Amazon.com plans to launch a marketplace for local services, a broad term that encompasses anything from babysitters to handymen to birthday clowns

June 13, 2014 Leave a comment

Amazon.com plans local services marketplace this year – sources

5:21pm EDT

By Deepa Seetharaman

SAN FRANCISCO (Reuters) – Amazon.com Inc later this year plans to launch a marketplace for local services, a broad term that encompasses anything from babysitters to handymen to birthday clowns, beginning with a single market, several people familiar with the matter said.

Amazon aims to gauge demand and test logistics before rolling out nationwide, mirroring its approach to its grocery delivery service, Amazon Fresh. Fresh was tested in Seattle for years before expanding to San Francisco and Los Angeles last year.

The move takes direct aim at consumer review sites Yelp Inc and Angie’s List Inc as well as U.S. home improvement chains Home Depot Inc and Lowe’s Companies Inc, which have both invested in ways to link customers with local plumbers, painters and other service providers.

Amazon declined to comment.

Services marks a new frontier for Amazon, which has focused on selling products as it expanded from books into consumer goods, groceries and media. Local services are massive and growing, but it has been tough for marketplace companies to turn a profit, since offerings must be tailored to each city or region.

In recent months, Amazon has reached out directly to service companies as well as to several startups in Seattle and San Francisco that already connect service providers, from home repair to massages, to customers through their own web sites and mobile applications, according to the people.

Amazon has also been experimenting with ways to tie services to the products it sells. In one example, Amazon recently ran a test on its website offering installation services to users who bought Nest thermostats.

The moves reflects Amazon’s long-running efforts to have services tied to every product sold by Amazon on its website, according to one person close to the company, who like others declined to be named discussing confidential plans.

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A local services marketplace would extend Amazon’s role as a middleman for third-party vendors, which account for about 40 percent of Amazon’s sales.

The quality of the local services would be backed by Amazon’s “A-to-z Guarantee” which the company uses to vouch for items sold by third-party sellers on its website, the sources said.

One of the companies Amazon contacted in January was San Francisco-based Thumbtack, a startup that serves as a matchmaker between consumers and 63,000 service providers including photographers, tutors and others.

In its conversations with Thumbtack, Amazon asked several questions about the company’s growth strategy and the market for local services, according to a person familiar with the conversation.

Thumbtack, which has raised $49 million from investors including Sequoia Capital and Tiger Global Management, said the average project on its site is $600. It drives an estimated $1.8 billion worth of business annually to professionals on the site.

Other industry observers estimate that the home repair and improvement market alone represents an at least $250 billion opportunity.

Angie’s List in 2011 estimated that the market for local services was around $400 billion, including remodeling services and pest control. But since going public that year, the company has had just two profitable quarters.

Amazon itself has had limited success with Amazon Local, a daily deals service. Amazon Local has no involvement in the services marketplace currently in development.

But the business opportunity may be improving, in part by the proliferation of smart phones, which let service providers schedule appointments on the fly.

Offering local services on Amazon’s website has been a goal of Chief Executive Jeff Bezos for years. He personally invested in Pro.com, a Seattle-based startup, founded by former Amazon executive Matt Williams, which helps customers find contractors and estimate the costs of home repair and improvement projects.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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