Who's Building The Shopify For Real Estate?
Technology companies need to empower real estate brands to build their business without trying to 'own' the customer themselves
Shopify is a company I have grown to love and admire. With a market capitalization of about $180B, it is a formidable company in the e-commerce industry.
For the uninitiated, Shopify enables small brands and retailers to go online, find customers and do business digitally. It offers a suite of products/services including marketing, order management, logistics, customer engagement and payment processing. It is a 1 stop shop for all needs of brands and retailers. 1.7M businesses (Including large ones like Red Bull, and small ones like your neighbourhood cupcake shop) use it’s platform to manage their business across 175 countries.
What I find most fascinating is that Shopify has a clear focus on B2B businesses - The brands on Shopify OWN their customers. Brands can market through their own website (or social media pages). Process orders whilst knowing the exact details of the customer who has placed the order. Manage shipping and payments. Send a personalized note if they want. And continue to engage with the customer even post transaction.
When we compare this to the same brand selling on Amazon (or any other marketplace), the dynamics are vastly different. When selling through a marketplace, it is very evident that the customer belongs to the marketplace. Brands neither get to know the customers who placed the order are, nor do they get to know about any information about the logistics. They are just 1 small portion of a long value chain. Very clearly - The marketplace owns the customer.
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Similarities between retail brands and real estate businesses
The fundamentals of the retail brands market is similar to the real estate market - The market is dominated by bottom of the pyramid players. What do we mean by this?
Typically, when the top 10 players capture potentially 40%+ of the market, we might call it a top of the pyramid industry. Simplest example will be the banking industry. Although there are more than 4,000 banking institutions in the US, the top 10 banks alone account for almost ~55% of the total assets held in banks.
Now let compare this to, say real estate. In 2018, about 400,000 new apartments were built in the US. Of this, the top 10 developers constructed only about 38,000 between them, or 9.5% of the total market. The rest were developed by small and medium sized real estate developers.
While I have quoted statistics for the US, the trend would likely be the same in any country with a free market.
The trends in retail are extremely similar to real estate - Small and medium sized brand drive a very high % of the commerce. Which begs the question - When a large technology company has been built to support SMBs in retail, why haven’t we a similar company for real estate?
Problems that set in when dependency on marketplaces increases
Although real estate businesses can be broken down into developers, brokerages, property managers, etc., most of these insights would be applicable to all these segments.
When real estate businesses start marketing their products/services, they invariable start with marketplaces and listing platforms. Zillow, RightMove, Magicbricks, PropertyGuru, Airbnb, etc. are overarching platforms that are attempting to do to real estate, what Amazon has done for e-commerce. They provide a search experience to customer to make it easy for them to start their search and discover properties which would be of interest to them. In most cases, they hand over the customer information to real estate businesses to complete the transaction offline.
While the intention behind marketplaces in real estate is great, and most of them do stick to their agenda, many marketplaces invariably overreach their mandate and eventually compete with the customers they started serving.
Zillow has entered the real estate broking industry, and offers its brokerage services to customers looking to sell their home. Other property portals have extended their offering in the rental industry by providing landlords with tools to find tenants, take bookings and collect rent too (jobs which were traditionally outsourced to property managers).
Airbnb, which is increasingly focussing on long term rental stays, takes anywhere between 8-16% of the transaction amount as a convenience fee to enable a transaction. They are fast replacing the role of brokers in many cities, especially for renters moving across borders.
None of this takes anything away from the fact that property portals and real estate business NEED to work with each other, because that is in the best interest of the end customer. But we do need to ensure that real estate businesses think a little beyond just generating leads, and think about how to own the customer for a life time.
What could the Shopify for Real Estate look like?
We would need technology companies to help real estate businesses with the following if they were to become the Shopify for this industry.
Set up a good digital presence including setting up their website, social media pages, etc.
Market properties to potential customers across multiple channels (Including property portals, their own website, social media, agent network, B2B partnerships, existing customers, etc.)
Manage bookings and enable the end to end transaction including negotiations, paperwork, background checks, other documentation, etc.
Customer engagement tools - Real estate sales cycles are long, so remaining in the active eye of customers is super important here
Now building all of these capabilities under 1 platform would be extremely difficult, so companies could start by helping 1 type of customer within 1 segment in real estate and build the business from there. Companies could also integrate or build on top of existing systems, instead of building everything from scratch.
Side Inc is one of the best examples of a company doing something in this direction - They help real estate brokers with self brand themselves, and marketing their solutions to potential customers along with providing them technology to manage their business.
At TheHouseMonk, we are attempting something similar as well in the rental real estate industry wherein we hope to enable property managers and landlords with tools to help them market, sell and manage their portfolio. Disclaimer - I am the Co-founder and the CEO of TheHouseMonk.
Are there more similar companies look at building end to end solutions for any subsegments within real estate? Would love to hear about them!
I hope you liked this article - It ended up being much longer than I expected :) I will be sending 1 more by end of this week (hopefully) which will be a round up of all news in the real estate and proptech industries from June-2021. Stay tuned for that!