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Okay, before we get started on this article, I admit that the title is kind of “click baity”. Just kind of though. I actually did mean what I said when I wrote this article title.
Do I think Jeff Bezos and Amazon are currently going after the Real Estate Industry? No, I do not. Do I though believe that there are parallel scenarios playing out right now in different industries that make it totally within the realm of logical possibility that if those ventures go well (NOTE: To date, I believe Amazon has only ever backed out of one venture they embarked on, which was the restaurant food delivery service)? You bet your last commission check I do.
So before I can share with you where I predict this whole thing is going to end up, I think I need to give you some context as to what Amazon is up to right now and why this is SIGNIFICANTLY important for the Real Estate Industry.
It All Starts With Warren Buffet
One strange thing about me is I am not and have not ever been a tech guy. I love technology, but I have never been employed by a technology company. I am a marketing expert and I am a businessman though. I thoroughly enjoy watching what other business owners, especially legit, O.G. business titans are doing.
A very important lesson I was taught years ago is don’t ever look at what a businessman says, look at what they are actually doing. For that reason, I find myself spending most of my time examining what the greats are doing, what they are newly interested in, and what they are pulling away from.
One thing I noticed this year was that Amazon was hiring thousands of insurance actuaries. Is this an issue? If you are an insurance company, you bet it is. The only reason Jeff Bezos is interested in anything is that he sees a weakness in the current structure of “the game” and wants to redefine it. He did it with books, he did it with brick and mortar retailers, and this year when I started noticing this, it seemed clear to me that he was seemingly looking to do it with some segment of insurance.
So what does this have to do with Warren Buffet, you ask? Well, Amazon engaged in a deal with Berkshire Hathaway and JP Morgan Chase. Amazon sees the health insurance industry as a broken segment that they can make big strides in. To get into insurance you need a ton of money. Even more money than Amazon could put up (or would be willing to gamble on a new business venture), so it makes sense that JP Morgan Chase would be involved in this.
But why Warren Buffet and Berkshire Hathaway? If they have the money thing figured out, why does Amazon need them? Like all things in life, the answer is blessedly simple. One of the companies in Warren Buffet’s portfolio is a re-insurance company.
For anyone that doesn’t know what re-insurance is, a re-insurance company is a company that actual insurance companies go to in order to get their own insurance. Insurance companies need insurance just in case some massive catastrophe happens. They need to hedge their bets to make sure they can payout on all those claims.
So by owning this company, and insuring the insurance companies, Berkshire Hathaway has data points on all the customers of all the major health insurance carriers out there and all the trends that go along with that.
The end result is a company (Amazon) that wants to completely change/revolutionize something that is considered by many to be old and broken. They have a partner that is going to invest in this new business (JP Morgan Chase) and make sure they have money to grow it into a successful business. And, last and most importantly, they have all the strategic intel on the state of the current landscape from a partner (Berkshire Hathaway) to draw a roadmap that will be optimized to completely upend the current health insurance model and make major headaches for the traditional health insurance providers.
If I was an executive at a traditional health insurance brand I would be very worried.
So What Does This Have To Do With The Real Estate Industry?
So if we can all agree that Amazon is good at disrupting traditional business models and we can also agree that they very rarely (at least up to this point) lose, what does this mean for the Real Estate Industry? Simply put, it means that the entire Real Estate Industry is in a lot of trouble.
Let’s fast forward two or three years. Let’s assume that this venture between Amazon, JP Morgan Chase, and Berkshire Hathaway unfolds swimmingly and everyone makes money. Do you know what other industry Berkshire Hathaway has millions of data points on? If you guessed the Real Estate Industry, you are right.
As I’m writing this article, Berkshire Hathaway Home Services is the second-largest Real Estate broker in the United States. They have over 1300 offices and 45,000 agents across the United States. That is a ton of agents doing a ton of Real Estate deals and Berkshire Hathaway is collecting a ton of data points about sales trends, agent earnings and the cost of doing business as a Real Estate Brokerage, just to name a minor few.
It is not an illogical assumption to think that Jeff Bezos is watching what is going on in the Real Estate industry, seeing new online startups in the Real Estate sector pop up, get tons of funding (think Compass Realty) and instantly think to himself, “I can do it better”.
The scary thing about this scenario is when he decides he may have a better model for Real Estate, who do you think he’s going to contact? Of course, he is going to contact his business partner in the health insurance business he launched. Why not go back to the well and try and launch another profitable business with a partner that is proven to have massive amounts of data that Amazon’s algorithms and business model building skills can exploit? Berkshire Hathaway will have all the data he needs to build a completely disruptive business model that is going to give the traditional Real Estate industry that we know today a complete full-blown ulcer.
Keep Reading. I’m Not About Doom And Gloom. I’m About Positivity
Now, this does sound ominous and I see how it could be really easy to stop reading this article and tell me to go screw myself and move on with your day. The thing is though that no matter how smart Jeff Bezos and Amazon are, and no matter how many data points Berkshire Hathaway can download for Amazon, you have a defense you can exercise in this scenario that not even the almighty Amazon can topple.
