May 2nd 2018
Amazon Home Assistants Are Staffed Employees
That’s right folks. Amazon now employs housekeepers as part of a pilot program launched last month in Seattle. Many of Amazon's growth initiatives can get overlooked. This one could be the linchpin that puts it directly into Airbnb territory - and much more.
Last month we predicted that Amazon’s in-roads into travel would eventually put the company into direct contact with the short-term rentals management space, and that this could eventually evolve into a home sharing platform - something akin to Airbnb channeled through and powered by the company’s 100 million + Prime membership base.
This tweak to its Home Services marketplace is called Amazon Home Assistants and could be the early manifestation of a new, more full-service home sharing platform.
From the website: “Amazon Home Assistants save you time by helping you with chores around the house. If you'd rather be at a park than vacuuming or seeing a concert rather than folding laundry we can help. Home Assistants specialize in "cleaning, taking out trash, laundry, and dishes".
Airbnb hosts and property managers will tell you that those are exactly the services that come in handy when flipping a property. A cleaning visit for a 1,500 square foot property was priced at around $150. An apartment of that size in New York city could easily fetch $400 a night.
More Control Over Pricing, Quality, and Scheduling
Amazon already has a Home Services marketplace that it launched in 2014 to compete with the likes of Yelp and Angie's List, but this pivot toward full-time staffers would give the company much more control over quality and consistency of service, pricing, and scheduling of in-home visits during and in between guest stays - for instance.
Other home services marketplaces work on either a subscription, led-gen, or commission model, which "can reduce expenses by as much as 30 percent by avoiding overtime costs, payroll taxes and workers compensation associated with hiring workers directly" - as explained in a recent Bloomberg article.
"The online retailer [Amazon] 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 organize their schedules."
Your Margin, Amazon's Opportunity
Historically, Amazon has sacrificed short-term profit in exchange for market share. The transition to staffed home service employees fits this MO. The company appears to be going for a number of angles here:
There's the direct opportunity. U.S. consumers spent $16 billion on home cleaning in 2017, according to ServiceMaster Global Holdings Inc., parent of the Merry Maids franchise. ServiceMaster operates various servicing brands and reported a 6% increase in 2017 revenue (US$2.9 billion) at 10% net income margin for two years running. Allied Research puts the global cleaning services market at US$74 billion by 2022.
There's the cross-sell opportunity. Amazon has a private line of household products including its Presto! line which provides bio-based cleaners, detergents, dish soaps and more. Pinzon is more décor-related, offering sheets, comforters, duvets, mattress pads, bedding sets and bath accessories, like shower curtains, towels and washcloths. The global household cleaners market is a US$33 billion opportunity by 2022. The global bed and bath linen market is reportedly worth around US$60 billion.
These are speculative but Amazon's recent acquisitions i.e. Whole Foods and home security company Ring offer clues to future synergies that home-based employees would have with the company's longer-run growth model. Clearly the company wants and needs to build a much more intimate relationship with its customer base. In our recent analysis, we highlight that Amazon's U.S. Prime member base is likely plateauing in terms of size. Amazon will now move to monetize on these relationships by offering more value to its most valuable customers. Having boots on the ground that it can shape and train to local market needs will help in delivering on this value.
Amazon Entertains A New Workforce For The Sharing Economy
"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."
The Home Assistants pilot is currently available in Seattle. Home Services (the marketplace) launched in 2014 and remains available in select U.S. cities:
Miami; San Francisco; New York; Houston; Seattle; Chicago; Washington, D.C.; Philadelphia; Boston; Dallas; Atlanta; Phoenix; San Diego; San Jose; Portland; Minneapolis; Detroit; Denver; Riverside; Tampa; Orlando; Austin; Sacramento; Pittsburgh; Nashville; Cincinnati; Charlotte; and St. Louis.
If it scales, we anticipate that Home Assistants would enter into these destinations first.
Networks of Skilled and Unskilled Labor
With these two schemes, Amazon could deploy lower-skilled cleaning crews from its base of staff employees, to fill demand for more routine housekeeping services. Less frequent and more specialized labor including plumbing and electrical could be sourced on an as-needed basis through contractors via the Home Services marketplace.
This configuration would give Amazon the access and flexibility to effectively build up a new local workforce aimed at servicing homes, second homes, offices, and other rentable spaces.
From the website. "Selling Services on Amazon allows top Pros, like Assemblers, House Cleaners, Handymen, Electricians and more, to sell professional services directly to Amazon customers in their area. With the Selling Services on Amazon app, you can see every new job in your area and only choose the ones that fit your schedule. It's a great way to keep your business busy or to fill in the open gaps throughout your week."
