Realogy Holdings Corp the largest full-service residential real estate services company in the United States, announced a couple of weeks ago a collaboration with Amazon. The new program is called TurnKey, a new homebuying program that simplifies the process of finding and settling into a new home. Now available in 15 U.S. cities, TurnKey combines Realogy’s real estate expertise across its brands, including Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, ERA and Sotheby’s International Realty, with the ease and convenience of Amazon’s Home Services and smart home products.
The program has two parts. The first is the connection with a real estate agent who is one of the designated TurnKey agents, and who are affiliated with one of Realogy’s trusted residential real estate brands.
The second part of the program involves a free move-in benefit for the customer. Upon closing on a home, Amazon connects the buyer with services and experts in their area to help make the house a home.
Amazon is playing the long game. Imagine for a moment that Amazon is actually registered as a Real Estate brokerage that is entitled to the broker referral fee. Let’s imagine for a moment that Amazon credits 100% of that referral fee back to the customer in the form of Amazon credits that the home buyer can use to furnish their new home. What they’re building is a new set of habits. Imagine, you’ve got $5,000 to spend on new stuff for your house. What are the chances that you’re only going to spend $4,999 dollars and stop, never to spend money with Amazon again?
Chances are good that you’re going to establish a new set of buying patterns at a time when you are already facing disruption and need to establish a new set of buying patterns. You’ve moved into a new area and will probably change grocery store, hardware store, furniture store. Imagine that Amazon is disrupting that process and you’ve got $5,000 to spend. You’re probably going to continue to use Amazon beyond the first wave of spending to use up your credits. Amazon wants you to think of Amazon first when you need to buy something. By sending you on a shopping spree, they’re helping establish a new habit.
There is a fundamental conflict when a platform owner competes with its customers. Some people think that the end consumer are Amazon’s customers. But the users of its platform who sell through the amazon marketplace are also its customers. Competing with your customers can be considered an anti-competitive activity because it not a level playing field. Numerous companies have encountered this problem over the years and this has been the subject of numerous justice department probes into anti-competitive practices. When a single company becomes dominant in the marketplace, it becomes a target for accusations of anti-competitive behaviour. This happened to IBM when it dominated the computer industry. Microsoft has been the target of a probe. Now Google, Facebook and Amazon are increasingly under the microscope.
Certainly, the EU has put the dominant platforms under the microscope and they are in jeopardy of facing billions in fines from EU regulators.
So what does this mean for us as real estate investors? The most difficult part of any marketing funnel is the wide part of the funnel. It’s not the fulfillment end of the process. Those who control the widest part will achieve dominance, since that’s where the majority of the eyeballs are looking.
For now, Amazon is not at all involved in the world of commercial Real estate. They’re focused on the retail consumer end of real estate. But this is a shift of massive proportions that stands to tip the balance in the world of real estate brokerage.
You can assume that Amazon will bring a lot in the way of consumer analytics that few other companies can match.
