[Redfin] “I coulda been a contender…”

Coulda Been a Contender Audio

I’ve been engaged in several blog discussions in the past couple weeks that have come down to the fundamental question: “Is technology innovation within the scope of a brokerage’s core competency?” It has taken me back to a post I read by Brian Boero of 1000 Watt Consulting Titled, “Redfin: A gift from the venture community to traditional real estate.”

I met Brian through his partner Marc Davison in his former capacity as a VP at Onboard LLC. Marc and I shared some pretty great email discussions while I was still in Baghdad and he got me really thinking about the role of a real estate brokerage as it relates to technology. I think Redfin is a perfect case study for this discussion.

Let me begin by disclosing my “party affiliation” and journalistic slant when it comes to Redfin. I am absolutely neutral on whether they are great for the industry or yet another uppercut to the chin. I am a true free-market capitalist at heart, so I believe that anyone, as long as they follow the rules like everyone else, should be able to introduce a business model, take their risks, and let the market decide. As a business owner in the very competitive real estate industry, I am prepared for the possibility that a competitor will compete with me for a customer and demonstrate more value. If that happens consistently and I do not adapt, then I will no longer have a viable business. It is the law of the jungle and I love it.

With respect to Redfin, I really think that they have missed a prime opportunity to become a national player and disruptive influence to the entrenched leading brokerages. They lost this opportunity by taking the easier road in order to reap short-term modest gains instead of taking the harder road which would have positioned them to do something really significant. The easier path that I am referring to branding themselves as “cheaper than the other guys with a great website.” It’s easy for obvious reasons. It’s the same reason that many untrained, desperate real estate agents immediately use discounting as their marketing plan. It takes work and it takes time to build a brand based on what you will do for your customer rather than what you won’t do to save them money. It is called creating a value proposition and demonstrating value.

No matter what the product or service is, people have natural disinclination to the cheapest. It is often-time unfairly assumed that the cheapest is priced this way out of necessity rather than strategy. People don’t buy the cheapest car on the lot unless they have to. People don’t ask for their menu’s to be sorted by price to make it easier to choose the cheapest dish. Ask Hyundai, who is spending millions on a new branding campaign to change its “cheapest in the market” brand that they erroneously staked their company on. Hyundai is by no means a failure; however, they have finally realized that their cars are probably more than their branding has allowed them to price them.

Another problem with the “cheaper than the next guy” strategy is that there will always be someone who comes along cheaper. You have a company like Iggy’s House that says, “we are going to prove to the world that we could choose the worst name possible and still get business as long as we are the cheapest” and poof, 50% of Redfin’s value proposition disappears in smoke.

Note: I do not have either of these company’s in my Colorado Springs market, but I would be willing to pay to see a video of these two competing for the same listing against each other. I can just imagine a Redfin agent responding to the customer’s objection with, “yes, Mr. Seller, it is true that listing your home with us will cost you thousands more, but do you realize that Iggy’s House is a ‘quarter-service’ brokerage and we are ‘half-service’ brokerage… What is that extra quarter service worth to you?” That would be rich.

I suggest that if Redfin would have instead taken the more challenging path and built a brand about value, then today they would already be a significant disrupter: bigger, more credible, and much more profitable. Redfin is by no means failing but I think they would be a battleship today had they chosen the harder right over the easier wrong.

Comparing them to the leading brokerages, Redfin could have offered a very compelling value proposition. Their value could have been offering industry-leading technology and a different way of doing business which provides the customer with a higher-value level of service. Instead, their pitch is basically, “we’ll pay you to choose us.” …Yuck. If they wanted to charge less, they still could have by marketing higher value than lower cost. The number one agent in my market once told me as a new agent to never advertise on cost but “when you are in their living room, do what it takes to get the listing.” That has always stuck with me.

To be frank, it’s not too late. Redfin could use some of their VC millions to “mature” their brand very quickly. The fact that they have penetrated so few markets by now would actually be an advantage to them in terms of changing their value proposition, message, and brand. In terms of technology innovation, they are already ahead of the leading brokerages so a internal renaissance now would allow them to stay ahead as they gain critical mass across new markets.

You may wonder why a Real Living brokerage owner in Colorado Springs and the founder of Zolve would care about Redfin’s current direction. Okay a part of me feels a kinship to my fellow entrepreneurs who put it out there and make it happen. My wife and I are single-handedly working to keeping open a local deli that was opened by a retired couple with their life savings due to this odd compulsion. I hate to visualize Glenn Kelman looking in the mirror five years from now with tears in eyes, lamenting, “I coulda been a contender. I could have been a contender!”

However, mostly it is out of frustration and good old-fashioned Generation-X anghst. I want something or somebody to shake our industry’s brokerage leaders into action. I am not talking about accepting and adopting new technologies; all of the leaders have open checkbooks and are on that bandwagon. I am talking about innovation and leadership. I have concluded that the only thing that will cause real change will be market-share loss.

If for some crazy reason, Redfin takes my advice, I only ask in return that they stay out of Colorado Springs. However, if Redfin continues its present course with its current brand & business model, they are welcome to come join us… we have a pretty good Assist-to-Sell that you can give run for their money for that small minority in our city who is willing to trade time for money.