Customer experience is the cornerstone of luxury purchases. Buying luxury yachts, jewelry, clothing, cars, restaurants……you name it – its always different. Now lets look at the other side of the coin.
Have you noticed that retail in your downtown area is dying? Have you noticed that malls are struggling? Macy’s, Target, Walmart, Gap, Nike and so many other retailers are struggling. The silent voices are the small, non-chain merchants, commonly known as the mom and pop retailers. When is the last time you went into an independent toy store?
The consumer has gone online, and Amazon is the category killer. Duh! Right? Consumers use the internet to shop. It is a lot easier to find products and pricing using your keyboard and a browser than it is to go in and out of stores, parking, cashier lines, etc.
If I were in the retail business today, I would create a great in-store online shopping experience. You valet your car. Going inside, you can sit down in a comfortable lounge with waitresses and bartenders. You order your merchandise as you sip your latte’. Runners collect your merchandise from the attached warehouse. When you finish your beverage or snack, the valet has placed your items in the trunk and brought your car up.
Have you looked on Amazon for Prada? Louis Vuitton? GEORGIO ARMANI? It’s not there. They do not sell their products online, and this is true of many luxury brands. What makes Rodeo Drive work is that the products there cannot be purchased anywhere but in the store. Notice how well luxury malls are doing – South Coast Plaza in Orange County and Fashion Island in Newport Beach. Amazon cannot touch them.
Is Online Real Estate like Online Retail
Not yet. Zillow launched Instant Offers to test this. They focused the product launch on the investor market. Investors do not really care about the purchase as much as they care about the economic fundamentals. They trust inspectors and appraisers. They trust their data and analytics about future prices and rental prices. Investors are a perfect market for online real estate. Beyond that, it will take time for the market to mature. If I were to forecast this opportunity forward for Zillow, I think that they have a major opportunity to make real estate investing easy. And the housing market is a great strategic investment for every investor’s portfolio. Note to real estate brokers: invest in growing your property management business.
Zillow does look like Amazon
Using Hitwise, comScore, or Nielsen, WAV Group can analyze the consumer behavior of online real estate shopping. When you look nationally, Zillow, Realtor.com, Trulia, and Homes.com crush everyone, but real estate is local. Hitwise is the best measure of local real estate search. You can see local MLS and large broker websites in the reports. Nielsen and comScore do not do a good job of recording smaller websites. In most markets, the large portals have over 50% share of the consumer audience.
Crazy opportunity for luxury real estate
Luxury real estate would be wise to follow the path of luxury retail. Luxury homes could be taken off the Amazon type real estate portals.
Top 5 reasons why luxury is not right for the Amazon’s of Real Estate
- Zestimates/AVMs are horrible at pricing luxury
- Luxury homes don’t prefer lockboxes
- Marketing for luxury is significantly greater
- Luxury consumers are demanding of a higher transaction experience
- Properties are more like art than utility
There are probably many more reasons why luxury properties should be marketed differently than commoditized real estate. If you can shop for it at Walmart – its not luxury. I think that the luxury consumer websites do a pretty decent job today. The problem is that the same properties are on Amazon.com for real estate. If you do not take those properties off those sites, you limit the opportunity to create a Rodeo Drive shopping experience.
I think that a lot of the luxury brands have done a good job of developing a definition of “Luxury.” They all have different formulas, but the pricing is generally in the top 5% of homes in the market area. Where they fall down is by publishing the luxury properties though syndication and IDX to websites that underwhelm the luxury property search experience.
The Who’s With Me Dilemma in Real Estate
Perhaps the biggest challenge to an idea like this is what I call the Who’s With Me dilemma. It takes more than a solo performance for a strategy like this to work. Every broker with a luxury listing in the market would need to follow the same strategy. Unfortunately, whatever leaders do in real estate causes others to turn the other way. The minute one or more leaders in Luxury go in one direction, their competitors will go in another. It’s an imperfect world.
Can MLSs Help?
Sometimes, the best way to serve a marketplace is the develop specific personas. We see Zillow developing realestate.com for the Millennial persona. Can MLSs develop a strategy for luxury? Sure they can! There are categories for lots and land, commercial, rental. Why not luxury? Who’s with me?