2017 has been a good year for Redfin, marked by a high-flying IPO and lots of positive buzz in the marketplace.
I think it’s well deserved.
Redfin has been executing quietly and methodically for the last 12 years to create what could become a market-dominating customer experience.
Let me explain through a couple of broader observations:
I am an avid Amazon customer. I’ve connected my house with Echo devices. My kids speak more freely to the “lady in the tube” than they do to me. My 4-year-old even asks Alexa to play her lullabies every night to go to sleep.
I’m a loyal Prime user and there is rarely a day that goes by when the UPS truck isn’t at my doorstep, sometimes three or four times a day. I buy virtually everything online, from toiletries to rock salt for my driveway.
I even geeked out pretty hard when I saw a Prime Air plane parked on the runway at Sea Tac.
As a consumer, I’m all-in on Amazon. How they got me to this place is a fascinating self-study.
Unquestioningly, I’ve played right into Jeff Bezos’ master plan.
Amazon’s long game
To build a revolutionary new shopping experience, Amazon needed to “get big fast”. In its first decade of existence, it plowed nearly all of its revenue back into strategic investments and made little to no profit. It invested in warehouses, in Amazon Web Services, in logistics (including its own ocean-going fleet of ships and now airplanes) and recently made a big retail acquisition with the purchase of Whole Foods.
The strategy was that Amazon would create an enormous reach coupled with a compelling consumer shopping experience and the profits would – and will – come later. In the meantime, they continue to create a deeper gap between themselves and the rest of the retail sector.
I’m also an avid Apple customer. My digital life revolves around my iPhone.
I can conduct virtually all of my professional work on its tempered glass surface, in vivid TrueTone color, at speeds that rival and even exceed desktop and laptop computers from only a few years ago.
I also love my Apple Watch, which rarely leaves my wrist. I buy my coffee every morning and my lunch every day through its biometrically secure payment system. My AirPods, too, are a near-permanent fixture in my ears. With them in place I have instant access to an unlimited library of music and podcasts that feed my mind and soul throughout the day.
All of those things would have been unimaginable 10 years ago and were in the realm of fantasy only five years ago.
Apple’s long game
To build the consumer technology ecosystem of the future, Apple made several important strategic investments along the way. Most importantly, in 2010, the company began building its own chip architectures and has steadily improved device performance since then by designing new silicon chips manufactured to its own exacting standards. Every other manufacturer, meanwhile, still needs to use off-the-shelf chips.
The strategy was that by owning its own design and production, it could – over time – create experiences so clearly better that the consumer lock-in they already enjoyed would get stronger and stronger over time. That engineering advantage now lets them push into other device categories and create new products. As the technological gap between Apple and its competitors gets greater, so do the profits.
The work we do at 1000watt allows me to dive deep into many strong real estate companies, but the completeness of the Redfin digital experience is distinctive.
Redfin’s search experience remains far better than the portals. It’s hard to even argue with that anymore. As a consumer, I enjoy the speed of the website and mobile app, the data accuracy and the overall user experience searching for properties. Their alerts to my saved searches come quickly and promptly through email and push notifications.
The more interesting strategic shift, though, is the value Redfin now provides to me as a homeowner. Since I’ve claimed my home on the website, Redfin now feeds me relevant information about my local market in monthly newsletters. I enjoy seeing what’s sold nearby on my owner dashboard. I also generally find Redfin’s assessment of my home value trustworthy and accurate.
The company has drawn me deeper into its ecosystem.
Redfin’s long game
Redfin set out to build a new paradigm for real estate. In its first decade, Redfin made smart investments in technology and data science, and made strategic choices about its business model and compensation plans in order to build a relationship with consumers that is based on trust and performance. At the same time, the company built the Redfin brand to stand in for the personal agent relationships that real estate traditionally has depended on.
And like Amazon and Apple before them, they have taken their fair share of licks over the years for those choices.
But I believe the strategy at play here is that if Redfin, like Amazon, creates the best possible experience on the buy side that they can – and will – eventually flip the switch on the sell side and the profits will follow. Then the gap between Redfin and its competitors would widen significantly.
I also think Redfin, like Apple, is building equity in its brand, which in theory should make it easier for them to move people to new products. Like Apple did in moving customers from smartphones to watches and headphones, home buyers will follow Redfin from search to sales and, yes, even mortgages. At least, I believe that’s part of Glenn Kelman’s master plan.
I already see this starting to play out. I don’t know about you, but I’m seeing a lot more Redfin signs in front of homes these days – just like I’m seeing a lot more Amazon-branded delivery trucks on the roads in my neighborhood and a lot more people with little white wireless earbuds in their ears walking around downtown.
These companies have been playing the long game for while.
So the question is, what investments are you making today to ensure that you will be in a similar position of dominance 10 years from now?