he doesn't have to be all things for all people (like a Walmart.)

 

[dcg9381]

How did they miscalculate? As far as I've ever heard or read, it wasnt the craftsman line that brought down sears. It was the fundamentally fucked up and greedy CEO Eddie Lampert that did them in.

I'm being sarcastic... Sears totally missed the internet, among other things as you've mentioned.

But I do miss Craftsman... Returns? Dead easy.

 

[Etchase]

A couple years ago TTI disclosed their warranty cost as 4% of sales. No further breakdowns were given. Their revenues do not include distributer or retailer mark ups and their costs are overheaded, so not cost of goods sold. It also does not include the consumers cost to exercise the warranty.

 

[four.cycle]

Once we had a store in SoCal that had a return rate 10x that of any other similar store. Upon some further digging an employee had a scam going where he had a crew of folks buying and returning products in unopened boxes. Normally these would be restocked, but in his position he claimed they were unfit for sale. So, destroy in field. Or in his case, place in dumpster, retrieve after shift, and sell on EBay.

When I was working as an independent manufacturers' agent, I was sent to a local warehouse that serviced a local chain of retail auto parts stores. (This was one of the major players here in the area.)
I was instructed to go to the warehouse, make contact with the warehouse manager, and tell him that I was there to write up all of his warranty returns.
He was more than helpful - grabbed a couple guys and told them "Hey, run up into warranty and bring down blah and blah and blah and blah." (We were selling them at least 20 different product lines.)
He handed me a clipboard with a mess of blank invoices, and I started writing stuff up.
When I got all done, I asked him which loading dock did he want me to use to load the stuff up.
He was a bit puzzled, and told me they usually just disposed of the stuff in the dumpster.

"I'm sorry, but I've been instructed by my employer to bring it all back to the office."
The guy's face changed colors about three times.

Apparently this guy had a deal cooking with one of their store managers (the warehouse owned the retail stores) and he would pull all the stuff out of the dumpster at night, then run it through his buddy's store as "warranty", and they'd divvy up the money.

We put the word out to every other rep agency in the area about it and brought his game to a screeching halt.

Never did unload that stuff into a dumpster - a good portion of it went to my buddy and he salvaged bits and pieces out of the stuff for years - lots of spark plug wire sets "missing one wire", or GM starter solenoids "missing parts" (the little copper sleeve), probably over half of their "warranty" returns were brand new parts where somebody ran some sort of scam on them.

The truly funny stuff was all the Harada automatic antennas that were returned marked "defective" that still had the string-mop stuff wrapped around them from the car wash.

 

[AEAdam]

Sorry. Are you guys saying when you warranty a tool at Harbor Freight, HF gets free tools or money back from the manufacturer?

I guess I just assumed, Sears, or Bloomingdales (who had a liberal return policy) or HF backed the warranty on their products. The distributors/retailers are collecting all the profit. They are just handling returns by reducing profit. Too many returns, too little profit, they cancel that contract and bring in new product.

I think it’s possible or likely Asian manufacturers are not making that much profit on the things they manufacture. I think competition is fierce among Asian manufacturers. I’d bet they are making 5%. These are the folks who invented “dumping” where they’d bid less than cost.

 

[Pexto]

These are the folks who invented “dumping” where they’d bid less than cost.

Not only are you painting with a pretty broad brush there, what you say is factually incorrect. The first anti-dumping legislation in the world was introduced in Canada in 1904, followed soon after by Australia and New Zealand. You should be able to guess which country they were trying to protect their domestic producers from.

 

[four.cycle]

Sorry. Are you guys saying when you warranty a tool at Harbor Freight, HF gets free tools or money back from the manufacturer?

As I mentioned above, in the case of Harbor Freight, the most likely scenario is that they've simply negotiated with their suppliers in mainland China (PRC) some sort of discount to compensate for warranty claims.
I doubt they're shipping broken tools back to China, and it's more doubtful the manufacturer is "giving money back".
Most likely the same sort of arrangement we had with Sylvania and Westinghouse - an off-invoice discount to offset warranty claims, or it's just built into the bottom line and HF just eats it and peddles off what they can.

 

[Aaron_W]

I don't believe there is one answer, as there are many variables. Profit margin, and company reputation being two of the big ones. The formula HF uses is going to be very different from Snap On, because they have entirely different business models.

 

[M635_Guy]

I don’t even see how you could easily do the math. They are not going to release those numbers to the public. While you can break any tool, the same few tools are probably the majority of tools that get replaced on warranty.

