Awhile ago I was speaking to a friend of mine about diapers. Yeah, that’s an odd way to start a blog. More specifically we were talking about all the diapers she was going through and how grateful she was to Diapers.com for the speedy delivery and awesome service. I had to admit I never heard of the company even though they have been around for about 7 years or so. Thankfully my diaper changing days are well behind me. The fact is that this was a company that came out of nowhere and turned into a half a billion dollar company. I asked my friend about it. The first word out of her mouth was ‘service’. I decided to take to the internet and do a little research on the company and lo and behold I found some interesting details that parallel the real estate industry closely. Maybe I should be more specific. They way they ran their business is the way I want to run my business.
Consider that Diapers.com had lots of competition. They knew they couldn’t win on price but they recognized that having a baby was a challenging time in everyone’s life. Sleepless nights and general chaos and mayhem. Mothers needed help, assurances, guidance, and faith that, when ordered, the diapers would arrive on time. By their very nature diapers are heavy and bulky and expensive to ship so Diapers.com decided that they did something different. They couldn’t compete on price so they poured all their energy into customer service. They believed that their brand would only be as strong as their relationship with the consumer. They poured their efforts into shipping and tracking software, creating supply chain efficiencies and using data to anticipate the needs ahead of time. If they didn’t make money on their first order, they bet on the long-term strategy… build trust and the money will come. The strategy paid off as they figured that 35% of their business came as a result of word-of-mouth. As a start-up, the two founders boot-strapped their business part-time for a few years working nights and weekends. In fact they didn’t do any real marketing until 3 years after they launched. Consider other internet businesses that build a website and pour millions of dollars into marketing in order to gain traffic then try to figure our how to make money from it.
To me this is the ultimate business case for service over price. We can learn a lot from other’s experiences. In real estate we are trusted to help our clients buy or sell their largest asset. For the busy or uninitiated, they want it to happen quickly with the least amount of hassle and for the most money if they are selling (and the least if they are buying). Ok so maybe my title is a bit over dramatic. In the end, I believe there is a place in our world for both sides and quite frankly the customer should have the opportunity to do it all themselves if they so choose. At the end of the day however I think that an agent’s referral business comes from them doing a great job and building and maintaining their relationships with their clients and not for doing it for less money.
mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.
Technology talk used to be the dominant topic of conversation at real estate conferences over the last few years but these days there has been a noticeable shift to discussions on brands and brand building. I think we are talking about brands more because our industry has become so fractured that it is tougher and more expensive for agents to succeed.
Consider this, in the early days of real estate sales, agents worked for a neighbourhood brokerage who fielded calls and handed out leads. Upon successful completion of a transaction, the brokerage would keep a substantial portion of the earned commission. In return, the brokerage office was responsible for advertising listings and managing day-to-day operations. When independent contractor status came out agents assumed more responsibility for the sales function thus opening the doors for new brokerage models. Now take a look at what is happening now.
In Toronto we are closing in on 40,000 agents who are all competing for a piece of the 90,000 sales that happen each year. The sharp increase in the number of agents in our market has caused significant shifts in the real estate industry. The first is a downward pressure on commissions, and the second is the rise in popularity of the “discount brokerage”, a model that relies on fees rather than commissions. Both of these shifts have benefited the consumer in some way but have also put pressure on the traditional real estate brokerage model.
Now agents are faced with a new dilemma. Their competitive advantage is no longer their ability to offer lower commissions. They need to create a lot more value for the consumer. That may come in the form of neighborhood videos, access to a research department, market and/or neighbourhood reports, rich demographic information, media coverage, websites with killer SEO, and, least we not forget… training. For the average new agent coming into the business with nothing more than a few hundred dollars in their pocket and a dream, it is next to impossible to shoulder the costs of these tools. For the savvy brokerage, it is clear that an opportunity exists to share their offerings and create a new competitive advantage with their agents …at a cost.
For further clarification and a hint of what is to come, it is worthwhile to look south for additional trends. Following a catastrophic real estate collapse, the US market is finally returning to health. But something happened along the way. The primary objective to staying in business moved from saving money to creating an experience for the client. Several companies that operated VOWs in the past are now embracing bricks and mortar models. Others are moving away from the fee based systems and returning to traditional brokerage business models. Take a look at these great videos from Go Realty in North Carolina or Red Oak Realty in California. They are creating an experience for the consumer who may have come to the realization that buying and selling real estate doesn’t work in a virtual environment.
This is not to say that a virtual office or fee-based brokerage can’t succeed. I am all in favour of consumer choice but from where I sit it is clear that the full-service real estate model is about to make a giant come back.
As the old expression goes…what comes around goes around. Years ago independent contractor status destroyed the big brand but just like the circle of life, the independent contractor status is bringing the concept of brand back.
The opinion expressed here are the opinions of Mark Mclean and don’t represent the opinions of Bosley Real Estate.