Is Amazon Primed to Conquer Angie’s List? Three challenges facing Amazon in the local services market

Amazon vs Angies ListSo you want a good recommendation for a local service provider to paint your house, remodel your kitchen, or tutor your kids. Chances are, you are turning to local service recommendation sites, such as Angie’s List and Thumbtack, to research and hire the best service provider available in your region. The response to these sites has been tremendous. More than 2 million households check Angie’s List before they hire.

Well, Amazon has taken notice. And they want in. In fact, efforts to enter this marketplace and obtain yet more consumer wallet-share are already underway at the behemoth.

There are many local service provider companies out there, each with a slightly different theory on how to best match consumers with providers. Angie’s List provides its paid subscribers with access to service provider and business reviews from real customers. Users can then select and book a local business, and even settle any complaints should a problem arise. Thumbtack, on the other hand, takes a slightly different approach. Their consumers submit a brief description of their needs, and up to 5 businesses will respond with quotes to provide the service.

Local service provider sites of all sizes could also be in Amazon’s cross hairs. Everyone from larger, more recognized review sites like Yelp!, to smaller fledgling startups, like the Atlanta-based home cleaning service Vergilis, will certainly be impacted by Amazon’s strategy to enter this multi-billion dollar marketplace.

I’m sure that Amazon will make a considerable dent in this market. And I’m also sure that providers of all sizes will feel the impact of their presence. But not all is lost for these companies; Amazon (and others) will face three distinct challenges at the local level:

1. Quality > Quantity

While monsters like Yelp! attract volumes of reviews from users, it takes a lot of effort for users to comb through the content to find reviews from people who are truly knowledgeable about the local area, and write reviews from a consistent point of reference. Volume does not translate to validity. Careful curation of service providers will be necessary to compete. Operationalizing the curation process is something that each company in the market does differently. For example, Thumbtack reviews offers from providers before sending them to customers, while Vergilis’ providers are fully vetted before being added to the site.

2. Service Loyalty > Product Loyalty

While most consumers are won over by the low prices offered by companies like Amazon and WalMart, the products on these sites are largely commodities. For example, most consumers don’t care where they buy their coffee.. And while I might buy a book based on a stranger’s recommendation, I’m not inviting someone into my home to remodel my kitchen unless I either know and trust the provider, or receive a recommendation from someone local who I know and trust.

3. Local Focus = Difficult To Scale

Local focus is difficult to scale, but it’s not impossible. Angie’s List has proven this fact. However, unless great care is taken when expanding the market, things can unravel fairly quickly. In order to replicate the experience from city to city, companies have to make sure they expand in line with their culture. Given how connected consumers are on social media, differences will be quickly spotted. A prime example of this is AOL’s Patch. The hyper-local news service took a big hit in January after being sold to Hale, laying off two-thirds of their employees, and being criticized for shallow journalism. Still, over 900 Patch sites are live. And they are beginning to rebuild by making significant changes in the way they manage content and advertising.

It will be interesting to see how the local services market plays out. In fact, this probably just the beginning. I think it’s only a matter of time before others, perhaps even WalMart, also decide to enter this business in a big way.

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