CEDIA Dealers Shouldn’t Trust Amazon as Smart-Home Partner, Says Industry Veteran
Smart-home pros would be 'foolhardy' to trust Amazon's intentions in launching 'Custom Home Services' for CEDIA-certified installers.
Amazon recently announced a collaboration with CEDIA, the trade association for smart-home pros, to expose online customers to professional installers. Should integrators participate in this new “Custom Home Services Program?” CE Pro contributor and former manufacturers’ rep Chuck Schneider warns integrators to think hard before trusting this online behemoth, which generally sets out to obliterate its erstwhile partners.
I DON'T TRUST AMAZON to do anything less than to continue to disrupt, and then destroy, the competition in every category it encounters. That means the smart home, and the professional installers who serve it — CEDIA-certified installers in the case of Amazon's new "Custom Home Services" program.
Don’t get me wrong. I love Amazon. I genuinely admire Jeff Bezos, placing him in higher esteem than Steve Jobs, Elon Musk and even Bill Gates as the most important captain of the technology revolution.
That said, does Amazon give us any reason whatsoever to trust them? Are the seemingly sincere intentions of the program in our best interest? Amazon’s own history of voracious business behavior (below) answers with a resounding no.
Undaunted and/or foolhardy, if you are a CEDIA member with the proper certifications you can strut your stuff on the web pages of the most powerful company in the history of man.
So many questions. First off, you must decide as to whether or not you want to do this. Think about it. If you’ve spent your career serving aged Porterhouse do you want to open a drive-thru window bagging Big Macs?
Amazon’s clientele ranges from well-read urban sophisticates to… ah, well… those who are not. Nonetheless they are likely to be equally demanding, equally reluctant to part with their money without good reason and potentially obnoxious pains in the ass.
As Amazon customers (Prime or not), they’ll complain to Amazon customer service for the tiniest reason. In all my Amazon experience as a customer, I’ve never ended up on the short end of a dispute with a third-party vendor, which—in all likelihood—is what you will be. And all this for fewer net dollars.
Still game? All righty then. If there’s any sort of agreement that requires your signature, find and retain a well-recommended contract law attorney who probably won’t be able to negotiate with Goliath to alter any terms you don’t like, but should be able to translate all that legalese into English so you can make an informed decision before signing anything.
More to consider. Are you bringing, and charging for, the gear or are these jobs DIFM with client purchases made from Amazon? Does the customer pay you upfront for the design so you are compensated for the time spent if he backs out?
What about warranties, service or system monitoring after the sale? Will Amazon provide financing through its financial partners?
And lastly, for now, will Amazon require or at least suggest that one of their Smart Home Consultants “tag along” to your job “just to observe”? Don’t scoff. Stranger things have happened.
For example, since you’re part of Amazon Home Services will your crew have to mow the client’s lawn, fold their laundry or do any of the other numerous services listed on the website? Are you sure?
CEDIA Dealers: Doomed to Repeat History?
My thoughts on this CEDIA olive branch aren’t based on mere instinct, admiration or even fear. Rather it’s rooted in a number of historical precedence in the consumer electronics industry.
As a rep back to 1983, I was sitting across the desk from the owner of a five-store home and car audio chain in Connecticut. On his desk was the strangest looking telephone I’d ever seen. When I inquired as to it, he almost lovingly picked it up, put the handset up to his face and said, “This is the future. And the future is going to make me very, very rich.”
He explained that he’d just signed a master distributor agreement with a cell phone carrier, could have been NYNEX or Cellular One or Nextel—all names from the past. As a master distributor, he received a handsome turn-on commission for every new customer and a “residual” commission on the anniversary of every active subscriber. Furthermore, he could set up other retail audio stores as dealers and get a piece of their action as well. Remember, back then phones had to be installed.
Although this does look a little like Amway or Herbalife, the system worked pretty well for the better part of a decade or, until the carriers realized that as the phones got smaller and lighter they didn’t need the install expertise any longer. Activation and residual commissions slowly shrunk to nearly nothing, contracts were not renewed or contained conditions detrimental to the retailer’s business. Carrier-owned showrooms began to dot strip malls everywhere in direct competition to the audio stores.
My friend the store owner in Connecticut never did get rich.
About a decade later in 1994 was the first year of DirecTV. Hughes Electronics owned this startup “small dish” satellite service and, at the onset, adopted a go-to-market business model similar to that used by cellular. Retail stores that never got a sniff of cable money jumped at the chance to sell a service that offered better quality picture and sound with more diverse video for the same or often less money than evil cable.
But before you could say ”pixelating in a thunderstorm” DirecTV set up an additional channel of distribution basically wholesaling dishes and set-top boxes to anyone with a wire cutter and a white van. With less overhead, these “distributors” undercut the prices the retailers charged promoting DirecTV authorized introductory packages offering more bang for less buck than the stores could offer. It wasn’t long until the retail programs ended entirely for the few who hadn’t given it up.
