Analysis – Amazon quickens push into tough local services market

Reuters Alex Vybourg (L) and Will Luzadas of audio visual integration company SpeakerGuy Inc. look at a projector screen they installed in a home in Manhattan Beach, California July 29, 2014. REUTERS/Lucy Nicholson

By Deepa Seetharaman

SAN FRANCISCO (Reuters) - Seattle audio and video technician Todd Mueller showed up last year for what might have been a routine job except for one thing: Amazon.com Inc was taking notes. As he mounted a flat-screen TV on the wall, an Amazon employee studied how he covered his shoes and used a blanket to protect the hardwood floor.

After at least two years of study, Amazon is ramping up efforts to offer repair, installation and other services online, tackling a fragmented but potentially rich U.S. market that may be worth an estimated $400 billion (236.89 billion).

Amazon's experiment with services goes back to at least mid-2012 in its hometown of Seattle. It's now expanded the tests to New York and Los Angeles, six service providers who worked and talked with the company told Reuters.

More locations and services are coming soon. As soon as mid-August, Amazon will take as much as a 20-percent cut from services booked through its website, though timing and figures may change, according to providers and several hard-to-find pages on Amazon's website devoted to local services.

Providing services would be a new frontier for Amazon, which hopes to enter one of the few remaining consumer sectors yet to succumb to Internet commerce. Its foray into the area comes as investors worry about Amazon's growing spending on initiatives with uncertain pay back.

It's unclear how Amazon can create an online exchange for services where others like Angie's List have failed to gain traction for years. While services like Yelp and Craigslist show what's available, getting a job done still often involves an old-fashioned telephone call.

The biggest challenge would be attracting enough small businesses to the site, Wunderlich Securities' Blake Harper said. Angie's List's spending on marketing - almost half its total revenue - to attract customers and retain providers has kept it in the red, analysts said.

"While the company has impressive logistical capabilities, it is lacking the local business information, reviews, and sales force, among other attributes, to begin to compete in the market," Harper said in a June 11 note, of Amazon. "We have a healthy respect for Amazon's ruthless competitive nature, but expect the local market to be much more difficult for them to scale than the ecommerce business."

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Analysis - Amazon quickens push into tough local services market