I have been fascinated over the past 6 months with the issues facing the real estate industry and Realestate.co.nz as the industry grapples with the issues related to the new pricing policy implemented by Trade Me Property. I have commented on these matters a number of times, each time though, I have thought "what would I have done if I were still running Realestate.co.nz"?
For over 6 years I was the CEO of Realestate.co.nz and in that time faced many challenges and implemented many initiatives. I got some things right and some things wrong; ultimately though I parted from the organisation largely the result of an impasse with the board as to the future direction of the company. I had a view as to the level of investment and structure required to drive the future development and create the leading property website in NZ, it was not the view shared by the board. I lost, that is the reality in business.
Subsequently the company has invested in new developments and undertaken up-weighted marketing as it has sought to leverage the dissatisfaction of the real estate agents to the policy changes at Trade Me Property. These investments have paid off as Realestate.co.nz has strengthened its position which I am delighted to see. However I still reflect on what plan I would have adopted in such a situation.
So purely as a hypothetical exercise and in an open manner for the benefit of the real estate industry I have outlined here my thoughts around a strategy for the future of Realestate.co.nz, a strategy to power it into being the leading digital property platform in NZ. Now clearly this plan is by no means guaranteed to work or would be in any judged to be full-proof. It is merely my opinion and in writing this I am in no way criticising the current management or board. I simply felt the desire to articulate my thoughts.
There are 4 distinct components to my proposed strategy:
1. Engage your customers
In my mind this is the most important strategy for the company. For whilst the website has to deliver a valuable experience for consumers searching for property for sale or rent, the business will be of no value without the support of the real estate industry. In this regard I am not simply talking about support as in the listings. I am talking about support in an evangelical way - you need to empower the industry to support the site and advocate the site. I often stated during my time in the role that the salesforce for the company were not those few account managers (excellent though they were!), but the 10,000+ real estate salespeople who through their everyday contact with consumers could become our full time evangelists.
Real estate salespeople are independent contractors and whilst in the past the decision as to online listing was a matter for the office manager and the admin team the critical importance of online marketing now and in the future requires all salespeople to engage with online marketing for every listing and with every client. To achieve this involvement and evangelical support requires investment in field based sales people together with comprehensive training. The real estate salespeople are the channel to future marketing products and services and need to be supported. I believe that currently neither Trade Me Property nor Realestate.co.nz has more than a couple of field based account managers and/or trainers compare that to the Australian market where REA group alone would have over 250 field based people dealing with customers - that would translate into the equivalent of 50 in NZ, now that might be excessive but I can be sure that if a customer in Morrinsville saw a visit from either Realestate.co.nz or Trade Me in the past year (or two) I would be surprised!
Beyond the critical customer group of real estate salespeople there is another subset of customers whose support the company needs, they are the business owners. Business owners are the 600+ individuals who own and operate the majority of real estate companies around the country. For whilst 80+% of the industry operates out of the 5 major brands, these are brands are franchise groups. The real influence and ultimately the buying-power rests with these business owners.
To empower and engage these business owners you need to provide them with motivation to support the company and nothing screams motivation more than “skin-in-the-game” and that in the case of the company this means real equity. Equity in Realestate.co.nz would be the motivation to ensure commitment of marketing budget and loyalty. That would provide the security of commitment for the company to attain the future vision to be the outright leader in the market.
Realestate.co.nz uniquely could enact this as it is notionally industry owned and a private company. For whilst the current shareholding is split between the REINZ and the 5 leading real estate companies, the reality is that the 10,000+ sales agents and 600+ business owners are disconnected from ownership, particularly as the shareholding of the large real estate companies is tied up in the franchisors to whom the business owner pay their franchisee fees. Effectively the business owners particularly are being asked to continue to support a website that benefits their franchisors at their costs - effectively making them pay twice.
Imagine if a cooperative structure was established much along the lines of Fonterra. Business owners having an equity stake in the website business through a capital raising by the existing shareholders. Shares could only be held by a subscribing and active real estate business. Dividends would be payable based on usage support commensurate with shareholding. Shares could be traded to allow for businesses to enter and exit the industry and thereby allow business owners to realise the value in their continued support of the company.
2. Focus on experiences
The company needs to invest. It needs to create a compelling digital platform that delivers experiences for users that excites and delights. Experiences across all platforms to provide solutions to property buyers and renters, helping them navigate the buying or renting process.
The tablet experience is the most critical at this time, this is the device that you want users to fall in love with your brand and service, capture the emotional early searching part of the home buying process and thereby guide people to then go on to use the more functional smartphone app. Win the app environment and you can effectively ring-fence your users and secure competitive advantage.
