For centuries, the notion of turning lead into gold has captured the imagination of countless Alchemists, all of whom were doomed to failure.
The real estate industry’s economic model has been for decades akin to conjuring concoctions that claim to convert the weight of our tarnished enterprise models into shining bars of profitability.
We have not always understood the true alchemy of our industry and the relationship between the decline of profitability with the introduction and application of new technologies to our industry.
Each of the two great historical shifts (economic eras) in our industry have occurred with the rise of new technology, the independence of agents and the empowerment of the consumer. Consider the following diagram and then listen to the accompanying presentation.
The shift from the Broker-Centric era to the Agent-Centric era was created largely as a result of the introduction of a technology known as the Personal Computer (PC) to the daily work habits of agents, empowering them to globalize their reach. From that point on, Broker-Owners were not able to fully contain the spillage of property information into the streets of their marketplace.
The loss of the MLS Book coupled with PC access to MLS data created a decline in the control of property information (always a key contributor to loss of profit) and the empowerment of the consumer who no longer had to enter a real estate office in order to see the Holy Grail.
Nor have we fully appreciated how technology has always defined each of the three economic eras of our history and most importantly how each increase in technology within the industry reduces profitability.
In 1994, along came the Information Super Highway and property data began to find its way to the Internet, where a hungry consumer was waiting. The Internet created a bridge from MLS sources to consumers who were also empowered with PCs. This was the beginning of a shift from the agent-centric model to the current new real estate economy where the consumer is now the central character.
“Pb” (lead) can become “Au” (gold). The alchemetrics (not sure that is a word but I’ll run with it) are simply undeniable. Technology creates the shift and transition from one real estate economic era to the next. With each transition three things always occur:
- Technology always defines the shift, the model and the wealth in our economic models
- Owner profitability declines as control over property information control diminishes
- Information control is distributed over time to an increasing number of people thus, democratizing real estate
What does all of this mean? Simply, and yet rather profoundly, this means that ours is a history made up of transitions created primarily by the introduction of new technologies and a fundamental shift in economic control from us to consumers. It also means that the principle of alchemy is real.
Our lead-based model (forget lead-based paint for a moment!) is in the process of being turned into gold. However, in the alchemic (not sure that is a word either but I’ll run with it as well) process, we will not necessarily become the benefactors of the creation of new wealth being created by the introduction of new consumer-centric technologies. We could be but we are not, it appears, equipped to transition with the consumer into The New Real Estate Economy.
Watch the presentation and please, comment.
e-Partner studies the real estate industry from an historical perspective with special attention to the evolution of our business models and the factors that contribute to changes in the industry’s economic performance.
We have divided the history of the real estate industry into three distince eras, each governed by a set of factors that shaped the business models. Listen to this e-Partner Podcast entitled The First Economic Wave, the Broker-Centric Era.
Need help with your Internet business model. Call e-Partner toll free at 1-877-380-1000 or use our contact form.
Syndicated from REALonomics
In the post Unlocking Franchise Economics – Part 1,we opened the door to asking relevant questions that will help owners analyze the economics of real estate franchising.
In this series of posts e-Partner has one primary objective it would like to accomplish on behalf of owners and that is as follows:
…to help owners unlock the door to franchise economics so that gain an understanding of the substantive value propositions that exist and how a franchise name and associated promises can be quantifed in real dollars that are converted to a profit equation that is greater than it would be if the brokerage firm operated without the franchise.
Franchising is an Add-On Toolkit, with Limitations
At its most fundamental economic level a real estate franchise is a brokerage toolkit. Yes, there are all sorts of issues such as marketing, relocation, referrals, training, conventions, etc. But for now, we are setting those aside. A real estate franchise is an economic toolkit, at least it should be.
Franchisors spend a great deal of time butter-balling brands, numbers of offices, growth, name recognition, relocation, referrals, etc., and that is how most franchise sales people will present their proposition to an owner. It’s the owner’s responsibility to translate the presentation into real economic reality and performance and to insist that the franchisor do the same.
As a toolkit, there are some things a franchise can do, there are many things it cannot do and there are more things it does not want to do for a brokerage firm because to do them will harm the franchisor’s bottom line.
Let me be clear on this last point. At some point in the franchise relationship, an owner may find the franchisor a competitor for market territory, referrals, relocation and even local business.
Hungry? Read more and comment…
Real estate company owners are at the forefront of perhaps the greatest economic opportunity in decades.
At e-Partner we believe that companies can leverage technology, the Internet and the new market realities to transform themselves into effective and profitable organizations.
While the market rocks and reels, Broker/Owner have the unprecidented chance to redefine themselves, rather than wistfully yearn for the return of the “good ol’ days” which we don’t believe is ever going to return.
Unlocking Brokerage Power involves at least three things:
- Redefining the notion of “market”
- Implementing new recruiting models
- Developing consumer-centric methods
Redefining our Notion of Market. Our market used to be defined as a city, a zip code, or perhaps and Effective Service Area or Market Service ares. Such notions benefit the definers and not Broker/Owners.
Vertical market definitions, whose primary expression of presence is a bricks and mortar building is not only inadequate for ROI and sustained profitability, it is antithethical to consumer desires and behaviors related to real estate and relocation.
Let me make it simple: No one cares about our buildings, which are simply monuments to brand ego and a deceptive illusion that drains capital at the expense of a sign, agent loittering and ongoing overhead associated with personal guarantees.
e-Partner can help Broker/Owners eliminate outdated market definition, reduce retail overhead and yet increase their potential for recruiting, mergers, acquisitions and ancillary revenue within a larger playing field.
Implementing New Recruiting Models. Broker/Owners have largely lost the commission and overhead battle and therefore, they have in many respects forfeited any hope for sustained profitability and adequate ROI.
In order to regain a foothold on profit, Broker/Owners should look at market expansion where the demand for overhead is dimished. e-Partner provides Broker/Owners with workable alternatives to cost-intensive business models that insure agent survival at the Owner’s expense. Ask us how!
Developing Consumer-Centric Methods. The age of “build a website and they will come” is over and DOA. Our industry requires more transparency in our online business models and this can only be accomplished when we reject the notion that consumers consumers want to be regarded as a “lead.”
In addition, we are seeing a powerful shift from passive Internet surfing to transparency that gives in order to get and where we engage the consumer s a content partner, not a commodity.
e-Partner delivers market platforms that incorporate opportunities for consumer partnerships through blogging, commenting, authoring, remarking and many other mechanisms.
Our industry has changed. The consumer is driving the profitability train and yet we, if focused and dedicated, are now in possession of the tools that can deliver new profitability to Broker/Owners who are willing to reinvent their companies.