Best Buy Stock Dips as Amazon Officially Launches Smart Home Services
Amazon Smart Home Services has launched in-home consultations — yes, the same thing CE Pro editor Julie Jacobson checked out earlier this year. But does it take direct aim at Best Buy's Geek Squad?
Back in February 2017, CE Pro editor Julie Jacobson set up an Amazon Smart Home Services consultation. The program, which offers free in-home consultations on everything from networking to voice control to smart lights and thermostats, was in its trial stages. Today, the service officially launched.
Networks like CNN are reporting that Amazon has rolled out "its own version of Best Buy's popular Geek Squad service," but unlike the Geek Squad, the Amazon consultants don't repair anything, and the only "installation" they'll do is to set up DIY devices and Amazon's line of smart services.
When a customer buys a smart device on Amazon, they have the option to set up an appointment. Service fees vary based on the product the customer chooses to set up. For example, the price to set up and personalize an Amazon Fire TV is $10, while an ecobee3 Smart Thermostat installation is $99. (Julie breaks it down futher.)
Here's the interesting part. Best Buy shares dropped more than 7 percent late Monday morning following news of the service. The reaction makes sense, according to investment advisor James Brumley.
"Best Buy has good reason to worry, as the rise of Amazon's tech-service field agents is a decent-sized source of revenue, and an oversized source of profits in a consumer-electronics arena that's known for paper-thin profit margins," says Brumley in a recent Seeking Alpha article.
But does Amazon's smart-home service take aim directly at the Geek Squad?
"It's difficult to say," says Brumley. "The former focuses on getting Echo devices up and running and getting users comfortable with its digital assistant Alexa. The latter offers a little bit of everything from setting up flat-screen TVs to fixing computers."
No investor-oriented discussion of the news can ignore the nuances of each company's operation, however.
While Geek Squad itself is a minor revenue source and a major profit source, it's also a key driver of product sales. A consumer or even a small business owner can step into a Best Buy store in need of a turn-key solution and walk out of that store with the problem solved in. The computer or computers have been purchased, along with all the necessary networking equipment, and Geek Squad's people will be on the deployment site soon enough to complete the job. In addition to a business in and of itself, Geek Squad (along with Best Buy's in-store technicians and service departments) are also a sales tool, helping promote computers, routers, cameras, thermostats, etc.
That was always by design, by the way. As Best Buy CEO Hubert Joly explained a year ago:
“Technology continues to innovate. But there is a growing gap between what the technology can do and our ability to understand it. And that can be overwhelming... The best place to have these conversations is inside your home. It doesn't need to be a big problem, but we want to build a relationship over time. So if you want help with not just an individual product but a whole system, of if you want ongoing maintenance, we can do that.”
[Best Buy] shares were understandably down in response to Recode's report, and the knee-jerk reaction makes a certain amount of superficial sense. When all is weighed though, Amazon is miles and years away from disrupting the existing tech-installation market. Best Buy remains the top name in that business, and will for a long while. Indeed, the launch of Amazon's rival service could prompt Best Buy to improve its overall game, making it even easier for buyers to come to the retailer for holistic solutions.
The Amazon program is still in its infancy. Amazon Smart Home Services are currently available in seven markets: Seattle, Portland, San Francisco, San Diego, Los Angeles, Orange County, Calif. and San Jose.
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Chelsea Cafiero is Senior Web Editor of CE Pro. She also manages the corresponding websites of sister publications Commercial Integrator, Security Sales & Integration, Campus Safety and Electronic House. Chelsea has previously covered politics, local news and consumer electronics. She joined the CE Pro family in 2012. Have a suggestion or a topic you want to read more about? Email Chelsea at firstname.lastname@example.org
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