Amazon Focuses On Local Services To Expand Marketplace Offerings

Amazon has introduced a service in three cities aimed at connecting customers through search to local service providers like plumbers and electricians. The service, similar to Angie's List, will roll out in New York, Los Angeles, and Seattle.

The marketplace, Amazon Local Services, will become part of a broader effort to compete with brick-and-mortar stores in local markets, which accounts for more than 90% of retail sales. Customer service will set the offering apart from others that might provide a similar service, per a document reviewed by The Wall Street Journal. Amazon will offer a money-back guarantee on services rendered by its contractor partners.

Similar to Angie's List, Amazon will conduct background checks on the businesses and to assure they are licensed and have liability insurance. A search on the name of the fan installation company, The Electronic Connection, Los Angeles, returned a few options to "Choose your pro." Other company names served were S.E. Electric and USA Electric.

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The information also integrates Amazon and Yelp reviews, if any, along with an estimate for the service. Amazon processes the transaction for the services company.

Home services, estimated at $400 billion annually global, could easily expand Amazon's offerings, per Baird Equity Research Analyst Colin Sebastian. "Amazon allows service providers to set prices and only pay a revenue share to Amazon for completed work," he wrote in a research note published Tuesday. "Since one of eight U.S. Internet users visits the site every 30 days, Amazon has the scale and customer relationships to drive meaningful volumes of appointments, in our view."

Sebastian explains that Amazon also allows businesses to create profile pages, offers payment processing, online scheduling, order management and customer communications. He said Amazon charges 20% commission to service providers on fees of up to $1,000, with a 15% commission on the portion of fees greater than $1,000. "We highlight that this is less than the 25% commission charged by competitors such as Homejoy, a privately-held home services company," he explains.

The Wall Street Journal also notes that Amazon CEO Jeff Bezos is an investor in Pro.com, a Seattle firm that connects customers with home-improvement professionals. The startup received early backing from Amazon's founder, as well as Madrona Ventures Group.

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