Saturday, March 29, 2008

Disintermediating Effects of the Internet on Home Repair Contractors

My garage door opener went on the fritz a couple of weeks ago and I have been procrastinating about getting it fixed. I had a relatively free day today that would ensure that I could be home if I could only find a contractor to come and fix it at a fair price.

I started this process at approximately 7 AM this morning.

Traditional Methods

Traditionally, I would have gone to the Yellow Pages and started at the top of the list and begin dialing. My expectation at 7 AM would have been that I would have gotten a lot of voicemails and if I got a warm body, I would have had to wait for a week or two to get someone out to fix it and hope that I was home during the 4 hour window that the service provider gave me. Bottom line is that this customer experience stinks.

Farwell to the Yellow Pages, Hello Residential Contractor Referral Services

At 7:15 AM this morning I made a request to Service Magic and they sent my request to 3 qualified contractors. By 7:20 AM I had my first phone call. By 7:30 AM I had my comparison shopping completed and had a contractor scheduled to meet me at the house at 2:00 PM.

Amazingly the contractor showed up at 2:05 PM and was completed by 3:30 PM. Hallelujah!!!

There are a ton of providers offering residential contractor referral services. I have used others in the past and have even used multiple services simultaneously, but my phone kept ringing for days after my job was completed. The fact is that the system is brutally efficient and I have found that these services are so effective that I don't really want to put my bid out to more than 3 contractors. Adam Smith and The Invisible Hand is truly at work here.

The Disintermediating Effect

In economics, disintermediation is the removal of intermediaries in a supply chain: "cutting out the middleman". Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal with every customer directly, for example via the Internet. One important factor is a drop in the cost of servicing customers directly.

Source: Wikipedia

The contractor who completed the job worked for himself out of his truck. He told me he often does not have any jobs scheduled for the next day when he goes to bed and ends up with a full days work by morning; a guy like this under the Yellow Pages model would have had to work for a larger organization with a bunch of overhead and infrastructure. It is amazing how the technology (e.g. Internet, GPS Navigation, Mobile Phones) have created an incredibly transparent marketplace.

When I looked online to price the garage door opener that he sold me, the suggested retail cost for the unit was more than his installed cost. As Thomas Friedman so eloquently noted "The World is Flat;" even in the local home repair market.

Lessons Learned

I am hard pressed to ever go to the Yellow Pages again for home repair and I can guarantee to you that I will not be calling the home repair companies advertising on TV, they have too much overhead. Who needs either of them, when I can go directly to their subcontractors and disintermediate the middleman.

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