NEW YORK (TheStreet) -- Angie's List (ANGI), Home Depot (HD), Lowe's (LOW) and Yelp (YELP) are just a few of the companies that should be concerned about Amazon (AMZN)'s entrance into the home services market.
The Internet retailing giant's new business lets consumers buy and schedule professional services such as furniture assembly and lawn care from neighborhood professionals through Amazon, which performs background checks and maintains insurance and licensing records. Buyers' accounts aren't charged until the service is complete, and Amazon offers a money-back guarantee.
Although Home Services won't significantly contribute to Amazon's earnings results anytime soon, it stands to be a major profit driver a few years down the road. The total U.S. home services market was estimated at $500 billion in 2014 and is expected to grow by a couple of percentage points a year, according to Piper Jaffray analyst Gene Munster.
Every 1% of the U.S. home services market that Amazon can capture in 2017 would add 5% to its overall business, he estimated, and Amazon could eventually hold a 5% share of a very large market. At present, the company holds a roughly 20% percent share of the e-commerce market, and home services could comprise 25% of its profit in 10 years because it's such a high-margin business, he added.
After launching with little fanfare in the fall as Amazon Local Services, the program was rebranded under the current name. Amazon hasn't publicly said how the unit has performed, and didn't immediately respond to a request for comment.
"They may be a little bit more aggressive in terms of how they're marketing it," Munster said, adding that when he recently purchased a television wall mount at Amazon.com, a popup asked if he wanted services for the purchase.
Amazon Home Services is currently available in markets including Los Angeles, New York, San Francisco and Seattle. Because of its range of offerings, the number of home services companies that stand to be impacted is huge.
"Home services is a notoriously fragmented market," said Munster. About 50% of the home services business is generated via word of mouth and the other 50% is generated online by a wide variety of companies that may be affected by Amazon Home Services, including Yelp, he said.
In the bricks-and-mortar sector, Home Depot and Lowe's could both be hurt by Amazon Home Services because they perform installation work and Amazon will be competitive with them, he said.
Amazon Home Services seems to be aimed squarely at Angie's List, Wedbush Securities analyst Michael Pachter said by email. The main difference is that Amazon guarantees satisfaction, and its services are priced before the work is done, so consumers will know what they are getting and have some recourse if they are unhappy with the work, he said.
"My guess is that it will work well," said Pachter, who estimated that Amazon collects a referral fee of about 10% in exchange for procuring work for each vendor. "I think this will gain some traction."
For now, Amazon Home Services is widely available in only a few large, urban markets and offers limited services in smaller markets.
"This is going to take a while to contribute meaningful revenue," Pachter said. It will probably be immaterial to Amazon's results this year, and add less than 1% -- much less than $1 billion -- next year, he estimated.
"It's going to be hard to scale this up to $1 billion for at least a few years," he said.
Amazon stands to take business away from companies including Angie's List, Home Depot, Lowe's and Yelp, among others, Rob Enderle, principal analyst at the Enderle Group, said by email.
Home Depot declined to comment, while Yelp and Lowe's didn't immediately respond to requests for comment.