Amazon takes fresh stab at $16bn housekeeping industry

Bloomberg

Three years ago, Amazon.com Inc. launched a marketplace to connect its customers with handymen, landscapers and housekeepers in their neighbourhoods, a direct challenge to the likes of Angie’s List Inc. and Yelp Inc.
The offering embraced the independent contractor model, using Amazon’s web store to create a new service from scratch without hiring a single person or buying any lawnmowers, hammers or mops.
Instead, it connected contractors using their own vehicles, tools and supplies with new business customers, taking a cut of each job. That same model let Uber Technologies Inc. disrupt the taxi industry without buying cars or hiring drivers.
Now Amazon is quietly hiring house cleaners in Seattle as direct employees. The online retailer is swapping the low cost of contract workers for the greater control of employing its own people. Doing so puts it on the hook for things like minimum wage, workers compensation and overtime pay. But it also lets Amazon determine how the workers are trained, which cleaning products they use and how they organise their schedules.
Some other Seattle area tech companies have also been making similar moves, though that bucks a general—and controversial—trend in the industry to farm out tasks to independent contractors instead.
Amazon’s experiment signals it’s concerned that saving money by using independent contractors can compromise the customer experience and make it just another online matchmaker. Amazon had lofty expectations when it launched its Amazon Home Services marketplace in 2015, saying the hundreds of services offered combined to represent a $600 billion market. But growth has been sluggish, prompting Amazon to revisit the plan.
So it’s conducting a trial to see if investing in its own housekeepers will differentiate its services by linking them more directly to the popular Amazon brand. US consumers spent $16 billion on home cleaning in 2017, according to ServiceMaster Global Holdings Inc.
If the test works for housekeeping, it could help Amazon grow more quickly into other service-oriented categories like home improvement products and sophisticated electronics that require assembly and installation. Best Buy Co. Inc.’s “Geek Squad”, which installs and repairs electronics and appliances, is an example of the branded service Amazon has to offer to keep expanding, said Kirthi Kalyanam, director of the Retail Management Institute at Santa Clara University.
“Any products that require additional services beyond opening a box, Amazon doesn’t do well,” Kalyanam said. “The possible rationalisation of hiring housekeepers is they are hitting a wall in selling products where service is important. They need to add end-to-end services to enter more categories, and that service needs to be branded. With independent contractors, you don’t get that.”
The new housecleaning service, Amazon Home Assistants, offers home cleanings in Seattle that vary in price by the size of the home and frequency of visits. A weekly cleaning of a 1,500-square-foot home runs about $156. Amazon introduced the Amazon Key, a smart lock that can let delivery people and service providers into a customer’s home in 2017. It agreed to acquire smart doorbell startup Ring for $1 billion, giving it a greater presence in homes. Both products lend themselves to providing home access remotely, which also raises customer concerns about safety. Amazon makes using its own workforce part of the pitch.
“All our technicians are Amazon employees who are trained professionals,” the Amazon Home Assistants website states. “We use 100% eco-friendly and kid-safe cleaning products which are rated 4 stars and above on Amazon. All our services are backed by our happiness guarantee. If you’re not satisfied, we’ll come back and fix any problems.”
Amazon declined to comment. The company uses the independent contractor model through its Amazon Flex app, which lets contract drivers deliver packages in their own vehicles.