Thanks to Charis Moreno, vice president of franchise sales at NextHome, who drew in a huge crowd at the Revaluate NAR stage for her presentation “Portal Combat” and who got me thinking about Blockbuster’s demise and how it relates to real estate.
People in the real estate and mortgage industry complain about innovative companies like Redfin, Quicken, Zillow and PurpleBricks. These types of companies have forever changed the industry, building what consumers want — and consumers are flocking to them. Industry titans and individuals long aware of Bill Chee’s lion over the hill, lash out as it comes into clear view.
Lashing out is perhaps just our natural reaction to a new challenger — it’s not wrong to defend your castle. Digging in with moats and walls are temporary fixes. But if we want to meet the consumer’s desires, then we need to transform our efforts from defense to offense.
Alternatively, we can look backward to the way it was.
Be kind, rewind
At its peak around 2004, Blockbuster Video was massive, bursting with 9,100 stores and market cap of nearly $5 billion. For comparison, that’s significantly more locations than Keller Williams and RE/MAX combined.
Blockbuster’s market cap in 2002 money was about three times more than Realogy (Coldwell Banker, C21, BHG, ERA, Climb, etc.) with a $1.6 billion market cap today.
Blockbuster was crushing it. But that would soon change.
In hindsight, we can see what was flawed — and we can learn from its demise.
On the surface, the Blockbuster business model made money renting tapes and selling overpriced candy — but actually, it made its vast riches by charging customers with high-margin late fees.
Customers (myself included) hated this practice, and we voiced our displeasure. Blockbuster leadership didn’t listen. In their mind, they didn’t have to — they were king of the hill. (See also: Hubris.)
Merely six years separated the Blockbuster behemoth from peak to bankruptcy. Stores went out of business, staffs were cut — all was lost.
Currently, Dish owns the remainder of Blockbuster, having bought them out of bankruptcy in 2011. But they operate no retail stores. There is only one Blockbuster remaining, known as @TheLastBlockbuster located in Bend, Oregon. This location is independently owned and its twitter account is packed full of awesomeness — but that’s the only entertainment Blockbuster still provides.
Scene two: Netflix
At its inception, Netflix subscribers received DVD’s in the mail — not via streaming services that launched years later in 2007.
Using the mail to deliver entertainment is the magazine subscription business model — not a Silicon Valley innovation. So it wasn’t a technology gap that allowed Netflix to decimate Blockbuster — it was much simpler.
Netflix had a customer-oriented focus. Netflix simply wanted to improve the user experience — and dominated at doing so. They removed late fees, and removed the frustration of returning a video on Monday morning. Removing that pain resulted in delighting an avalanche of new customers.
How big an avalanche? Netflix now has a market cap of $158 billion, putting it just behind Disney at $169 billion as the second most valuable entertainment company.
Environment and experience matter
You’ve probably spent a considerable amount of time at a real estate or mortgage office — does the atmosphere reflect the significance of buying a home? This could be the happiest moment in many people’s lives, a huge stepping stone forward — yet most offices feel like a drab, utilitarian attorney’s office. Is your space more like a contemporary and sexy Netflix user experience, or a drab, old school Blockbuster? Drab does not delight.
Create an atmosphere that reflects an awesome experience that is buying a home and pair it with excellent customer experience and people might even wait in line for you.
Great experiences are in demand as consumers are desperate for great service in real estate. So desperate are they, that more consumers now trust a “media company” (Zillow says they are a media company since they sell ads) for their real estate advice, not Realtors.
Here’s some data to back that up:
- 63 million unique visitors/mo on the official website of NAR, Realtor.com
- 193 million uniques visitors/mo on Zillow.
- Realogy, the largest residential real estate company/conglomerate is spending $120 million on consumer marketing and holds $2 billion in debt.
Meanwhile, Zillow spends $200 million each year on consumer marketing and is raising $1 billion to continue to innovate (Read: iBuy homes).
According to NAR 2017 data, 82 percent of homeowners say they will or would work with their prior Realtor — however, only 23 percent did.
The No. 1 reason consumers didn’t work again with “their” agent? It’s simple: The Realtor didn’t stay in contact with them post transaction. Charge high fees and ignore clients?
That is Blockbuster-lackluster poor service.
Tech won’t replace the Realtor — but better service will
You can’t be full of yourself, provide poor service, a poor environment and “charge late fees” when customers expect to be delighted.
According to Charis Moreno, vice president of sales at NextHome, “The biggest problem for the individual, team and brokerage is the inability of today’s Realtors to articulate their own value” — perhaps because they don’t know what value they should bring to the table.
Ours is a service industry where hubris has no place and we ought to focus on the end user. Outshine the drab and execute delightful service while providing an amazing experience celebrating homeownership for past clients and future prospects.
Don’t believe the snake oil salesperson. There is no silver bullet. It’s not a single specific technology fix or “becoming a tech company” that will solve your problems. It’s a combination of things, and it’s hard work.
Focus your efforts on better servicing your clients. Determine what your customers will enjoy, and you can both defend the castle you built and grow your kingdom going forward.