Good news, if you need a goat grazer, Amazon (AMZN +0.68%) has you covered. The world's largest online retailer has outdone itself once again, this time with the launch of Amazon Home Services -- a new feature that lets customers hire professional service providers for things such as house cleaning, furniture assembly, and lawn care directly from Amazon.com. The service is currently available in New York City, Los Angeles, San Francisco, and Seattle, though Amazon has plans to expand the service to other major U.S. cities in the coming months.
You're likely thinking, wait a minute ... isn't Amazon over-stretched as it is? Not only does the e-tailer sell everything under the sun on its namesake website, but the company has also poured billions of dollars into a myriad of other business ventures in recent years. Think: Amazon Supply (its business-to-business gamble), Diapers.com, Amazon Local, AmazonFresh, and its expensive foray into the smartphone industry to name a few.
Source: Amazon.com.
It seems Amazon is bent on world domination. But, should investors worry that this is yet another way for the company to burn through cash? A look at Amazon's balance sheet reveals the e-tailer generated a net loss of $241 million in 2014 on sales of ... wait for it: $88.99 billion. Ouch. The company also suffered its widest quarterly loss in more than 14-years in fiscal 2014 because of its aggressive spending habit. However, Amazon's professional services gambit could end up being one of its more profitable ventures down the road.
Why Amazon Home Services is different
For starters, there's no shortage of opportunity in this space. In fact, the home services market in the U.S. is estimated at around $500 billion today, according to Gene Munster of Piper Jaffray. Therefore, it's easy to see why Amazon wants a piece of this increasingly lucrative pie.
Linking its customers up with specialized service providers is also nicely aligned with Amazon's core business. For example, if you purchase a wall mount for a television on Amazon.com, the e-tailer might also recommend adding home services to your cart in which a local service provider would come to your home to install the mount.
Additionally, because Amazon is simply taking a 10% to 20% commission on the cost of the service rendered, there aren't significant overhead costs as is the case with other Amazon ventures. Moreover, tens of millions of Amazon Prime members already trust the e-tailer for most of their online shopping. Therefore, selling these customers on-demand services backed by Amazon's happiness guarantee seems like a no-brainer. Staying true to its roots of offering consumers the best possible value, Amazon will also let the service providers compete for a customer's business based on price and availability. So this is clearly a win for consumers. But what about investors?
Spoiler alert: Amazon Home Services shouldn't have a meaningful impact on the company's bottom-line any time soon. It will take time for Amazon to scale this offering, as it is not yet available in many markets. In fact, Wedbush Securities analyst Michael Pachter estimates the service will contribute less than 1% to Amazon's revenue next year. Once again, it seems Amazon is asking investors to be patient with its investment choices. Nonetheless, this could prove to be one of the e-tailer's smarter attempts at world domination.
