In the waning days of 2018, Coldwell Banker CEO Charlie Young predicted a “storm of change” was coming to the real estate industry in 2019.
Past 2019’s halfway mark, Young is now seeing that change first-hand and he believes Coldwell Banker franchisees are positioned to compete in an increasingly competitive landscape.
While Young predicated major change, what he likely couldn’t predict was how the equity markets have treated his parent company, Realogy, whose stock opened the year around $16 per share and has plummeted to a $6-per-share range.
Young spoke with Inman about the changes hitting the industry, the struggles of his parent company and ongoing rebrand efforts of the century-old Coldwell Banker brand in an exclusive interview with Inman.
In conversation with my colleague Jim [Dalrymple II], at the end of last year, you predicted this “storm of change” coming to the real estate industry in 2019. What are your thoughts on those predictions at the halfway point of 2019?
I remember that conversation. I’ll tell you what, I think this is a great time to be in real estate. There’s so many things coming together. First and foremost, all of the economic indicators over the long term look like they’re they’re good for the market. Demand is high and should continue to be high for years to come based on the inventory situation we have.
To the point that Jim and I were talking about, there is a lot of change happening in this industry, but that change is for the good. I think that the innovation that’s happening in this marketplace is good for agents, it’s good for consumers and I think in the end, it will drive the industry to a better place.
I really believe that Coldwell Banker is in the absolute perfect position to capitalize on that change. I think we are in the middle of a change process. I think the change is happening all around us and I think that that’s a good thing.
Why do you think Coldwell Banker is in the best position to capitalize on all this change? There’s so much money flowing into the real estate space but a lot of it is going to tech companies and non-traditional brokerages.
I think the characterization of traditional [and] non-traditional is sort of a paradigm that doesn’t really apply anymore. Why do I think we’re in a perfect position? It’s three simple things. First, we have size and scale and quality that others can’t match. So that’s number one: our network.
Number two, I think that based on the fact that we have such a great scale in the marketplace and understanding of the industry, we’ve developed a toolset for our agents and for consumers that solves real problems and moves the needle in terms of talking disruption for disruption sake and actually moving toward innovation and ingenuity that solves real problems and benefits those involved.
Then the third reason is the brand. At the end of the day, the brand is a great differentiator. It has been the premium position in real estate for many, many years. I understand there are many people that want to put us in a box based on that. But at the same time — despite what others are trying to do with throwing around their pocketbooks — you can’t buy the brand reputation and presence Coldwell Banker has with agents and consumers. And so for those reasons — size and scale of our network, a toolset that actually solves real problems and a brand that both consumers and agents recognize as the premium player in the market — we’re in a prime position.
We frequently hear executives talk about innovation. But how is Coldwell giving agents and consumers a leg up?
I’m happy to dive into specifics because I think one thing that I have noticed is that there’s a lot of claims being made that I haven’t seen substantiated in the marketplace. Let’s take the use of data, predictive analytics, machine learning, artificial intelligence.
Coldwell Bankers’ CBx technology suite has been live and in the market for over four years. We’re coming up on five years. In that [timeframe], we have given our agents and the consumers they serve an advantage in the marketplace. Nobody is even playing in this space yet. However, I think the future of this business is all about the utilization of data to make smarter decisions.
Here are two examples of how the technology suite really is doing that today. First is through our buyer locator program, the ability for an agent to sit with a consumer who’s looking to list their property and be able to predict where a likely buyer is going to come from for that property. Then seamlessly and easily target advertising and marketing for that property, in the most cost efficient way, is a real benefit that’s in the marketplace today.
CBx Seller Leads which we launched a little over a year ago, predicts homes that are likely to come to market. We have real experience in doing that. Not only can we predict address, but we can predict what’s going on inside that home and give the companies and agents of Coldwell Banker the ability to solve a problem that’s in the market today, which is inventory. So we introduced the CBx Seller Leads program a little over a year ago. Seventy-four percent of Coldwell Banker companies are utilizing the seller leads tool today. Fifty-two percent of Coldwell Banker markets are utilizing the buyer locator today.
Compare that to Keller Williams. Keller Williams, you know, famously said, “we’re a tech company.” Well, first of all, I would never claim we’re a tech company. We’re a real estate company that applies technology to help solve problems for agents and consumers. By Keller’s own public statements, their biggest tech innovation to date in their CRM system that they’ve got a 26 percent adoption rate. That’s their number, they published it, not mine. [Note: Keller Williams reported that approximately 24 percent of associates worldwide had adopted its CRM by the end of the first quarter, but that number has since grown according to a recent interview with KW President Josh Team.]
So while they’re fooling around with CRM — which is, you know, table stakes today in real estate, it’s cost of entry, agents need CRM platforms, and most of them are sourcing them on their own — we’re out there playing in the tech space with artificial intelligence, big data, and making predictive decisions.
Realogy’s market cap has suffered this year. Do the struggles of your parent company impact your franchisees’ ability to compete when outside money is coming in?