I would probably be safe to say that ratchet internals, bit sockets, and screwdrivers are among the most often warranted tools.

Externally there's zero chance you'll be able to do the math. I used to do customer briefings under NDA and got a stern warning every year that the warranty claim information I was using had better never get released publicly. I used to (kinda) laugh since it would have been a great story for us, but it was seen as propietary information.

Unsure, but Sears/Craftsman clearly miscalculated.

Only in their selection of a CEO that gutted them like a bait fish. Craftsman and the Kenmore appliance lines alone had huge value before he started playing games.

^ They're most likely giving the buyer an off-invoice discount rather than deal with "warranty".
That's how bulb manufacturers did it: Sylvania, GE, Westinghouse.
They just took 3% off the bottom line of the invoice and called it "warranty allowance".

Can you imagine the logistical nightmare of trying to return "warranty" hand tools to mainland China or Taiwan?

Doesn't happen. They handle it with contract terms one way or another. But when it's a house brand there are guardrails unless they're stuipd.

I'm being sarcastic... Sears totally missed the internet, among other things as you've mentioned.

You're right. They bought Lands End to try to to figure it out, and mainly just destroyed them because they were so busy trying to be clever with real estate and other stuff that wound up killing them. If they'd gotten their **** together they could easily have been Amazon before there was an Amazon. But a company called ValueAmerica was Amazon before there (today's) Amazon, and they still managed to be a disaster too.

But I do miss Craftsman... Returns? Dead easy.

Which HF has largely copied...

A couple years ago TTI disclosed their warranty cost as 4% of sales. No further breakdowns were given. Their revenues do not include distributer or retailer mark ups and their costs are overheaded, so not cost of goods sold. It also does not include the consumers cost to exercise the warranty.

If that's across all their product lines (total) I could see it as they have a lot of cheap consumer stuff they're probably playing some odds of "Will they bring it back?" and cost. For things that have the 5 year warranty like the Milwaukee FUEL stuff, I bet it's a lot less than that 4% (unless they're really stupid, which I doubt. Same for the HF Hercules - you put a warranty that long out there you better have done the homework to minimize failure.

Sorry. Are you guys saying when you warranty a tool at Harbor Freight, HF gets free tools or money back from the manufacturer?

I guess I just assumed, Sears, or Bloomingdales (who had a liberal return policy) or HF backed the warranty on their products. The distributors/retailers are collecting all the profit. They are just handling returns by reducing profit. Too many returns, too little profit, they cancel that contract and bring in new product.

It's more complicated than that - As a pure retailer, Bloomingdales almost certainly ran returns through multiple different sections of their books, some of which was cost of customer goodwill (not likely described like that). And they likely balanced it with the folks they were buying from over time.

Sears, specifically Craftsman, was big enough that they likely had warranty thresholds with the people that manufactured for them. Just like HF, they definitely weren't sending 1-for-1 returns to their manufacturers, but I'd guarantee they both have thresholds in their contracts after which the manufacturer was on the hook for any abnormal levels of returns. Both probably provided samples back to the factories for process/manufacturing improvement.

The company I worked for had multiple tiers of tracking warranty claims at component, assembly, manufacturing plant and finished goods (among others) and really dialed in on all of them. Every single product had a "Service Cost Estimate" as part of the approval process to get the green light to move forward, and those estimates were constantly evaluated against the real-time warranty claims. The result was the various teams got really good at evaluation and estimation, and warranty claims were the lowest in the industry. Just the savings on stuff like shipping and dealing with the customers alone made that an extremely critical piece of being profitable.

I think it’s possible or likely Asian manufacturers are not making that much profit on the things they manufacture. I think competition is fierce among Asian manufacturers. I’d bet they are making 5%.

Based on what do you say this? Seriously.

I'd note that based on the above stuff in this post, "competition" almost certainly contains as much quality and minimizing claim rates as it does low price/cost.

These are the folks who invented “dumping” where they’d bid less than cost.

 

[Aaron_W]

If that's across all their product lines (total) I could see it as they have a lot of cheap consumer stuff they're probably playing some odds of "Will they bring it back?" and cost. For things that have the 5 year warranty like the Milwaukee FUEL stuff, I bet it's a lot less than that 4% (unless they're really stupid, which I doubt. Same for the HF Hercules - you put a warranty that long out there you better have done the homework to minimize failure.

If you look at the add on when there is an extended warranty offered that should give some idea of how warranty factors in, although I'm pretty sure there is some additional profit factored into optional warranties.

