Realogy has taken proactive steps to reduce costs and equip its agents with tools to generate leads and help close digital transactions in an era of social distancing, but one of the company’s programs that you won’t hear it touting is the marquee TurnKey partnership with Amazon, launched last summer.
Realogy CEO Ryan Schneider announced on an earnings call Thursday that the company is suspending its partnership with Amazon.
“The value proposition of the TurnKey program, which we piloted with Amazon in 15 cities, the value proposition of that is all built around in-home services and in-home installation,” Schneider said. “We, together, made the joint decision that we were going to suspend that because helping people with smart home products and home services that require people to be in someone’s home, just doesn’t work in a COVID-19 social distancing world.”
Schneider said the company liked the TurnKey pilot but the companies had reached a decision on the next phase in April and decided to suspend the pilot. Realogy is focused on other affinity and lead generation programs, including enhancements to its Social Ad Engine and AARP rewards program.
“You’re not going to hear much from us about Turnkey, given COVID, because of the way it kind of eviscerated the value proposition that the thing was built on,” Schneider said.
COVID-19 has undoubtedly changed the way real estate companies work and Realogy, in addition to suspending TurnKey, has taken a number of other proactive measures that have led to cost-savings, which Schneider believes will benefit the company in the long run.
The company swiftly transitioned to a virtual environment in March and has since closed more than 150,000 transactions digitally. Parallel to the company’s efforts to support agents and consumers, Realogy has taken a number of steps to navigate the crisis at the corporate level.
“We moved aggressively to implement crisis-level cost savings through multiple people cost levers, marketing reductions, select investment deferrals, and real estate actions,” Schneider said. “The cost-savings actions we took in the last two weeks of March and throughout April are expected to lower our operating cost by $80 million to $100 million each full quarter they are in effect.”
The company also drew down $400 million in cash on its revolving credit line to ensure cash-on-hand liquidity and ended the quarter with $628 million in cash and cash equivalents.
Schneider also believes the company will benefit from strategic business decisions made before the crisis began, in particular the company’s focus on profitable growth, at the expense of market share.
“That choice should benefit us during the crisis, especially compared to those who have been making unprofitable choices, those trying unprofitable new business models, and those trying to disrupt the industry with new capital-intensive but unprofitable ideas,” Schneider said.
The company had already adjusted capital allocation decisions like focusing on debt reduction, stopping share re-purchases 15 months ago and not paying a dividend since August 2019.
While the length and the depth of the crisis will determine how long these measures will be in place, Schneider believes that, ultimately, Realogy stands to benefit, as there’s often a flight to scale businesses and quality brands
“Crises also often expose unprofitable business models or unprofitable attempts at disruption, creating new opportunities for established players,” Schneider said. “We’re working hard to be a beneficiary of both of those phenomena.”