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Are Amazon’s Custom Home Services a Deal with the Devil?

Some integrators believe that Amazon will play a significant role in the future of the smart home, while others point out that Amazon annihilates competition in virtually every market they touch.

Following the announcement of Amazon’s new partnership with CEDIA back in early September, details have been hard to find. After some digging, however, I found broad strokes about how the program will work.

Integrators interested in participating in the “Custom Home Services” program must have at least one employee with a CEDIA ESC designation. Once approved, these companies will submit basic business info, along with pictures and descriptions of their work to be displayed on an Amazon landing page. Integrators then designate the zip codes from which they would like to receive bid opportunities.

There is no recurring fee to be part of the program. Starting on January 1, 2018, participating integrators will have to share a portion of their labor revenues with Amazon. The exact amount of this revenue-share is TBD, but according to Dan Quigley of Amazon, it will likely land around 10 percent. Amazon does not require that participating integrators abide by any price rules, nor does the company require that any of the installed equipment is purchased from Amazon. Lastly, it is important to note that clients who purchase through Custom Home Services will pay Amazon, who will then remit payment to the integrator.

The Debate Rages…
As you might expect, a debate is raging in the integrator community about the merits of the program. On one end of the spectrum, you have those who see this as a significant opportunity. These integrators argue that, regardless of how you feel about it, giant consumer brands like Amazon will play a significant role in the future of the smart home. Instead of resisting (or worse yet, ignoring) the efforts of such companies, they hope to leverage them to their own advantage by using Amazon’s market presence to bolster their own pipelines.

On the other hand, you have integrators who see Custom Home Services as a deal with the devil. With a fair amount of accuracy, these skeptics are quick to to point out that Amazon annihilates competition in virtually every market they touch. This program, the skeptics say, is nothing more than a Trojan Horse. Beyond pointing out what they believe may be the company’s ulterior (even sinister they say) motives, the naysayers also point to myriad potential “gotchas” in the fine print of the agreement.

So, Should You Play Ball?
Like most important decisions, this one is not black-and-white. And, where you land will depend largely on the specifics of your business, combined with a touch of a gut feeling. Regardless of where your final decision may land, however, it’s worth doing your homework.

If you’re one who sees mostly potential upside on the surface, be sure you critically evaluate the fine print and try to read between the lines. Even if you don’t find any deal breakers, certain aspects of the program might emerge as potential pitfalls. For example, Amazon’s policy of collecting payment, then remitting to the integrator, leaves me wondering how progress payment schedules (especially important on larger, custom projects) will be dictated. That, of course, is only one example. The point being to take your time thinking through how the policies will work in practice, and then dig in and ask the right questions to be sure you fully understand all of the implications.

If you’re among those who look at the program with great skepticism, make sure you are not dismissing it out of hand. If nothing else, a detailed analysis may confirm your instincts.

You may decide that it’s worth dipping your toes in the water. In the end, this is not an all-or-nothing wager. There’s nothing to stop from staying well diversified by continuing full steam with your own business development and lead generation efforts. This diversification will protect your business, while allowing you to benefit from a ground-level view of how the program works. Then, if you decide it’s not for you, you can rest assured knowing you made decision for the right reasons, as opposed to a fear of the unknown.

Make Your Move
It is impossible to deny the brand power of Amazon. And, whether you see them as friend or foe, their continued forays into all aspects of the smart home are a clear indication of their intent to be force in this growing market. Faced with this new reality, integrators of all sizes would be well served to understand Amazon’s latest offering inside and out. Do not make headlong commitments, and definitely do not bury your head in the sand. Now is the time for careful analysis and informed decisions.

Do you plan on giving it a try? Let us know in the comments section below.