Redfin was profitable last month.
It doesn’t matter anyway.
I’m focused on this:
A company that rebates half its buy-side GCI, charges a modest flat fee to list, gives salaries and benefits to its agents, and maintains high-priced development and management teams actually made a go of it one month.
This is quite remarkable when you consider that most brokerages keep all their buy-side revenue between themselves and their agents, collect $30,000 in GCI off a half-million dollar listing, pay no salaries or benefits to their sales force, outsource their technology to lackluster vendors, work with very little management muscle and still struggle to achieve profitability.
What’s Redfin doing right that so many in real estate are getting wrong?
There’s a long list, but here are three biggies:
1. Talent. Maybe you didn’t like Glenn Kelman when he said real estate was “the most screwed up business in America” on 60 Minutes, but he is a serious CEO. The company is loaded with serious talent: Programmers, product managers and marketers flush with the skills today’s brokerage really needs.
So many real estate companies are weighed down with people manifestly unequipped to do the job that needs to be done in 2009. It’s sad and paralyzing, for even if the CEO groks something like social media there’s often no go-to guy or gal to drive execution.
And the idea of paying somebody top-shelf – let’s say a serious interactive marketing executive – is anathema. Too expensive.
But it’s not too expensive. What’s too expensive are the office locations that should have been closed five years ago; those office managers called from the ranks of agent mediocrity to their reward of a steady paycheck; the advertising, online or offline, that just doesn’t work.
There are lots of good people out there these days. Brokers should hire them.
2. Transparency. I wrote a blog post a few months back calling for real estate to stop trumpeting transparency. I think it was a little off the mark. What I really wanted was the end of transparency happy talk from people who have no understanding of what it really means, and no capacity for practicing it.
Transparency, done sincerely and systematically, can be magical, particularly in an industry as opaque as ours. It’s a powerful differentiator. As Glenn Kelman has noted, demand shot up when Redfin put agent reviews online. Real agent reviews, not polished testimonials.
But here’s the thing about transparency: It only works if you don’t suck.
Redfin enforces standards with their agents. They pay them bonuses based on customer satisfaction. They may not be top producers, but they are capable people with experience held accountable for their performance against a brand promise.
So transparency works for Redfin.
For many brokerages transparency would be suicide: The contents of their closets would not survive the light of day.
More brokerages should embrace transparency, but only after the hard work is done.
The work of creating something meaningful.
3. Technology. This seems obvious. Or does it? Redfin.com is pretty ugly – no pretty pictures of homes or home page Flash, right?
Redfin.com is usable, which is almost always better than pretty in real estate. Things that work build trust.
Redfin.com also contains darn near every bit of information a consumer needs in order to make an informed decision – or at least get far enough to qualify themselves before contacting an agent. It is a complete website from a consumer perspective.
Because it’s usable and complete, people talk about it. And word of mouth is golden – cheap and powerful every time.
Think about it: Have you ever heard a consumer say “You have got to use __________.com; the home page is gorgeous!”
Brokers who create a usable and complete website will be repaid on their investment.
All three of these things are related and in some respects dependent.
They also have tons of other positive effects.
For example, because the company had a CEO willing to say hard things, and is capable of saying them well, they got gobs of media exposure, which helped make it possible to forgo spending on advertising entirely — money many others brokerages (even a company like Zip Realty, another “online” broker, has ads blinking across the web) are often forced to spend at the expense of the things I mentioned above.
This goes on and on.
Redfin is not the only real estate company pushing the envelope on brokerage practices. We’re working with many who are making their own bold moves.
But Redfin is the furthest along at this point. Go to school on them. It’s free. And there’s a lot to learn.