Buy something from Amazon.com Inc. (NASDAQ: AMZN) and need help setting it up, installing it or just making it work at home? The world’s largest e-commerce company will arrange to send an expert. It may be Amazon sees the service as a way to compete with local stores like Best Buy Co. Inc. (NYSE: BBY).
No matter what the reason, the service to set up the appointments must have a middle man cost as part of logistics management — yet another reason for investors to worry about Amazon’s margins, even though Reuters reports the company will take a cut of the local service revenue. The services are purchased by the Amazon customers, so the primary costs are passed along to them.
Amazon’s description of the offering:
Add a service to your cart and check out. Within one business day, the service professional will contact you to set an appointment. If the service is at your home, the service provider will contact you 24 hours prior to the appointment to confirm and 30 minutes before arrival. All services provided in-home require someone 18 years or older to be present during the entire appointment.
The locations where it is available:
Installation and repair services are currently available in three cities: Seattle, New York, and Los Angeles. More locations and services launching soon.
The decision is another one by Amazon to put “boots on the ground” instead of being an Internet-only company. The ultimate example of this is the eventual use of drones to make local deliveries, one of CEO Jeff Bezos’s favorite public relations toys.
As of the release of its latest earnings, many investors have lost faith that Amazon will ever have large margins. Services, even those in which Amazon acts as the middle man, have a cost. Amazon revenue did rise 23% in the most recent reported quarter to $19.34 billion. It would seem impossible to be in the red with that kind of growth and huge sales base, particularly for a company that is decades old. However, Amazon did post a net loss of $126 million.
Amazon’s experiments in local services will need to bear some profit fruit soon, or they will be another reason for Wall Street’s ongoing anxiety.
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