Shortly after Y2K, along came what I (at the time) derisively called “pay radio.” Satellite radio providers Sirius and XM battled for both content and subscribers prior to their inevitable merger in 2008. To sign up subscribers, both competitors solicited car audio specialists, who may or may not have sold home products, with a similar commission plan employed by the others. Was this third time the charm? Nope. Bolstered by big venture capital infusions, both soon went direct relying on extensive web and television advertising.
Did Amazon look to these three incidents as it developed its Custom Home Services Program? Who knows.
What began as an online bookseller in the early days of Internet commerce quickly morphed to a destructive whirlwind that nearly obliterated a retail business model that had stood the test of time since before Columbus set sail for the Caribbean. Next, they delivered the left hook to the audio and video software business while an increase in bandwidth allowed streaming services to deliver the knockout blow.
Either of these businesses makes our industry look like a chain of front-yard lemonade stands. The nearly $14 billion Amazon recently paid for Whole Foods indicates that, if it had a mind to, Amazon could buy each and every independent entity in the CE Pro 100 with the change hidden under its sofa cushions. But why pay good money for entities that will wither and die in due time?
Financial analysts who study Amazon for a living have recently speculated that the sprawling retail behemoth started its Smart Home Services for two reasons. First and foremost, it wants to do whatever is necessary to ensure that Siri and Cortana become bugs on the windshield of Alexa’s Ferrari.
Second, Amazon likely has its eyes on obliterating Best Buy and stomping its Birkenstocks on the necks of the Geek Squad. Although not as imminently terminal as Sears/KMart or Toys R' Us (yet another category leader Amazon has helped bankrupt), Best Buy—a couple of relatively rosy quarters notwithstanding—is still seen by some on Wall Street as a chronic patient in the retail ICU.
But wait, there’s more. With Whole Foods in tow, Amazon now has almost half the number of brick-and-mortar outlets that Best Buy does. It took them no time to put “farm fresh” Echos and Dots (day one in fact) on the end caps of Whole Foods, just down the aisle from the free range chickens. Can a sustainably-raised Sonos and others be far behind?
Remember, Amazon has 11 freestanding book stores (this drips with cruel irony) with more on the horizon. It has pop-up mall stores, a prototype “scan-and-go” store and scheduled warehouses/fulfillment centers the size of Rhode Island coming to a big chunk of vacant land near you. Looking out for the wellbeing of America’s custom installers is nowhere on its to-do list.
Read the Counterpoint: Amazon Is Friend, Not Foe
Amazon Not Out to ‘Serve Man’
When fans of Rod Serling’s iconic TV series The Twilight Zone (1959-1963) are asked to name their favorite episodes, “To Serve Man” from the show’s third season is almost universally on everyone’s top 10 list.
For those who have never seen the episode, it’s really a post-World War II/Cold War nuclear-era, science-fiction update of the Trojan horse tale. A race of 9-foot-tall 350-pound big-headed aliens, called the Kanamits, arrive on Earth with the stated intention of aiding humanity by giving humans access to their advanced technology.
The Kanamits claim they’ve done this for other civilizations throughout the galaxies. Even skeptics are convinced after the alien leader telepathically tells the United Nations General Assembly that the Kanamits will forever end war, famine and human suffering on Earth forever.
He unintentionally leaves behind a book, a Kanamit manifesto, which is given to a team of American cryptographers to decipher. While the humans secretly work on that project, the aliens begin to offer free trips for earthlings to visit the Kanamit planet, which is described as a Utopia.
The humans soon translate the title page. It spells out the seemingly innocent and apparently well-intended “To Serve Man.” This revelation convinces even the translator team to sign up for the trip to a galaxy far away.
As the chief translator is boarding the spaceship, his assistant runs franticly to the boarding area screaming “Don’t get on the ship. I’ve translated the rest of the book. It’s a cookbook.”
After giving the recently announced Amazon collaboration with CEDIA member integrators a lot of thought, I’ve come to an incontrovertible conclusion: Amazon is the extraterrestrial chef de cuisine and CEDIA-certified integrators are the steamship rounds of beef.
Participate at your own peril. With apologies to the late Ron Serling: “You unlock this door with the key of imagination. Beyond it is another dimension—a dimension of sound, a dimension of sight, a dimension of mind. You're moving into a land of both shadow and substance, of things and ideas.”
You've just crossed over into the AmaZone.
Chuck Schneider is a freelance writer with a long history in consumer electronics. He started and restarted his award-winning manufacturer’s representative firm - Value Added Marketing - and was also a vice president and general merchandise manager for a multi-regional CE chain, as well as a buyer for Lechmere's (a division of Target). Today, he is a freelance writer. Have a suggestion or a topic you want to read more about? Email Chuck at [email protected]
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