Amazon.com (AMZN) expanded into the service sector as it nimbly rolled out a website for its Amazon Local Services, a marketplace for customers to hire the services of professionals like auto mechanics, plumbers and handymen online.
The Journal reported that the services are currently available to customers in New York, Seattle and Los Angeles.
“Services Made Simple”
This is the tag line for Amazon Local Services.
True to the promise, it lets customers locate professionals nearby, using the customer's zip code. If a professional is located nearby, customers can peruse prices, fix an appointment and pay via Amazon once the task is completed.
The Amazon web page displays a broad-range of services. As of now, most of them are related to installation of physical wares like security cameras, auto parts and garage doors. The four categories in which the tasks are divided include - home repair, automotive, lawn & garden and computer & electronics.
While Amazon will also be providing local services as an individual marketplace, the company's capability of displaying related services directly next to products on its site will make it attractive to small businesses.
This implies that if a ceiling fan is purchased through Amazon, the customer will have someone to install it for them too via Amazon.
Customers will have an option to post reviews of services and businesses that they have utilized.
If the services are unsatisfactory, Amazon will provide its customers a money-back guarantee.
Sounds simple? It is, but these services don't come cheap.
How Does Amazon Make Money?
There are two types of services that professionals can offer via Amazon's website: in-store and in-home services.
Amazon carries out a background check on all in-home services technicians. In order to list certain services, the providers may be obligated to meet additional requirements.
Service providers such as handymen, plumbers, electricians, computer technicians, auto mechanics, car electronics specialists, home media specialists and appliance technicians are required to pay 20% of the transaction fee up to $1,000, and 15% thereafter. However, this comprises payment processing fees, and marketing and seller tools.
The service providers are also required to pay a monthly subscription fee that is waived through June 30th. They might also be obligated to pay for their background check, if the company requires them to do so.
The service providers are not obligated to pay for leads or for advertising.
Competition
With this service, Amazon is entering a market dominated by established players like Yelp Inc. (YELP) and Angie's List Inc. (ANGI). eBay inc. (EBAY) has also been testing the waters with eBay Hire, which connects products sold on the auction website to the profiles of the providers offering related services.
Startups like Thumbtack further increase competition for Amazon. Thumbtack allows consumers to post the jobs that they want done, following which service providers bid to win the assignment.
The Wall Street Journal reported that Amazon expects its money-back guarantee to make it competitive with more-established rivals. However, it also notes that it will likely take some time for Amazon to build up an exhaustive list of service providers before Amazon Local Services gains a strong foothold.
Interestingly, Amazon's chief executive, Jeff Bezos, is an investor in Pro.com, a Seattle based firm that unites its customers with home-improvement professionals. The startup received an early backing from him and Amazon investor Madrona Ventures Group. It recently completed a $14 million funding round.
Let's Wait and See
Amazon's reach and scale are a big advantage for the company. However, Amazon has experience in dealing with products rather than services whereas Yelp and Angie have immense experience in the services field.
According to Sun Trust analyst Robert Peck, Amazon could even try to partner with an already established player like Yelp in the near term in order to improve the quality of its ratings and reviews. He gives the example of GrubHub and OpenTable, noting that both compete with Yelp in the restaurant space but have not matched up to the services offered by the latter.
Amazon's advantage lies in its access to a large number of customers, which will attract service professionals. Moreover, it has the platform required for customer referrals, which will spur sales for service providers. The first mover advantage of smaller players will likely fade over time. Amazon has the financial muscle to buy up startups if it sees they have niche strengths.
As the company begins testing its Amazon Local Service in select cities in California, Florida, Georgia, Kansas, Kentucky, New York, Texas, Washington and Wisconsin, we need to wait and see whether it can make its mark on this turf and compete with the seasoned players.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AMAZON.COM INC (AMZN): Free Stock Analysis Report
EBAY INC (EBAY): Free Stock Analysis Report
YELP INC (YELP): Free Stock Analysis Report
ANGIES LIST INC (ANGI): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
