Brokerage Models, Consumerism, REALonomics, Technology in RE
The Third Economic Wave
December 1, 2006 by REALonomics · Leave a Comment
Welcome to the Third Economic Wave of the real estate industry; this is the Consumer-Centric Era. This era is the outcome of all that has gone on before it within the real estate industry and I believe it will be the most powerful era in re-defining our business models.
Before we can fully appreciate the Third Economic Wave it is important that we highlight the factors creating the transition from one era to the next.
- New technology is introduced;
- The profitability of owners diminishes;
- Different models emerge;
Our era, the Consumer-Centric Era will become the most powerful and profound of all the eras because of its power to ultimately redefine markets and thus impact the business models utilized in the real estate industry. Three developments created the Third Economic Wave and thus the Consumer-Centric Era.
Internet Property Listings
The Consumer-Centric Era began in the context of 1993-94 with the first development of Internet websites for real estate agents followed by the manual entry of property listings with photos.
This marked the beginning of the escape of the property information genie from the Multiple Listing Service bottle, a single event so significant that more than a decade later the industry is still fighting about the event and its outcomes.
The On Line Consumer
On the other side of the real estate cyber spectrum was the consumer, now gaining more and more access to the Internet via the early Internet Service providers such as AOL, CompuServe and the granddaddy of them all in that era, Netscape.
Through home and office telephone lines and PCs equipped with 2400bps modems, parts of the real estate industry started connecting to the consumer directly, thus bypassing brokers, boards, books and buildings (read the First Economic Wave).
Agents gained access to the property information via WAN portals and then ultimately, placed the MLS information on the Internet via websites. This event would ultimately change the real estate industry forever.
The office-less real estate business model became more than just a theory as thousands of real estate agents began purchasing PCs for use at home and office. The cataclysmic change was the swellin of the tide which has now become the tsunami of our industry.
The online consumer began sending us a message that they would no longer accept the brokerage office as the primary method of introduction and communication, opting instead for email and online property information that could bridge thousands of miles of geography and initiate a real estate relationship across a city, State or the Country.
The relevance of brokers, boards, books and buildings (the First Economic Wave) were going to become less relevant, creating the empowerment of agents as the new controllers of the industry. Now, suddently, it seems, the agent-centric model is being challenged, creating the ultimate ism.
The Ultimate “ISM“
The Third Economic Wave created the ultimate “ISM” within the real estate industry; consumerism. Consumerism is the central most powerful factor influencing the real estate industry’s business operating models. Consumerism is the ultimate “ISM†because of its power to dictate the coversation models between consumers and brokers in the new open, freedom markets. The nearly universal demand for 24/7/365 online services is now paramount to every owner’s business model and profitability.
The territorially defined, static, vertical geographic markets are going to be ripped to shreds by the consumer’s demand for instant horizontal access to everything, any time and from anywhere. Will models that emphasize territorialism become antithetical to consumerism?
Consumers are no longer impressed, if they ever were, with our office complexes, brands and internal trappings that have little or nothing to do with what they want from us. Our industry ego statements are simply something that we use to attempt to impress one another.
We have entered the New Real Estate Economy. The rules for entry and operation are being re-written by a consumer backed by both the Internet and apparently the Department of Justice.
Are we listening? More importantly are we adopting models that will allow us to re-tool our real estate business models so that we can expand horizontally into new markets all around us without the need for the old bricks-and-mortar operations that suck-out the capital we could be using to re-invent and re-margin our businesses. This is what it will take to compete in the Third Economic Wave.
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