Amazon The Home Sharing Platform
We believe that it makes sense for Amazon to eventually step into Airbnb territory by building out its own home sharing feature, as part of its e-commerce platform. It's massive and engaged Prime membership base would fuel both the demand and inventory for the platform. In our recent analysis entitled Amazon Prime Price Increases, U.S. Market Saturation Points To Shifting Strategy we estimated Amazon's U.S. prime member base at roughly 70 million. That's 70 million potential properties and many more potential guests since Prime subscribers tend to share log-ins.
Last month, we summarized what this might look like in our playful and purely speculative letter to Mr. Bezos entitled Hi Jeff! Please Help Share My Home.
Figure: Global Prime Member Base And Forecast Revenues Through 2020
Amazon's Potential Advantages Over Airbnb
Having home servicers on staff would afford Amazon some advantages over Airbnb - if the company were to go down the road of integrating as a platform. As employees, Amazon Home Assistants could theoretically be directed to take on other duties beyond cleaning. Hosts (or managers) could use Home Assistants to keep after their guests while away, for instance.
An Amazon Homesharing app could also feature integrated "guest services" functionality that connects guests and hosts to vetted Amazon employees. Trust factor is a big one when it comes to housekeeping. Amazon’s strong brand would be put to good use here.
Home Assistants would also pull Amazon in closer to property management groups which typically contract with housekeeping services to turn guests. These relationships would help Amazon scale inventory, but also help maintain healthy business relationships that would facilitate negotiations on commissions for bookings processed through the Prime community.
Amazon Has Rental Economy In Its DNA
The vertical push by Amazon into housekeeping has parallels with what's happening in the growing and increasingly mainstream alternative accommodations space. The industry continues to experiment with different business models ranging from marketplaces (Airbnb, HomeAway, Booking), to networked assets (Marriott, Accor), to more fully-integrated property management players including Vacasa, Turnkey, VTrips, Stay Alfred, and others.
Those in this last group are becoming platforms much like the OTAs in that they capture bookings through thier portals, but also deliver added functions including revenue management, property maintenance, concierge and guest services, in addition to housekeeping. We recently spoke to executives from all of these companies to get a better sense of the current landscape.
We see how Amazon could have some acquisitive interest within this category, particularly for their technology which is robust and designed to batch load property management listings. Also for their contracts under management as fuel for a deeper and more concerted push into the rentals space.
Ultimately, the market remains complex with various configurations the relationships of which we outline in greater detail in a recent analysis entitled Rental Economy DNA: Opportunities Within The Folds. Our sharing economy model highlights these complexities. 4 Attributes; 8 Classifications; and 16 Archetypes.
Amazon's push into housekeeper staffing would touch all of these configurations to varying degrees.
This is an excerpt from our earlier analysis:
Four Sharing Economy Attributes: Market, Tenure, Occupancy, Management
These are the core four attributes that define a rental property's position relative to its host, guest, service providers, rental marketplaces, and the community in question. Out of those attributes we pulled 8 classifications.
Markets: Regulated / Unregulated
There are urban markets and resort markets. Rented spaces are new to urban markets where regulation has yet to catch up with demand. Rentals are not new in resort destinations e.g. beach, nature, and ski locales that have traditionally high visitor volumes. Some rentals are fully legitimate. Others fail to comply with local regulations. Regulated is not synonymous with restricted. Regulated markets have established rules and bylaws that allow ecosystems to mature.
Tenure: Owned / Leased
Hosts either own or lease the space. Landlords often include restrictions in their lease agreements with their tenants. In dense cities like New York, where rents and demand are both high, a large share of listings are likely leased properties. Tenants take on the risk of non-compliance with their tenant agreements. Owners have the added responsibility to abide by local ordinances and typically need to register their properties and pay taxes (as do tenants) on their rental activity. Certain property management groups lease out spaces for the exclusive purpose of running a rental business.
Occupancy: Primary Residence / Secondary Residence
Rentable spaces exist as either primary residences i.e. the host picks up his mail there, or as secondary residences serving as investment properties that accommodate guests as their primary function. Occupancy status impacts guest experience, terms of agreement between property managers and tenured individual (owner or tenant), volume of visitors and other considerations.
Management: Resident Managed / Professionally Managed
Rentable spaces are either resident managed or professionally managed. Owners or lease holders can do it themselves or contract with firms to manage the rental process including pricing, revenue management, guest services and housekeeping. Sometimes residents contract with service providers including housekeeping. A space is considered professionally managed when the process is coordinated by a third party end-to-end.