So in numerous past blogs I have discussed the value of understanding the opportunity of “everything but the real estate commission.” In case you missed any of those blogs, you can find them posted on www.trancen.com/blog. Now I have an example of a brilliant strategic move "coming soon to a real estate market near you."
See the forwarded email below. Introducing the offer of the Compass Concierge.
There are many different strategic aspects that I would like to point out related to this program, but here are just a few of the most important aspects I think you should take time to consider.
First of all, we are finally seeing real evidence of what some have predicted was the ultimate play in the brokerage business for Compass.
That is the ability to deliver 'everything but the real estate transaction.' In other words, what Compass always intended when they set out to aggressively move the equity of companies like yours via recruiting away your agents and purchasing entire brokerage companies. We all suspected, or we should have anticipated, that there was more here than simply rolling up agents and brokerages. Why? Because we all know that there is very little opportunity, especially now, in owning a brokerage company to make profits in generating commissions. Margins are low, use of related services is a push and commission splits continue to soar in favor of the agent.
So, if not being just another big brokerage company, what is Compass really doing to bolster the promise of its company’s future revenue? It’s simple it has established the foundation to finally crack the code to become the Nation’s largest and most effective home services company by leveraging its growing presence as a brokerage company.
Compass has a laser focus on becoming the home services company “at the point of listing” and at “the point of sale.” The more listings they take and the more sales they make, the more home services they sell.
And you should note what they have also accomplished in the attached email. They have convinced their agents to willingly cooperate and to open the door for Compass to offer home services! In other words, Compass has clearly messaged, "agents you can have the real estate transaction" but we, Compass, want the home services you have historically left on the table. And everything else.
Compass has invested $1.4 billion to create a means to tap into the future revenue of the $394 billion home services and improvement market.
Did you notice that this agent did not attempt to brand the offer of home services to himself? Shocker. Compass agents consistently brand the real estate services to themselves and Compass has agreed to acquiesce and take a “back seat” to the branding of the real estate services. But when it comes to home services, Compass totally demands and controls the brand and the experience.
Compass is not going to hijack their agent’s consumer databases, they intend now to leverage those databases to do more than real estate transactions with the permission of the agents!
If that doesn’t speak loudly about what their true value, I don’t know what does. The most important thing to try and understand is Compass’s planned exit strategy. And I think the true answer to that question is all a matter of timing.
While I have discussed the impending multi-billion $$ IPO that Compass will be undertaking within the next 2 years and likely sooner, wait, there’s more. But now I think there could be something they are planning that could be an even bigger play. All of the widely advertised home services companies have failed to date to gain any significant traction with the consumer. And that list of companies includes Homeadvisor, Angie’s List and even Amazon. So why is this and what have they missed with their B2C marketing strategies?
There are a number of missteps, but I think there is one major reason that these companies have overlooked. ALL of these companies have attempted to control the home services market, but they are too close to the "top of the funnel.” The leads they generate are to vague and not related to a specific instance of need for these services.
But where homes are sold and bought is actually where home services are most needed. And clearly, Compass knows this.
I believe that if Compass is successful in aligning its focused and controlled offer of home services with the sale and purchase of a property, they will have cracked the code for the effective delivery of home services. And if they are successful in accomplishing this strategic alignment, finally there might be "some there, there” to motivate a company like Amazon to purchase Compass - either before or after their IPO.
And we all know the change that would happen in the real estate brokerage industry with the offer of Prime Real Estate were to made to some 150 million very loyal Amazon customers.
So why has Amazon not entered to real estate brokerage business to date? I think it’s because they see ZERO value in acquiring a business where the key revenue generators are independent contractors that continue to drive the profit margins in brokerage to a rate that is fast approaching ZERO. But that said, the ability to effectively deliver a wide array of home services now and throughout the life of the homeowner is a completely different value proposition.for a company like Amazon.
And one last critical thought for you. Let’s not forget that if Compass goes public, or even if Amazon were to buy Compass, the wealth created will be shared by ALL of the participants in Compass that have and will contribute to this success. And yes, that includes their agents.
Gaining the cooperation of the agents in assuring the company’s success is 100% dependent on - yes I said 100% dependent on - creating a real means for the agent to share in the wealth created by a company's ultimate exit.
We have a lot to think about now and more than thinking, we all have even more to do now. And yes, time is still very much of the essence.
Have a great weekend my friends.