Amazon Joins The Local Services Scene
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Amazon announced last week that it will soon launch a marketplace for local services. It’s a way to connect customers to professional services that can range from babysitting to handymen to birthday clowns, a by Deepa Seetharaman reports. It will compete with the likes of review sites like Yelp and Angie’s List as well as home improvement stores like Home Depot and Lowe’s that already help link customers to local service providers.
“Amazon.com has found a new place to sell and it doesn’t have anything to do with books, DVDs or physical products,” says Forbe’s Ryan Mac in an article.
So why does Amazon want to enter the fray? It would extend Amazon’s role as a middleman for third-party vendors, which account for about 40 percent of Amazon’s sales, says Seetharaman. The quality of these vendors will be backed by the “A-to-Z Guarantee” which Amazon already uses to vouch for third-party items. A local marketplace would also help the company’s long-standing dream to have its services tied to every product sold by Amazon on its website, according to Seetharaman. For example, if you go to buy a lawn mower, you may see a listing for a landscaping business next to it. Truly one-stop shopping, and Amazon gets to control what you see when you buy.
The Curse Of Going Public
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However, it might not be so easy for Amazon to make a profit. In 2011, Angie List’s estimated that the market for local services was around $400 billion when the company first went public, but in the years since, Angie’s List has only had two measly profitable quarters, Seetharaman reports. Yelp hasn’t done so well either since going public in 2012. In fact just after Amazon’s marketplace announcement, shares of both Yelp and Angie’s List immediately went down, according to a Forbes article by Maggie McGrath.
SunTrust analyst Robert Peck says that Amazon could spark a reaction from other tech companies. Apple, Yahoo, Google and eBay might try to launch imitation sites or even acquire Yelp if all goes well with Amazon’s foray into the local marketplace, according to McGrath. eBay actually launched eBay Hire Beta in November 2013, according to an eBay blog post. It helps professionals market their services and is currently not charging commission.
Yelp Can Rest Easy, For Now
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Analysts say the two review giants, Yelp and Angie’s List, should have nothing to worry about. Peck says that Amazon and Yelp might even partner up in the future in order to get reviews and ratings, but he says the quality and depth of reviews would likely never match Yelp’s content now, according to McGrath. For example, both GrubHub and OpenTable compete with Yelp in the restaurant space, but Yelp does better and continues to see increased growth and user traffic, according to McGrath.
Amazon’s Future
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A Fox News article by James Rogers thinks the local marketplace will be a consumer win. Rogers cites retail expert Robin Lewis who makes the same point in a hilarious quote.
“They have got a database bigger than the Pentagon and they know how to mine it,” Lewis says. “They know (what) the working mom in the corner of Milwaukee eats for breakfast and what brand of blue jeans she is working – Angie’s List and Yelp! don’t have that leverage.”
The future for Amazon does look bright. In fact, just this week Amazon announced their new 3D Fire phone that is said to compete with Apple’s and Google. See Forbes reporter Ryan Mac’s Twitter reaction to the right.
We wonder how this will affect other enterprise ideas like the local marketplace and Amazon’s stock price! What do you think? Let us know your opinion on Amazon’s efforts by commenting below.