About four months ago, Amazon launched a brand new division that enabled customers to not only buy water heaters and TV wall mounts from the retailer, but also find someone to install them.
This morning, the company is announcing it has rolled Home Services in 11 more markets for a total of 15 cities. They are: Atlanta, Boston, Chicago, Dallas-Fort Worth, Houston, Miami, Philadelphia, Phoenix, San Diego, San Jose and Washington D.C. At launch, the service was available in New York City, Los Angeles, San Francisco and Seattle.
Today’s announcement puts the company on track to hit its goal of launching in 30 markets by the end of the year, making it a formidable competitor to other sites like Angie’s List, Pro.com, HomeAdvisor, Porch, Yelp and others.
When using Amazon Home Services, customers can place an order online, set up a time for the service or repair, and then pay using the credit card he or she has on file. Additionally, Amazon offers a Happiness Guarantee, which backs up the quality of the work.
The launch represents a major new push for the retailer, which up until now focused on selling physical and digital products — but not services. To get up and running quickly, Amazon has amassed a large database of repairman, teachers and contractors, who conduct a wide range of services, from home repairs to basketball hoop assembly or faucet replacement and piano lessons.
In a lawsuit, Angie’s List is accusing Amazon of using its service to steal proprietary information to reach out to professional service providers on its network. In an interview with GeekWire, Nish Lathia, Amazon Home Services’ General Manager, declined to comment on the lawsuit.
But he said the service has been going well since it launched, with consumers giving workers an average rating of 4.71 out of 5 stars, and in the first half of July, orders doubled compared to all of the orders fulfilled in June.
However, those numbers are slightly skewed because of Prime Day, which gave everyone $30 off of all services in the form of a gift card. On Prime Day alone, he said the number of custom orders placed increased 20 times the usual volume.
A couple of major changes has taken place since the service first launched.
Previously, Amazon was only offering pre-packaged services, such as TV Wall Mounting, Basketball Hoop Assembly or Faucet Replacement. But it found that a customer’s needs can be much more ambiguous, and a TV installation in one house may be very different than the next house. So, it’s added “custom services,” which allow customers to get estimates for more complicated projects by describing what needs to be done and attaching photos. Custom projects can include anything from home entertainment setup, central air installation or house painting.
For example, a “pre-packaged” TV wall mount starts at roughly $135, and likely includes a cable cover for the cords, but a custom project starts at $215 and might include installing an electrical outlet or hiding the cables in the wall.
The concept of custom packages seems to stray from the company’s original mission of using data to automate the bidding process, but Lathia said that’s not necessarily the case. “If we’ve done a custom job hundreds of time, we would eventually have enough data to convert that into a prepackaged service,” he said. “On the long-term horizon, if the data is rich enough, then you can pre-price anything.”
Instead of charging service professionals a fee for each lead generated, like many sites do, Amazon takes a cut of the fees once a project has been completed. For pre-packaged services, it equals to roughly 20 percent of the job, and for custom jobs under $1,000 it’s 15 percent. For custom jobs over $1,000, it’s 10 percent. Eventually, Amazon will also start charging service providers for background checks in order to be part of the network, but for now those fees are being waived.
When asked whether some service providers were using Amazon to meet customers, but then never notifying Amazon of the job to avoid having to pay the fee, Lathia said he wasn’t worried about it. If the job isn’t logged, customers don’t get the guarantee, or the ability to pay with a credit card, and the contractor doesn’t have protection against fraud or customers who refuse to pay. Additionally, he said that violates their terms of service, and they’d be kicked off.
Interestingly, it also violates Amazon’s terms of service to mark up the cost of a service by 10 to 20 percent because of the fees they collect. He said if a customer can find a cheaper price by calling directly or going through another site or ad, they can apply for a price-match guarantee.
He says Amazon can justify making these steep demands on the workers because they ultimately save money.
“We require them to offer the same price to the customer on Amazon as if the customer approached them directly or through some other site,” he said. “What happens is there’s a certain cost they spend today in acquiring transactions. But we are sending them a customer and they aren’t paying that cost.”
He said the pitch appears to be working. Over the past three months, the number of service workers applying to the program has increased four times.
“This is partly why we have been able to expand so quickly,” he said. “We have awesome providers reaching out to us, saying I’d love to be on this platform. That momentum coupled with the amount of traction from customers is both exciting and exhausting at the same time.”