It was just a matter of time before the usual defensive arguments popped up in the wake of Compass’ announcement last week that it would merge with rival real estate giant Anywhere Inc.
The industry’s chattering classes all sing from the same songbook: that the Compass-Anywhere Inc. deal is not ideal for agents by limiting choice and bargaining power, that it will result in loss of culture in favor of homogenization, that it is a pro-shareholder move versus something that benefits homebuyers and sellers.
Utter tosh.
Family way
In the past few days, leaders at some rival networks have been expectedly caustic about Compass’ pitch for Anywhere Inc. However, these same brokerages and networks have not missed a chance to scale, whether through company-owned operations, licensed franchises or acquisitions. Are we missing something? Are they saying that only single-brand real estate companies can offer culture, networking, agent care and distinction?
It’s time to debunk the argument in real estate that scale excludes culture, induces homogeneity and is antithetical to the interests of agents, franchisees and customers. What is Anywhere Inc. if not a holding company — or conglomerate — with its assortment of differently positioned real estate brokerages?
In my previous piece, I mentioned that Compass’ play for Anywhere Inc. will make it the Amazon of real estate in clout, scale and ubiquity. Without a doubt, it will reshape global real estate and also take on the National Association of Realtors, multiple listing services nationwide and Zillow on issues such as private listings and whatnot.
What I left out in the piece is that Compass, at least from the luxury standpoint, has a role model in LVMH, the French parent company to 75 distinct global luxury brands.
LVMH’s portfolio includes Christian Dior, Louis Vuitton, Tiffany & Co., Möet Hennessy, Loro Piana, Sephora, Bulgari, Fenty Beauty by Rihanna, Guerlain, Marc Jacobs, Tag Heuer, Givenchy, Rimowa, Belmond and Paris Match, among others. Each brand has a clearly spelled out unique value proposition with distinct clientele and customer experience.
Similarly, LVMH rival Kering has a portfolio of around 15 global luxury brands including Gucci, Bottega Veneta, Saint Laurent, Balenciaga, Boucheron, Kering Eyewear and Alexander McQueen. Again, the brands have their own persona that is obvious to the buying public and those who work at the maisons.
Having worked with these luxury brands — and others beyond luxury — for decades as a publisher, editor, market researcher, event producer, consultant and leader of a global luxury real estate network, I learned a few things.
First, these companies paid extraordinary attention to the teams staffing the brands via constant upskilling, training, networking and knowledge exchange. Next, their product quality and attention to detail was impeccable. Third, they turned brand positioning and differentiation to an art, relying on the marque’s heritage, authentic roots and origin story, creativity and craftsmanship journey.
Finally, their stores were temples of desire, drawing repeat business and new customers via skilled associates, artful merchandising, elegant layout and prime locations.
In other industries, companies that have mastered a multi-brand portfolio without much conflict include Marriott and Accor in hospitality, General Motors and Volkswagen in automotive, WPP and Interpublic Group in advertising and marketing, and Condé Nast and Hearst in media.
In retail, even the mighty Amazon.com made acquisitions to enter new categories and plug into readymade audiences: IMDb, Goodreads, AbeBooks, Zappos, Audible, Shopbop, Ring and Whole Foods Market — all of them currently standalone brands within the Amazon portfolio. Each acquisition brought in new customers and added credibility and trust to the Amazon shopping experience.
Tip the scale
Most of the commentary against scale is a veiled fear of Compass’ enhanced clout should the merger with Anywhere Inc. come to pass.
For public companies, the need to scale is key to generate growth beyond organic means and deliver shareholder returns. Done effectively, M&A works. The same benefits apply to privately held companies, which also have owners to whom they answer.
In the Compass-Anywhere Inc. case, the deal will combine brands such as the eponymous Compass and its recently acquired Christie’s International Real Estate label with Anywhere Inc.’s Corcoran, Coldwell Banker, ERA, Better Homes and Gardens, Century 21 and the crown jewel in the portfolio, Sotheby’s International Realty.
The trick will be to maintain or upgrade the culture of each brand to retain its distinctiveness internally and externally while working on economies of scale at the backend: admin, accounting, technology, office-lease and contractor negotiations, material procurement and advertising media buys. Obviously, there will be cutbacks and spending freezes, impacting vendors, partners and managers who served the individual brands before consolidation.
A holding company with disparate brands, particularly many serving the luxury end of the market, will have to ensure that real estate agents, brokers, managers and staff feel the continued love with regular knowledge exchange, upskilling and training, networking and state-of-the-art marketing and tech tools. Recruiting and retaining stellar agent and office talent will have to take priority as well to counter defections and attrition.
Bottom line, to say that scale in the real estate industry results in homogeneity, loss of culture and an unfriendlier attitude to agents — the literal walking assets of any brokerage — is simply ignoring the tides of business and countless examples of successful mergers in other sectors.
Now’s not the time to simply carp or pull the line out of the water for those brokerages or networks threatened by the latest consolidation move in real estate. They should reorient their focus on what makes them unique and different, both to agents and customers. Adopting a similar posture will likewise help a newly emboldened Compass. What a triumph to combine Amazon’s scale with LVMH’s finesse.
Mickey Alam Khan is CEO of the Luxboro agency and Luxury Roundtable network. Reach him at mickey@napean.com.
