Back to the Future: Amazon’s Misguided Venture into the Real Estate Industry
Jeff Bezos has transformed the retail industry and become the most influential business leaders of our time. However, the move into the real estate industry by partnering with Realogy does not make sense. For those of you not familiar with the real estate industry, Realogy is a company that owns some of the larger brands like Better Homes and Gardens Realty, Century 21, Coldwell Banker, and ERA. While these companies may be recognizable, they are more likely to be identified with the same brokerage your parents (or even grandparents) used to complete their last home purchase. The value and market share of Realogy has been in a constant decline for the last 5+ years, as consumers are placing a higher value on technology, innovation, and costs. Therefore, the partnership with Realogy will not put Amazon in the exclusive company of true real estate industry disruptors like Compass, Redfin, and Hausmarkt.
The idea behind leveraging Amazon’s huge customer base and trying to save people money when they buy or sell their next home makes complete financial sense (minus partnership with an outdated real estate brokerage holding company like Realogy). The brokers/agents of Realogy receiving the referrals from Amazon may need to give up something in exchange for the value of these new leads and consumers are smart enough to realize there is no such thing as a “free lunch.” Consumers will question the value of an amazon gift card and being forced to use a particular broker for such a large financial transaction.
The real estate industry is full of referral based companies that charge brokers to help generate business. For example, Zillow earned $900 million charging brokers/realtors to help generate leads based on activity from zip codes. Zillow recognizes how foolish the idea of partnering with one brokerage would be in an industry that sees a failure rate of almost 90%!
If Amazon’s first venture into the real estate industry is trying to save the reputation of a failing group of legacy real estate brokerages, they should look no further then what their own disruptive business practices did to the outdated business model of “brick and mortar” bookstores.