I think the thing to focus on is that we are the market leader. We didn’t buy our way into that position. You know, many of our competitors are utilizing price to try to make a dent in market share. Market-to-market, right? That’s a dangerous game to play, because at some point, when you compete on price, and you have no value behind it, you’re going to run out of runway. All the new players that you’re talking about, they’re not making money.
We’re a highly profitable organization, and we are doing well in the marketplace. We’re focused on the value proposition and driving innovative change that’s going to impact the lives of the consumers we serve and the agents we serve.
On the tech front, it doesn’t stop with CBx. We are actively piloting and working with partners like Ojo to better scrub leads and provide a much more convertible lead to our agent population. We’re extremely active with Facebook around targeted media and how we can drive a more efficient media spend for our agents.
We’re working in the iBuyer space, to test concepts that not only bring an iBuying buying alternative available to the consumers we serve, but also leverage the power of our agents and our brand to maximize the return that those consumers are going to see.
How much does it help to have a parent company that owns its own brokerage with the same brand where they can kind of act as the test ground for things that then you can equip your franchisees with?
We work really as one. We bring one brand in the marketplace. There are things that happen in the franchise side of our business that are innovative and new that we package and bring to the own-side. Likewise, there’s a great testing ground for us in the own-brokerage business.
That’s another area where size and scale matter for us. When Facebook and other tech innovators in the marketplace want to bring something to this space, they reach out to Coldwell Banker and they reach out to our parent company because they know we have the size and the scale in order to execute on these initiatives.
What are the biggest hardships facing Coldwell Banker agents?
For franchise owners, it is a highly competitive marketplace. Right now, there are players in the market that are making some very short-term decisions that are not sustainable over the long term and that is having an impact on profitability for all. So it’s a much tighter business from a margin perspective than it ever has been before.
What do you mean by short-sighted decisions? Can you elaborate on that?
If you’re making decisions based on pricing — agent splits, buying agents through big sign-on bonuses — these are things that are not sustainable over the long term.
Is that putting upward pressure on commissions at brands like Coldwell Banker? You’re competing with 100 percent and transaction fee-based models. Is that forcing commission splits to be less favorable for franchise owners at Coldwell Banker?
The first thing that you need to remember is all real estate is local, right? So the competitive pressures differ market-to-market. Certainly, there are markets that are under more pressure than others. Some of the competitive dynamics are impacting not just Coldwell Banker but the profit margins for all players in the business.
We’re seeing a lot of consolidation in the indie brokerage space with acquisitions, and some indie brokerages shuttering. Do you think that consolidation is something that could help franchise businesses in markets where you’ve got a lot of competing franchises under the same brand?
One of the things that is defining the market today is consolidation. It’s another reason why I love being Coldwell Banker. Size and scale on a broad global basis is important. And size and scale from an operating perspective is super important on a local market basis.
What happens in a consolidating market is that market leaders are able to take advantage of a consolidating market and provide a home for smaller players that don’t have the resources to compete. And market-to-market, in primary markets, secondary markets and tertiary markets, Coldwell Banker companies are the leaders in their marketplaces. It puts us in an absolutely great position.
How have the efforts been with the rebranding so far? Have the franchise owners been receptive to the change?
The answer to your question is yes. The rebranding is first and foremost about putting a spotlight on the value that Coldwell Banker brings to the marketplace. The trade media, the competitive set, is very eager to position Coldwell Banker as traditional, and somehow traditional is a box they think we don’t want to be in. I would put our brand up against anyone, as it relates to innovation and driving change in today’s marketplace.
Ingenuity and excellence are two of our four core values that are driving the rebrand. The rebrand is about putting a spotlight on how Coldwell Banker is actually leading through this period of change. It’s very significant from that perspective. We’re very proud of it and we’re excited about it. Our network is jazzed by it.
We had a process that went like this: We announced our intention to rebrand back in March, we further announced our intention to pilot all of the identity elements for signage, marketing in four test markets throughout the summer.
We’re going to lock down our formal standards in September, and then open the door for our affiliates to rebrand starting January 1 of 2020 and giving them a two-year window to do that.
The demand for the new identity has been so strong. I think you will likely see a healthy number of markets actually re-identify themselves with the project Northstar identity prior to that timeline.
Are you concerned about moving away from the legacy and name recognition Coldwell Banker has worked so hard to establish for so many years?
We wouldn’t do this if we didn’t think the modernization of the identity and the logo wasn’t going to help accent and drive our position in the marketplace and be a benefit overall to the brand. Certainly, you’ve got a 113-year-old brand. You have a current logo that hadn’t been changed in 40 years. You don’t step into that lightly at all.
One of the reasons we went through the process that we’re going through is to make sure we did it with lots of consideration, with much input and with significant research with the real estate community, as well as consumers.
One of the things that has come out of the work we’ve done today is to make sure that when the interlock CB shows up, it also shows up with the words Coldwell Banker under it because we want to make sure that that is a locked up unit. The CB star and the Coldwell Banker together. Because we think there’s great equity in the Coldwell Banker brand, and we had no intention to signal that the words Coldwell Banker were going away.
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