The company also needs to think laterally to envisage the next experience opportunity. How could the smart TV be a complement to the lean-back tablet browsing experience?
Realestate.co.nz is a technology platform for the real estate industry. It needs to showcase innovation to the users and go as far as to assist the customers in their quest to better understand the future of digital engagement.
3. Empower consumers
Consumers need to feel engaged and empowered especially around decisions that are complex and involve high risk. The advent of the internet has opened up access to enable consumers to be better informed and to have a true sense of involvement in so many aspects of their lives. This is not reversible. Real estate in someways epitomises this and yet at the same time it is the most opaque industry for data and empowerment. From the simple process of how to find and evaluate an agent, to what is really going on in the real estate market, and what is the best method of sale, there are as many answers as there are individuals willing to share opinions on the questions.
This situation opens up the opportunity for Realestate.co.nz to create a digital oasis of insight and assistance, to be a partner to the home buyers and sellers. This positioning for the company could provide it with an unassailable position of influence, respect and trust. Developing this in partnership with it customers ensures that the two sides operate in tandem and both benefit. It all comes down to data. If the customers could have the confidence to trust and influence the way the market data of transactions is collected, analysed and reported then a single repository of knowledge through Realestate.co.nz would benefit all stakeholders in the company.
The final component of empowering the consumer is almost akin to the final blow to the competitive threat of Trade Me Property to which I refer to private listings. These listings will for ever be the differentiator that enables Trade Me to retain its massive hold over the real estate industry. Cutting them off from this unique differentiator would finally allow Realestate.co.nz to create the winning move. There is no valid reason why private listings should not not be displayed on Realestate.co.nz. To the consumer it makes not a jot of difference, all they want is comprehensive content on a consistent single platform, nothing more frustrating for them than hopping from site to site to ascertain the total portfolio of listings on the market.
As for the attitude of real estate agents to private listings, surely by now the logic must be established that this approach to selling your home will not go away, nor will it undermine the role of the agent. If agents somehow believe that by not advertising private listings on Realestate.co.nz they are in some way cutting off oxygen to these sellers they are mistaken. Equally if they think that denying private sellers access to Realestate.co.nz is some how a demonstration of a value proposition for agents, then the value of agents is not valuable enough. As a final sweetener, surely the potential of $6m of revenue a year would quieten the loudest sceptic, especially if they were a shareholder of Realestate.co.nz
4. Build passionate brand adoption
With a laser-like focus on the customers, a cooperative structure of ownership, matched to a resurgent investment funding to power new innovation, the last component of the strategy would have to be building the brand identity such that the brand becomes a byword for the process, a trusted and recommended single solution to all aspects of the property market.
Clearly the emboldened financial situation for the company as a result of greater support matched to a capital raising would create a war chest worthy of a major brand campaign, however burning the budget on flashy TV adverts does nothing more than stoke the coffers of the TV companies (even if one of them is state owned). What would be needed is an approach to marketing that created a real sense of why Realestate.co.nz is the logical solution. It should be as much about the innovation and experience as it about creative messaging. It should literally wrap itself around the agent process and support the agent in their day-today work as a part of the very foundation of the industry in all aspects of training, materials, communication and success. The brand should be there with the agent in the home of the potential client on the day of the first presentation as much as on the day the contract is signed, as on the day the keys are handed over and then the brand should live on with the consumer through the life of the property. This takes time and takes commitment, however the goal is audacious and yet highly achievable.
That is my proposal to the industry. My view as to how to push home the advantage and ultimately remove Trade Me from the equation, or at least marginalise them to the role of auctioning tractors with a 20 acre farm thown in!
As to the measure of success for the adoption of this strategy, which by no means is guaranteed, you need look no further than the overseas markets whether the digital real estate marketing platforms are reaching stellar levels.
In the UK a market of 60 million population the leading property portal (Rightmove) as a listed company has a market cap of $4 billion and the #2 (Zoopla) is about to list at an estimated cap of $ 2 billion. The US has two leading property portal players both listed companies in a market with a population of 320 million - Zillow has a market cap of $5 billion and Trulia a market cap of $1.5 billion. Finally Australia with just 5 times to NZ population with its powerhouse property portal REA Group topping all of them with a market cap of over $6 billion. These valuations are not reported here as inducements to demonstrate the upside of the future value of Realestate.co.nz, for with this cooperative structure why would the future shareholders sell? The key demonstration of these numbers is to highlight to the industry as to what to expect if Trade Me is given a free run at the future, as its aspiration is to emulate these performance metrics from the real estate sector, and as a consequence the industry directly or indirectly will end up paying to generate the revenues to create the profit to support these levels of profitability, many times their current level.