The internet sales giant Amazon is deciding to further
broaden its horizons. Recently Amazon has further developed its on-demand video
service as well as continuing to offer its online ebooks. However, the newest
idea Amazon has entertained is service based sales. What this means is that Amazon
will allow people to sell services like oil changes, garbage disposal, and
bizarre services such as renting your own goat herd. Though Amazon will not
offer most of the services itself, they will allow people to sell their
services through the website. Amazon's major claim is that by them doing this,
consumers can view accurate reviews of different service providers. Most of the
time, in order to view accurate reviews of a service provider, one would have
to do research online at forums or look for yelp reviews. However, for smaller
businesses, any reviews would be hard to find. Amazon's service allows anyone
to easily see how cheaply and reliably a service can be purchased for.
One of
Amazon's biggest hopes with selling services is that it will stop
"surprise charges" that come with a lot of services. Amazon says that
they want to standardize the haggling and up-selling of some services. For
example, even though it isn't fair by any means, an auto repair shop could say
that the an oil change became more complicated and make up an excuse such as
the filter was rotted and fell apart trying to get it off, adding to the amount
of time it took. However, there's no way that the consumer can technically
check this and someone who isn't sure what goes in to an oil change or standard
service would even second guess what the repair center is telling them. Though
this is malpractice, it's not hard to see how something like this could happen
with a smaller shop or service center. This is what Amazon is claiming to try
and weed out using their new system.
Critics
also brought up the point that Amazon's current dropdown selection method
wouldn't work for more custom services. One such critic brought up the building
of a patio or porch. There would be different heights, types of wood, styles,
backyard sizes, etc. How could Amazon accommodate for all of those? Amazon
still has not commented on this and it can be assumed there wouldn't be a standard
price for services such as this. This would have to be more of a way for people
to find the services and then just speak to those selling the service to
establish a price. Another question that has been asked of Amazon is how much
of a cut does Amazon take? Though they have not made an official statement, the
beta testing of Amazon's new service shows anywhere from 10% for recurring and
20% for one-time non-custom services. This begs the question of whether this is
really worth it for sellers? If 20% of your sale is taken by Amazon, and as a
small business your pricing needs to be competitive compared to larger
service-providers, how much are you actually taking home? The major selling
point will be the ability to acquire seller reviews for your services, and
that's what Amazon is counting on.
I think that this is a good business idea from the perspective of Amazon. I think that they could potentially compete or eliminate competition from websites like Craigslist if they are successful in implementing this new policy. Since they have such a large following from people all around the world I think that expanding their services will only generate more revenue for them. However, it does seem like they may not be able to profit from this because as you said the small businesses must be competitive and by taking 10-20% of their profit that may discourage the use of Amazon. I'm interested to see how this plays out and I'm interested to see if this is a big flop since Amazon would have to remodel to include this type of interaction.
ReplyDeleteI'm very hesitant when Amazon decides to seek new ventures such as this because they already take business from so many smaller businesses - not necessarily mom & pop stores, but companies like Barnes & Noble that are large on their own but cannot compare to Amazon's mass. Amazon taking 20% of a service provider's profit is essentially walking over to a kid with a sandwich and saying, "Let me help you eat that," and then taking 20% of their sandwich.
ReplyDeleteAmazon claims to want to eliminate up-selling and surprise charges, but what's stopping Amazon from adding their own up-selling? The issue of up-selling comes from the customer not knowing any better, and in this situation, the customer's position is not change, so Amazon could charge as much as they want for a service. Hidden fees are already common practice with large corporations - especially phone companies - so Amazon could add those in as well.
Plenty of websites already exist to review service providers, hopefully if Amazon goes through with this, people will choose to read those and still give the maximum profit to the providers so that they can remain in business.