Extend is a warranty extension platform for consumers and merchants. What makes Extend unusual is that they have managed to take a legacy model, warranty plans, and turn into a fully digitized, billion-dollar unicorn.
Extend makes money through the service fee it charges with each warranty plan. These plans can be catered towards consumers or merchants and can come in different varieties, such as base plans and ADH plans (Accidental Damage from Handling).
Business Model of Extend
The business model of Extend is that of a warranty plan model. Although this is a legacy model that has been considered by many to be outdated, Extend has reinvented the whole process. By fully digitizing this model into a platform, they have made a once-unsatisfactory claim process reliable and efficient.
When this legacy warranty plan model is reconstructed to meet the demands of the 21st century, it becomes a TAM model as Extend CEO Woodrow Levin states at his appearance on podcast Paypod.
In fact, they have been so successful with their model, that their customer base not only includes consumers. Rather, it includes merchants that realize that Extend could handle the contracts and claims process better than they themselves ever could. Therefore, merchants are outsourcing their warranty contracts and extended warranty contracts to Extend.
Extend CEO Woodrow Levin explained the philosophy behind Extend’s model in relation to legacy models at his appearance on the podcast Paypod. “The legacy players’ obstacle is our opportunity.”
Consumer protection is a hugely important part of the transaction process. It’s something that every merchant should be mindful of when they’re selling online, but it’s often an afterthought.
Protection plans and extended warranties aren’t popular with buyers because they add to the price of the product. They also become a hassle if you ever have to file a claim. Merchants are hesitant to sell them because they can cost up to 20% of their profits on some items and take away from the money that could be going into marketing or inventory costs.
Extend’s solution to this problem is elegantly simple: it offers merchants the ability to add protection plans and other services at no cost — no up-sells, no markups, and no profit loss — and buyers pay for these warranties.
For merchants, it’s an easy way to increase their bottom line without sacrificing customer experience or profitability, and for consumers, it’s an affordable way to get peace of mind on every purchase they make online.
Extend’s top competitors include:
- Upsie Clyde & Mulberry
- OPCMI
- Insureon
- CoverWallet
- Virado
- Simplesurance
- Founder Shield
- Indio
Product/Service
Extend offers a platform where businesses and consumers can purchase extended warranty plans for a wide range of products. Because everything is digitized on a fully interactive platform, the contracts and claims process has been expedited.
Extend is simply a service provider. Instead of selling protection plans directly to consumers, merchants are now the ones offering the plans to their customers, and they’re the ones who pay for them. This creates a built-in incentive for sellers to make sure that every customer is aware of the benefit — which is good for us, because it means more people will buy our products.
In other words, we’ve created a situation where everyone wins. The customer gets an affordable product with free extended protection, and the merchant makes money on each sale at a little extra cost. Plus, even though we’re no longer selling directly to consumers, we still get paid!
In consequence, Extend is the recipient of many outsourced warranties and warranty extensions.
Extend API Documentation
Like Kaley, Extend API Documentation represents the technology spirit of Extend that has enabled them to revamp a legacy business model like warranty contracts and extended warranties.
SoftBank emphasizes that Extend’s APIs were key to their success. Their API features enable merchants to better serve their customers, in real-time, and get an advantage over their competitors, with minimal managerial headaches since most of the contract and claims processing has been outsourced to Extend.
Notable Extend API Documentation features include:
- Sync: allows for merchant stores to be synced to Extends full system
- Extend Access Token for proper authentication and online security
- SKUs to provide proper barcodes for products covered by Extend warranties
- Extend JS SDK Snippets to allow programmers to use code to customize features for applications
- Extend Shopify JS SDK which acts as a Plugin in conjunction with Shopify
- Extend Shopify Addon SDK which assists in display for merchant websites
- Extend Big Commerce Addon which allows shoppers to add extended warranties to their carts with support for quantity matching and cart normalization for extended warranty product SKUs in your cart
- Extend Analytics SDK is used to capture the purchasing behavior of merchants’ customers. This provides proper metrics and analytics about the performance of your Extend warranties and related products in merchants’ stores.
- Indempotent Requests “for safely retrying requests without accidentally performing the same operation twice”. This is helpful when an API call is disrupted in transit and a response is not received. This feature prevents the same contract from being generated twice.
Marketing
A lot of Extend’s marketing potential comes from its own investors. According to TechCrunch, both PayPal and SoftBank can do a great deal for Extend.
Because warranties are often purchased at the “point of sale”, PayPal, as a remote payment service, has a lot of tools that could be useful for Extend and already has access to many potential clients for Extend within its own client-base.
SoftBank, on the other hand, is a part-owner of T-Mobile. T-Mobile’s customer-base includes many SMBs that might want to have Extend handle the warranties for their customers rather than the merchants themselves.
“Over 95% of Extend claims are resolved in less than 90 seconds!”, is a quote from their site.
Extend has a blog and news feature on their site to get the word out about new opportunities and innovations. By marketing to both consumers and merchants, Extend has been able to achieve explosive revenue growth. Furthermore, the ecommerce market and the point-of-sale markets also hold a lot of potential promise.
One could argue that Extend markets itself as a bridge. It is a bridge between consumers and merchants. It is a bridge between legacy models and API-integrated platforms. It is a bridge between human bureaucracy and AI technology.
Expenses
Extend has the expenses one would expect of any large platform:
- Hosting
- Payroll
- Sales
- Marketing
- Staff
- Offices
- Materials
- Utilities
- Security
- Compliance
Furthermore, Extend needs a good legal team for the processing of claims and a budget to pay for any claims that Extend itself is expected to be financially responsible for.
