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Amazon to Launch Marketplace for Local Services

Amazon.com has plans to launch a new marketplace for local services, according to a report by Reuters.  The new offering will compete directly with existing local market players including Yelp and Angie’s List – as well as home improvement chains such as Home Depot and Lowe’s – which provide resources for customers to connect with local service providers.

Third-party vendors make up about 40% of Amazon’s sales, and these existing relationships provide the critical mass needed to have a meaningful impact in local.  As the Reuters report notes, Amazon will refine the tool much like the company did with AmazonFresh, its grocery delivery service, by gauging demand and testing logistics in local markets before introducing the product nationwide.

Amazon’s move isn’t surprising to those who attended our 2014 Local Search Association Conference in late April. Industry experts Matt Booth, Neal Polachek, and Greg Sterling predicted that “Amazon will score big with SMBs beyond Amazon Web Services” in the near future.

While there are few details, I believe Amazon is getting into the local services space for a few reasons. For one, a large number of consumers are looking for local service providers. According to YP’s most recent Local Insights Report, of the top 10 most searched local categories, seven are service providers.  Plus, there are billions of local searches each month via digital and mobile, many of which are related to local services.

Second, while the local services space is massive, it has been difficult for media companies to turn a profit given the unique needs and offerings required for each locale. Industry observers estimate that the home repair and improvement market alone represents a $250 billion opportunity, and cracking the local services nut presents substantial upside for the marketplace that can do it best.

Finally, as search traffic continues to fragment across platforms, the local services offering that provides the best user experience across the board will have the greatest potential for success.  Given Amazon’s strong brand and standing as a leading e-commerce platform – in addition to its focus on reviews and security – the company is well-positioned to capture the entire purchase process for local services in one place.

While there are many other reasons that we are probably not aware of yet, this is a big move, and we will be watching it closely.

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