Amazon is famous for selling so many things online that no one thought was possible. Now, the Seattle retailer is tackling yet another challenging category — home improvement and repair — with the launch today of Amazon Home Services.
In an earlier story today on GeekWire, experts in the home improvement space questioned whether Amazon could standardize a business that has so many variables. After all, one leaky faucet is not necessarily like the next.
But in an interview with GeekWire, Amazon’s Marketplace VP Peter Faricy explained why he thinks creating a marketplace for local services is feasible, and why both customers and professionals will ultimately end up turning to Amazon.
Here’s a transcript of our conversation, which has been edited for clarity and brevity.
Tell me a little about the launch of Amazon Home Services.
Faricy: I’m super excited about the launch. I think home services is a natural extension for Amazon. If you think of where we started with physical products, and then we moved to digital products, now we are moving into the services space — it’s a good extension.
We are trying to solve a hard consumer pain point. When you need something fixed or maintained, it’s a big time sink and you aren’t confident you’ll get the best quality.
What makes Amazon Home Services different?
Faricy: The home services launch has three major features:
— The first one is that we’ve done the homework on who are the best service providers in your area and we’ve only invited those pros to come on Amazon. We do a five-point business background check for each company. They have to be licensed, insured, and each individual technician has to go through a six-point personal background check. We have a dedicated team that does nothing but reference checks and check the quality of the work for each of these service providers. We’ve done all that homework for you.
— Second, the big feature of the launch is we’ve standardized the work, and we tell you the price right upfront, so you don’t have to worry about how much does this cost really.
— The third and final piece is our “Happiness Guarantee.” One of the primary worries when you have a service done is, ‘Am I going to be satisfied with how the service is completed?’ And, just like we do with physical product business, we stand behind every single purchase of a service on Amazon. So, if the service isn’t done to done to your happiness, we’ll try to make it right, and if we can’t make it right, we’ll give you a refund.
Is this a competitor to Angie’s List or Yelp?
Faricy: I think this is going to be the first home services offering that’s end-to-end. For a comparison’s sake, we don’t require you to have a subscription to read our customer reviews … Also, the happiness guarantee is a big deal. There really aren’t other offerings that stand with you end-to-end with this process. Some provide high-quality service providers, and some provide you information if you subscribe, but this is really the first offering that stands behind you 100 percent during the entire process.
We are also offering a wide variety of services. At launch, we have 700 unique service offerings, and over 2.4 million offers from service providers across the nation, and to be honest we are only getting started. We have good coverage in four major cities: Seattle, San Francisco, L.A., and New York. But we are working throughout the year to have the same coverage across the 30 major metro areas in the U.S.
How different is it working with sellers of services vs. sellers of products?
Faricy: This is Amazon’s 20th anniversary coming up in July, and we’ve run the marketplace business — the one I lead — for 15 years, and believe it or not, service providers are similar to small-and-medium-sized businesses that are already sellers on Amazon.
At launch, 95 percent of service providers are local neighborhood businesses. We do have four to five big national service providers, but most of them are small local businesses, which is the exact profile of the physical good sellers we have on the marketplace today. One of the reasons that sellers love Amazon is that they get access to over 100 million Amazon customers in the U.S., and for service providers, it’s the same thing.
The thing I hear from service professionals is that they have to spend disproportionate time on building their business and finding customers, so joining Amazon makes it easier. Last year, we had 85 million customers shopping for products that required a service, and so if you think about the connection between physical products and services, there’s already pent-up demand for Amazon customers to be able to buy services.
What does it cost?
Faricy: The service providers pay a revenue share, so it’s the same model we use for the marketplace business. The rev-share varies in relation to the different service offerings. It’s a terrific model because our incentives are all aligned on one thing — taking good care of the customer.
According to the website, the revenue share ranges between 15 to 20%.
Faricy: Yes, it varies by the service provided, but yes, it’s in that range.
One painter, who is beta-testing Amazon Home Services, said his margins are 35 percent, so he would be uncomfortable paying 20 percent because it wouldn’t leave him much of a margin. Can you address that?
Faricy: I can’t speak to that individual use case, but one reason they like the model on Amazon is we’ve simplified a lot.
Once you’ve joined, if you are national service provider you have access to 100 million customers across the U.S., and for each local service provider, you have hundreds of thousands of customers depending on your geography. We’ve also helped them build really attractive storefronts, where they can give info about their business, talk about their specialties, their expertise, and much like we do for all of the marketplace sellers, we do the payment processing piece. We take away all the complexity for them. Customers pay Amazon, and we aggregate the payments, and we take care of payment processing and fraud protection and give the service provider one simple payment, so they really like this business model.
It’s a different mindset to be a service provider on Amazon, but for those who join, I think they find the economics are very attractive for them, as well.
In my conversations with several contractors, they say they typically want to see a project first-hand before providing a bid. Can Amazon get to a place where estimates can happen online?
Faricy: We’ve been working on this with all of our service providers. We are trying to standardize the work, and answer questions up front. Let me give you an example. When we are having our TV wall-mounted, there are three questions we ask all customers: We ask if the size of their TV is over 50 inches or less than 50 inches; Are you providing your own mounting bracket, or do you want it provided for you?; And, how do you want the wires to be concealed. In the wall? Outside the wall in a cord cover? Or, just hang loosely below?
We try to answer these trickier questions upfront, so once the service is done, it’s straightforward.
Why do you think there’s suddenly so much interest in making home improvement more high-tech? There’s a number of startups doing nearly the same thing, including Pro.com, Porch.com and Home Advisor.
Faricy: A lot of it has to do with how difficult the customer experience is today. It’s a frontier that has not been solved by e-commerce. It’s a great way to innovate on behalf of customers. The fact that they get to see reviews without subscribing and see the pricing upfront, and then in the end, we have their back with 100 percent happiness guarantee, we think we are tackling the biggest customer pain points.
Amazon does have some local services, including its daily deals business. Does Home Services have to do with that?
Faricy: No, this is leveraging the marketplace model for physical products. The one difference here is the physical product sellers we have on Amazon for my marketplace business, you can be in Colorado and serve the whole nation, but with service providers, it’s a zip code-based market area. We had to build some technology that would allow us to connect customers at a zip code level with service providers at a zip code level. But otherwise, it’s the same well-established marketplace model that we’ve used for 15 years.
How big of a business do you see this becoming?
Faricy: That’s a terrific question. I think we really focus in the beginning of these things how successful are we at taking care of customers. We don’t release any financial numbers for the business itself, but based on the customer feedback, 4.7 star rating out of five, and based on third-party estimates that say customers spend four times as much on services as on physical products, we think this is a big opportunity.
So, you think this will be on the same scale as physical and digital products?
Faricy: Absolutely, the part that was incredible to me was that last stat. People spend four times as much on services, according to third-party estimates, as they do on physical products. Obviously, we have a pretty large products business serving the customer well, and we are anxious to serve customers well in home services.
You just launched Amazon Prime Now in the fourth city last week, which offers one or two-hour delivery. Fast delivery seems to tie into local services, by making Amazon less of an intangible thing that lives in the cloud, and something that makes same-day deliveries and sends a handyman to your house.
Faricy: You nailed it. It’s a very natural extensive of our business. I personally love it when I search by my zip code — I’m 98004 — and I get to see all the service offerings just for my area. That’s where we are headed for physical products, too. Soon, you’ll see very fast delivery options just for your area.