I look at HF Bauer brushless impact, which is $39, an optional 2 year warranty adds $13 (+30%). Hercules brushless impact driver is $69 with a 5 year warranty included.

By extension the Bauer with a 5 year warranty (if it were offered) would end up costing about the same as the Hercules.

That is part of the reason I don't worry about warranties beyond 90 days as we pay for those longer warranties one way or another, and 90s days is usually enough to catch manufacturing flaws.

 

[gtae07]

I warrantied a tool exactly once, a HF ratchet. Once the customer service guy realized it was a lifetime warranty, it was no hassle.

Otherwise I just don't break tools, or if I do I knew I was abusive to them.

 

[Steve_P]

I see where you are coming from but on the flip side of that thought....lose a very tiny amount on the warranty claim and get a repeat customer, possibly for life.


How many here bought Craftsman years ago, when they were young, when money was tight, before they got in the trades and before they found GJ.

You could buy decent tools for a decent price with a lifetime warranty. Those tools, which probably rarely failed without abuse are still being used today. If Sears/ Craftsman were still a thing, like days of old, most of us would still be buying them to use, for truck boxes or for our kids, son in laws and grandkids as they are starting out.


All because they took a little loss on a warranty claim.

Like HF, the Craftsman business model had you return to the store. So, you returned a $1-3 their cost socket, screwdriver.... and then since you were there, I mean, you drove there and need to make it worthwhile, you 99% you bought at least one other item that they made $ on. And with Sears, it was an excuse to buy a thousand other items, like socks.... since you and the family were there.

 

[M635_Guy]

If you look at the add on when there is an extended warranty offered that should give some idea of how warranty factors in, although I'm pretty sure there is some additional profit factored into optional warranties.

I look at HF Bauer brushless impact, which is $39, an optional 2 year warranty adds $13 (+30%). Hercules brushless impact driver is $69 with a 5 year warranty included.

By extension the Bauer with a 5 year warranty (if it were offered) would end up costing about the same as the Hercules.

That is part of the reason I don't worry about warranties beyond 90 days as we pay for those longer warranties one way or another, and 90s days is usually enough to catch manufacturing flaws.

That's my guess why they have it. Everybody slaps it as a lack-of-confidence-in-their-product thing, but I'm pretty sure it's a financial thing: if you offer a long-term warranty you have to accrue money for future warranty costs. That's really inefficient financially in multiple ways and creates a cost that has to be passed on to the customer (or take a profit hit, which nobody does). So they let the customer choose.

If the tools with the 90-day warranty were actually only designed to last 91 days, the rain of hate would flood the internet and they'd lose money on the tools, the lost sales, the customer goodwill, etc. But even the cheapo grinder they sell for $15 (and is currently for sale for $12, which happens fairly often) seems to last most people really well. I wouldn't expect it to be more than light-duty for that money, and I'd hope anyone else buying one doesn't either, but...

They had a smokin' sale on the 13-amp corded Hercules grinder (normally $99, got it for $55) that only has a 90-day warranty (5-year is on the brushless battery tools), and that thing was an absolute champ when I was carving up a cast iron tub in my house a couple years ago. It has done everything I've asked of it since.

Net: the 90-day thing doesn't bother me because I'm 100% positive it's a price point thing, not a quality thing.

 

[M635_Guy]

I see where you are coming from but on the flip side of that thought....lose a very tiny amount on the warranty claim and get a repeat customer, possibly for life.


How many here bought Craftsman years ago, when they were young, when money was tight, before they got in the trades and before they found GJ.

You could buy decent tools for a decent price with a lifetime warranty. Those tools, which probably rarely failed without abuse are still being used today. If Sears/ Craftsman were still a thing, like days of old, most of us would still be buying them to use, for truck boxes or for our kids, son in laws and grandkids as they are starting out.


All because they took a little loss on a warranty claim.

100%, though I'd bet at their scale they didn't really lose money in total, especially with how much loyalty and preference it built with so many people for Craftsman that brought them back to the store over and over (including me).

If Sears still existed I'd guess HF wouldn't be doing nearly as well.

 

[NUTTSGT]

100%, though I'd bet at their scale they didn't really lose money in total, especially with how much loyalty and preference it built with so many people for Craftsman that brought them back to the store over and over (including me).

If Sears still existed I'd guess HF wouldn't be doing nearly as well.

I honestly believe HF stepped into a void left by Sears going defunct. Someone was smart enough to ser the writing on the wall, picked up the ball and ran with it