Plan for Profit
To understand the plans of Extend, one need only talk to their investors. Nagraj Kashyap, managing partner at SoftBank Investment Advisers, explains that Extend is “reinventing the extended warranty industry” via its “leading platform, API solutions, and consumer-first approach”.
Merchants are finding that managing warranties “in-house” has become less profitable. Outsourcing these warranties through companies like Extend is quickly becoming an attractive alternative. The phenomenon presents both a new opportunity and growing market for Extend.
Extend plans to penetrate the ecommerce market. It now has both the funding and the track record to do it. As Founder and CEO Woodrow Levin describes it, “same day delivery, buy-now-pay-later, and other tools: we are now all part of that core e-commerce toolset.”
Its ambitious stats include:
- Unicorn status within the first two years
- 300,000 protection plans sold within its first year
- Plans to sell more than 3 million plans for this year
- 8,000 customers in 2021
Levin has also claimed, in his appearance on podcast Panic With Friends, that the warranty business is a $50 billion industry. He also states that there is another $50 billion within the industry that has not been factored in that he plans to pursue.
How Does Extend Make Money?
Extend charges a fee for every warranty plan it sells. These extended warranty plans include coverage for various types of products:
- Electronics
- Appliances large and small
- Sports and fitness equipment
- Auto parts and furniture
Extend’s customers include both consumers and merchants. It has a range of services and features for each market.
Consumer Plans
According to the company site, consumer plans have many features available:
- Fast replacements and repairs
- Accidental protection
- Free shipping
- Malfunction protection
- No hidden fees
- Store credit
- General wear-and-tear
- Easy online claims
- Customer support
Merchant Plans
For merchants, its primary customers are in the D2C market.
Notable customers include:
- Peloton
- iRobot
- Harman/JBL
- Backcountry,
- Balsam Hill
- BlendJet
- RealTruck
- Traeger Grills
Within the merchant market, common sectors for Extend include:
- Auto
- Beauty & Personal Care
- Bikes, Scooters, Skateboards
- Electronics
- Exercise & Fitness
- Furniture
- Jewelry
- Household Appliances
- Smart Home & Network
- TV, Audio, Video
- Outdoor & Recreation
Popular features that extend offers for their merchant plans include:
- Fast integration with robust APIs and pre-built integrations for ecommerce platforms
- Tailored protection plans in partnership with leading underwriters for competitive rates
- Instant claims handling for speedy claim processing, access to exceptional live customer care, and best-in-class product protection
- Post-purchase opportunities. This particular feature is great for merchants because it allows them drive customers back to their sites by offering their clients specials through email campaigns, call centers, connected apps, etc.
Kaley
Kaley is Extend’s own virtual assistant/virtual claims specialist for customer service. Even though Kaley does not make money for Extend directly, it is a service feature that separates Extend from other competition in the warranty contract business that use defunct technology and cliched business models.
Extend Funding, Valuation & Revenue
Extend’s funding has increased exponentially over the past three years. Throughout 2019, it has more than quadrupled from $4 million at the seed round to $16.4 million at the series A round. In the approximately eighteen-month interim between its series A round and its series B round, Extend’s funding has nearly quintupled, going from $16.4 million to $200 million.
Notable investors include:
- SoftBank Vision Fund
- Meritech Capital Partners
- GreatPoint Ventures
- PayPal Ventures
| Date | Round | Funding |
|---|---|---|
| Jan 7, 2019 | Seed | $4 M |
| Nov 6, 2019 | Series A | $16.4 M |
| Oct 15, 2020 | Series B | $40 M |
| May 18, 2021 | Series C | $200 M |
While the yearly valuations are not available at this time, Extend has reached unicorn status with a recent $1.6 billion valuation at its series C round.
Its yearly revenue stats are also not available at this time. However, its revenue growth over the course of the last year has been nothing short of explosive, with a 40x increase since 2020. Extend expects a 400% increase in revenues this year.
According to GetLatka.com, Extend hit $30.6 million in revenues for 2021. Therefore, we can estimate that their yearly revenue growth looked something like this:
| Year | Revenue |
|---|---|
| 2020 | $0.76 M |
| 2021 | $30.6 M |
Therefore, if Extend delivers on their expectations of a 400% increase for 2022, revenues could get as high as $150 million.
Is Extend Profitable?
Extend has a profitable business model that allows merchants to issue and manage product protection plans online. This helps online merchants reduce the cost of product returns and increase conversion rates on their site, while delivering outstanding customer experiences.
Extend makes it easy for online retailers to offer a simple and affordable product protection policy. Everyone’s a winner!
If Extend and their backers are correct, the whole ecommerce market is waiting for them. They also feel that warranties will become the next point-of-sale trend. Extend Founder and CEO has told Woodrow Levin Protocol, “Consumer point-of-sale financing has also been transformed by API-first companies”.
Conclusion: How Does Extend Make Money
Extend is revolutionizing the industry by providing a better, cheaper way for online retailers to offer extended warranties and for customers to file claims. This blog explained all about Extend’s technology, its business model, and why we think it’s the future of extended warranties.
We have researched the business model of Extend, so we are aware that there are risks involved, but these concerns do not diminish the promising potential of this new, reinvented concept in an industry that has been dormant for many years.
In fact, there may be significant potential with the right management team and the right marketing strategy. The fact that a company like Extend is working on solving this longstanding problem among manufactures and consumers is encouraging.
We hope you really enjoyed this article and that it was a good read for you. As always, thanks for your interest in what we’re doing!