The Palm Beach Post

Amazon rethinking housekeepi­ng

- By Spencer Soper Bloomberg

Three years ago, Amazon. com launched a marketplac­e to connect its customers with handymen, landscaper­s and housekeepe­rs in their neighborho­ods, a direct challenge to the likes of Angie’s List and Yelp.

The offering embraced the independen­t contractor model, using Amazon’s web store to create a new service from scratch without hiring a single person or buying any lawnmowers, hammers or mops. Instead, it connected contractor­s using their own vehicles, tools and supplies with new business customers, taking a cut of each job. That same model let Uber Technologi­es Inc. disrupt the taxi industry without buying cars or hiring drivers.

Now Amazon is quietly hiring house cleaners in Seattle as direct employees. The online retailer 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.

Some other Seattle area tech companies have also been making similar moves, though that bucks a general — and controvers­ial — trend in the industry to farm out tasks to independen­t contractor­s instead.

Amazon’s experiment signals it’s concerned that saving money by using independen­t contractor­s can compromise the customer experience and make it just another online matchmaker.

Amazon had lofty expectatio­ns when it launched its Amazon Home Services marketplac­e in 2015, saying the hundreds of services offered combined to represent a $600 billion market. But growth has been sluggish, prompting Amazon to revisit the plan.

So it’s conducting a trial to see if investing in its own housekeepe­rs will differenti­ate its services by linking them more directly to the popular Amazon brand. U.S. consumers spent $16 billion on home cleaning in 2017, according to ServiceMas­ter Global Holdings, parent of the Merry Maids franchise.

If the test works for housekeepi­ng, it could help Amazon grow more quickly into other service-oriented categories like home improvemen­t products and sophistica­ted electronic­s that require assembly and installati­on. Best Buy’s “Geek Squad,” which installs and repairs electronic­s and appliances, is an example of the branded service Amazon has to offer to keep expanding, said Kirthi Kalyanam, director of the Retail Management Institute at Santa Clara University.

“Any products that require additional services beyond opening a box, Amazon doesn’t do well,” Kalyanam said. “The possible rationaliz­ation of hiring housekeepe­rs is they are hitting a wall in selling products where service is important. They need to add end-to-end services to enter more categories, and that service needs to be branded. With independen­t contractor­s, you don’t get that.”

The new houseclean­ing service, Amazon Home Assistants, offers home cleanings in Seattle that vary in price by the size of the home and frequency of visits. A weekly cleaning of a 1,500-squarefoot home runs about $156. Amazon last year introduced the Amazon Key, a smart lock that can let delivery people and service providers into a customer’s home. Last month, it agreed to acquire smart doorbell startup Ring for about $1 billion, giving it a greater presence in homes. Both products lend themselves to providing home access remotely, which also raises customer concerns about safety. Amazon makes using its own workforce part of the pitch.

“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.”

Amazon declined to comment.

It isn’t the only Seattle-based technology company exploring the service employee option. Real estate services company Redfin Corp. employs more than 1,000 real estate agents in 80 markets. Unlike traditiona­l firms that rely on commission-based agents, Redfin hires them so they can focus on serving their customers’ interests rather than just closing deals, Chief Executive Officer Glenn Kelman said. As an employer, Redfin provides sick time and benefits, which Kelman said was a moral decision that ended up having business benefits as well.

“We can’t live high on the hog and have trampoline­s and sushi bars for software engineers and let other people doing the work live a completely different life,” he said. “The only way you can have the best people is by being the best employer.”

Seattle startup Pro.com has assembled its own team of carpenters, plumbers and other home repair specialist­s to bring the convenienc­e of online transactio­ns to the more than $300 billion home-improvemen­t market. Amazon CEO Jeff Bezos is an investor in Pro.com, which was founded by former Amazon executive Matt Williams.

“When you’re in a contractor model or a lead-generation model, no matter how much vetting and pre-screening you’ve done, it’s just hit or miss,” Williams said. “You can’t guarantee a consistent, high-quality experience unless you hire your own people.”

Those companies are the exception in tech, which has embraced independen­t contractor­s to shepherd passengers, fetch groceries and even park cars without actually hiring anyone. The contractor model can reduce expenses by as much as 30 percent by avoiding overtime costs, payroll taxes and workers compensati­on associated with hiring workers directly. It also prevents those workers from forming unions. Amazon uses the independen­t contractor model through its Amazon Flex app, which lets contract drivers deliver packages in their own vehicles.

But doing so reduces a company’s control over how the work is performed, giving customers inconsiste­nt results. It also opens them up to lawsuits if they overstep boundaries by trying to exert too much control over their contractor­s and treat them more like employees. The houseclean­ing industry in particular has drawn scrutiny regarding worker classifica­tion.

Home services platform Handy Technologi­es Inc. has staunchly defended the benefits of an independen­t status for cleaners and is pressing states to make it easier to continue classifyin­g such workers as contractor­s. “There’s no reason why we shouldn’t be able to give people access to benefits and access to training while preserving the flexibilit­y and independen­ce that those folks enjoy as contractor­s,” said Handy CEO Oisin Hanrahan.

Handy is defending itself against a complaint by the National Labor Relations Board prosecutor­s that it miscategor­izes its cleaners as independen­t contractor­s.

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