Here’s How Amazon Is Growing Its House Services Business

Recently, Amazon‘s (NASDAQ:AMZN)  House Services segment completed its first year of existence and, according to the company, the business has now expanded to more than 90% of the U.S.  Customer orders have grown by 20% per month on an average since last year, despite competition from players such as TaskRabbit and Angie’s List.  Several products sold on Amazon’s e-commerce platform require additional services, such as installation or assembly, and providing these services under the house services segment is a natural extension of its e-commerce business. The company provides the option to customers of adding professional services at the time of checkout from its platform.  We believe the convenience of buying the product and related services at the same time gives Amazon a competitive edge over stand-alone house services companies.

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Ease Of Purchase Key Growth Driver

Amazon’s value proposition of providing professional services along with products purchased on its platform has gone down well with consumers. The company has expanded its home services segment from four markets at the time of launch to 30 metro coverage areas in the U.S. in one year.  And it has increased the total services offered to 1200. The home service industry is estimated to to generate $400 billion to $800 billion and, apart from start-ups such as Porch and Red Beacon, large players such as Google are actively looking to enter this space. Angie’s List, which is an established player in this market, is using technological innovations to increase market share. The company recently launched a mobile app called SnapFix which allows  home owners  to take a pictures of the required job and receive bids to fix it. While Angie’s list is its strongest competitor, Amazon — with its broad network of Prime Members and the ability to match services with products purchased on its platform — has a competitive edge.  Currently Amazon sells more than a million products with an option (in certain cities) to request for help with assembly and installation. According to the company, providing these services is boosting Amazon’s sales and the most common requests are around mounting flat screen TVs and assembling treadmills. Amazon’s reputation of good customer service ensures that consumers purchasing products from its website are also attracted to its home services.

While Amazon has not revealed revenue numbers or other figures pertaining to its house services segment, we believe this business will see growth along with the company’s e commerce  segment. The company is expanding these services in international markets as well. In December 2015, Amazon led a $23 million investment in India-based Housejoy, a start-up that offers on-demand home services such as home cleaning, plumbing, beauty, fitness, laundry and other such services.  Such strategic tie-ups with key players in international markets and its strong expansion in the U.S. confirm that the company can succeed in this segment. We believe Amazon has the potential to capture a significant market share in this market over the long term.

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