Amazon.com (AMZN) is thinking of expanding into the services sector.
The listings service, called Amazon Local Services, has been introduced in 3 cities: New York, Los Angeles and Seattle. The initiative will initially deal with sales support services such as installers, handymen, plumbers and electricians but will eventually expand to fitness instructors, music teachers and other service providers.
According to the Wall Street Journal, Amazon has come up with a money-back guarantee on services rendered by its contractor partners to attract customers. It will also carry out a background check of its partners to determine if they have liability insurance.
Amazon customers can add the services to their shopping carts prior to checkout. On its website, Amazon will exhibit reviews of the service professionals from its customers.
The service providers will create profile pages, with information about their businesses, and a scheduling feature that will help customers set up an appointment.
Why the Move?
This can be viewed as Amazon’s endeavor to contend with physical stores, which account for more than 90% of retail sales. To compete with brick-and-mortar stores, Amazon is trying numerous ways to speed up deliveries, having also launched a credit card reader this year.
Crowded Market
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.
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 the smaller players will very likely fade over time. Amazon has the financial muscle to buy up startups if they think they have niche strengths.
Amazon currently sports a Zacks Rank 3(Hold).
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