You Need To Be Present Online And Be Seen By Homeowners As The Thought Leader In Your Marketplace.
The truth is tons of Realtors® will perish when the new business model takes over. They are going to perish because they are unwilling to change the ways they have traditionally marketed themselves and their services. In that push back, Amazon is going to eat their lunch.
I have an actual real-life example of this from a meeting I was in (at a Berkshire Hathaway office curiously enough) a couple of weeks ago that I would love to get into today, but for sake of keeping this article short, please take a look for an upcoming episode 5 of our podcast and I promise I will give you a real-life example that will blow your mind.
For those of you though that don’t want to get run over by Amazon (or let’s face it, any other tech giant that might decide to take on this space), there is a formula that you can follow to put a forcefield around yourself that will keep your business from dying off and will, in fact, help you grow faster than you ever thought possible.
Real Estate Is A PERSONAL Business
No matter what advancements are made with technology, the bedrock of Real Estate has always been that Real Estate has always been a very personal transaction. A person’s home is likely their most valuable asset.
Because of this, human interaction and human touch will always beat technology. The razor’s edge here though is that all these homeowners are now searching for who to work with online. They are absorbing content from Real Estate agents online. They base their opinions on what they think about the things they’ve engaged with on Facebook, Instagram, websites and LinkedIn.
Homeowners Main Attention These Days Is Online. You Need To Be “The Mayor” Of Your Marketplace Online
Real talk, the next time I hear a Realtor® tell me they have a TV commercial deal on local spots on Comcast and that is their strategy for growing their Real Estate business, I’m probably going to vomit on the conference table.
Think about it. Other than sports, do you ever “really” watch live network TV anymore? My guess is you watch Hulu, Netflix and HBOGo. AND, for those of you that say, “Nope, I still watch live TV”, what do you do when commercials come on? Twenty bucks says you either jump up and go to the bathroom or kitchen, or you pull out your cell phone and start surfing social media. We are an online society.
The sad truth is every agent complains about SEO rankings because sites like Redfin and Zillow have taken all the top rankings. The truth of the matter though is that’s not even a drop in the bucket. Sites like Zillow and Redfin haven’t been able to penetrate local markets specifically and instead rely on regional search.
So if you haven’t crushed your search rankings in your local market today, it doesn’t fully impact you. You have to believe though that Amazon and all the data points they have from everyone that shops on their platform will have a plan in mind to penetrate even the smallest neighborhood within a massive city with area-specific data that no brokerage or individual agent could ever compete with.
So what do you do? Do you give up? Hell no. You just need to take advantage of the trends you know are happening, create good content NOW to get in front of people in your marketplace, and if/when Amazon comes in guns blazing to upend the Real Estate industry, you will be one of the few that aren’t impacted and keep doing business and growing.
How will you keep growing? You will keep growing because there will be two types of people in the “new business model”, which are very similar to the two types of people that are in the current model. There are those that will do anything to save a buck and there are those that truly take the sale of their home as a true to their heart, serious transaction and want to do business with someone they know and trust. You need to be looking to keep the latter in your crosshairs.
You need to get in front of the train and make sure that you have a solid digital presence and are highly regarded as the thought leader in your marketplace. Even when a giant tech company comes in and tries to control the digital narrative, enough people will already know about you and there is nothing Amazon will be able to do to change their thoughts of you. You were useful to them, gave them content and knowledge they regarded as important over all these years and they will reward you for it. You will win.
What if I’m wrong? What if Amazon never makes a play for the Real Estate Industry? The worst thing that happens (for me) is you can call me out and make fun of me online. Even with that though, having done these things I’m suggesting over the next year or two, you will be such a ubiquitous name in your marketplace that you will still end up doing more business than you have ever done before, so you still win. Sounds like a pretty good bet to me 🙂
UPDATE TO THIS ARTICLE ON 7/25/19
So I wrote this article about 7 days ago and posted it this past Monday. Yesterday though, it was reported that Amazon and Realogy Corp. just signed a deal to work together on a project that has been dubbed as Amazon “Dipping Their Toe” in the Real Estate Business. Very interesting.
While this is deal technically amounts to Amazon simply offering financial incentives to get homeowners to buy more of the things they are already buying from Amazon (plus smart home gadgets like Alexa, or whatever else they may want for a new house), again, it’s all about the data.
More data means more insight into how an industry works. In the case of a company like Amazon, that means more ways to figure out how to exploit that industry. Whether they were to stick with Realogy as a partner and one day open an actual online Amazon home marketplace, or go back to the well and do another deal with Berkshire Hathaway, as I suggested in this article earlier this week, the same concepts still apply.
The market is going to change. Now more than ever it seems like a question more of when than if. Those that get in front of this, build out their digital presence with great content, and establish themselves as thought leaders in their marketplace will win. Be one of those Realtors®