Recently I wrote about the new entrant to the real estate digital advertising arena in the shape of the NZME site OneRoof. It’s many years since we saw a portal vie for a place up against the two established incumbents; so it is with real estate companies in the NZ market. The fact is, there have been very few new additions to the brand line up in the past decade or two. I can count just 3 – The Joneses, who crashed and burned in 2008; then a couple of years later in 2010 Mike Pero, and at pretty much the same time Sothebys International. Both of these trading on very well-known brands – one kiwi; one international.
So we now we have the news is that there is to be a new brand to take on the Australian and New Zealand real estate market – Better Homes & Gardens Real Estate. A brand that certainly has contextual relevance, but doesn’t come with any heritage in this market or across the Tasman. First and foremost it's a media brand, a lifestyle brand; most recognised for the well-known magazine and TV channel. The key question though is, can it carve out a place in the real estate high street in New Zealand?
To answer that question you have to dig a little deeper behind the name to look at the organisation that is driving it.
Better Homes & Gardens Real Estate began life in the US in the 1970’s as a classic brand ‘line extension’ from the original magazine which dates back to the 1920’s. The magazine has been a stable of the Meredith Corporation; a major media company that earlier this year acquired Time Inc for US$2.8bn. The operation of the real estate business ran for 30 years under differing operational management before the brand name was licensed to Realogy, the largest US real estate conglomerate. Realogy Holdings Corporation operates a number of brands in the US and International markets including Century 21, Coldwell Banker, The Corcoran Group and Sothebys International. It is a huge corporation with over 190,000 sales agents in the US and around 100,000 in more than 116 countries around the globe.
The core principle of Better Homes & Gardens Real Estate is to leverage the essence of the parent brand that speaks to people’s aspiration to a lifestyle epitomised in the magazine and then capture that dream through the process of buying or selling a home. This promotional video on the brand's US website embodies this brand principle.
The company has grown to a significant scale in the US market over what has been a fairly short period of time. A lot of the credit for this success can be attributed to the founding CEO Sherry Chris, who I have seen at numerous industry conferences over the years. She is an impressive individual as well as real industry icon. She has driven innovation and technology through the organisation to create a tremendous business.
So that’s the background to this company and this brand; however as to the local NZ or even Australian market opportunity I am sceptical. The US real estate market is so different to most other countries; fundamentally due to the nature of the dual agent role in the transaction process. An agent representing the buyer and a separate agent representing the seller. This for me is why Better Homes & Gardens Real Estate (BHGRE) was adopted so quickly in the US – the buyer side service is inherently lifestyle and aspirational as that is how buyers approach the property process, full of dreams of their new home and BHGRE plays on the media channels to sell this service. However the seller side of real estate is always transactional and seldom embodied by aspirational lifestyle. The stark reality of the seller side of real estate is that sellers face everyday challenges brought about by life changes, be they financial or functional.
The NZ and Australian markets are seller side agent markets and are transactional process driven, even if the outcome they seek is aspirational the sell process is a means to an end. Buyers living in their aspirational mindset are largely left on their own to undertake a self-service process where the property portals take on that role as their aspirational guide. Interestingly as I write that comment I realise how poorly the incumbent NZ property portals deliver on that role.
Now add to that transactional process requirement of sellers' agent role, the significant consolidated operational power within the New Zealand market which I recently analysed where more than half of all offices operate under one of 5 brand banners along the high street, and you have a playing field that does not augur well to the brand positioning of BHGRE.
The reality of the real estate industry unlike other consumer services is that a new entrant doesn’t just set up shop, hire staff and start a business. The core of real estate industry, right at the coal face, is individual agents (each one a unique brand) as self employed contractors, that is how the industry works. Any new operation such as BHGRE will have to entice such agents to join their brand and leave their existing brand. It is not only agents, but business owner / licensees who will have to switch brands to enable this new entrant to get a foothold. This situation is not new in this industry, as I have recently commented Ray White has made significant gains by getting other business owners to switch and so it happens with other brands given the franchise nature of the industry.
The only potential entry for BHGRE as I can see it, is to be found in the fact that BHGRE is a part of the Realogy stable of global brands including Century 21 - a brand that in NZ has slipped down the rankings with now around 50 offices. It might just be the base that the franchise holder in Australia and NZ of both Century 21 and BHGRE: Charles Tarbey could use to transition the Century 21 offices to launch BHGRE in NZ. Time will tell and as the article cited states the plans for NZ would follow Australia probably in 2020.
So potentially this could be good news for some business owners and top performing agents as the enticements by a new entrant may be sufficient to make the switch, but so might the competing offers from the major 5 brands. As we know time will tell, but I for one would be surprised to see BHGRE becoming one of the top 5 players anytime soon.