Birth of a New Local Giant: Amazon Home Services Now in 15 US Markets

Amazon announced this morning that Amazon Home Services has now grown to 15 US markets. Beyond original markets New York, LA and San Francisco, the company has added Atlanta, Boston, Chicago, Dallas-Fort Worth, Houston, Miami, Philadelphia, Phoenix, San Diego, San Jose and Washington D.C.

Amazon launched the service earlier this year on March 30. The company says that it now offers “over 15 million unique services across more than 900 professional services.” The service has two “modes”: custom and pre-packaged. Custom allows users to describe a project and get bids from local service providers. Pre-packed essentially commoditizes services.

Examples of “pre-packaged” services include “power outlet relocation,” “exterior door painting” and “TV wall mounting,” among thousands of others. Many services that are subjective or variable are not available as “pre-packaged” (e.g., landscape design).

Amazon Home Services

Amazon screens service professionals and also provides an “Amazon’s Happiness Guarantee” (essentially mediation between the pro and consumer) to instill confidence about the quality of the work. Users can also see reviews of “commodity” service providers before agreeing to purchase.

Amazon is the brand, the professional is the “fulfillment” partner. Amazon handles consumer payment processing and will take a fee from the business depending on the type of services rendered.

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Here’s more of the pitch to merchants:

  • Zero Upfront Cost: There’s no charge to sign up and no charge to list your services. And, best of all, you’ll only pay us when you get paid.
  • No Lead Fees No Lead Fees: Don’t waste time chasing leads. When you sell your services on Amazon, you’ll get requests directly from customers.
  • Invite Only Invite Only: Our program is invite-only, so you’ll only compete with top-rated pros instead of every other service professional in town.

In its press release Amazon included a bunch of stats that suggest the service is doing very well:

  • Service pros average 4.71 out of 5 stars
  • 92% of customers surveyed say they would recommend Amazon Home Services to a friend
  • On Prime Day, the number of custom estimate requests increased 25X compared to the same day the week prior
  • In the first half of July, we received nearly 2X the number of orders that we fulfilled in June
  • Customers are 11X more likely to leave reviews on verified services purchases than on products
  • In the last three months, the number of new applications from service pros has increased 4X

Amazon Home Services

It appears that Google is preparing to do something similar (though execution and the business model may be quite different). Beyond these two, are numerous vertically oriented “service marketplaces” now out there. With the rise of Amazon and the potential entry of Google it will be challenging for independent marketplaces to succeed — they will have to attract the pros and consumers both.

There are also legal issues, as with Homejoy, regarding the status of contractors as employees and the financial implications for the startup.

Putting aside the legal question, which is major, these independents can succeed with superior terms (for the pros) and a better or richer user experience for the consumer. But it will be very challenging.

Another thing to point out is that these marketplace help close (and manage) business. They replace “advertising” or “lead-gen” with actual bookings and payment processing (and later data). Another thing they do is take the uncertainty or ambiguity out of “ROI.”

What we’re seeing is the emergence of a new “service commerce” or “local transactions” model that marries online and offline, combining “e-commerce” with local fulfillment. Mobile is often the center of the experience for both the service professional and the consumer.

While there are many benefits to both buyer and seller in this model, the results may be mixed for many local businesses — with some marketplaces (e.g., Amazon) turning them simply into fulfillment providers of commoditized services.

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