Proptech for Developers & Home Builders.
The biggest “disruption” that technology brings to an industry isn’t functionality, it’s where the money flows. New tech introduces new ways to make money, renders old ways obsolete, and fundamentally shifts the financial balance in ways that can leave legacy players (even dominant ones) gasping for air. (RIP Kodak).
The new home industry is ripe for this kind of disruption. Proptech is going to fundamentally change how and where money is made. It’s already happening in resale as players like Opendoor and Zillow start to attack that 6% realtor commission. The key is going to be finding areas the areas where new ways to make money intersect with customer experience challenges, and then taking aggressive action (even if it feels unnatural or risky) to capitalize
Where's all the money?
Operations
Developers and Homebuilders spend $1B+ every year just tactically managing these developments.
Discovery & Buy
Developers and Homebuilders spend $15B+ marketing and selling homes.
Live & Consume
More than $100B+ is spent in these communities every year on groceries, gas, maintenance, services, and retail.
3 New PropTech Business Models for Real Estate Developers & Home Builders
1. Aggregators
Ultimately, every industry has to grapple with aggregators. Whether it is Amazon in retail, Kayak and others in travel, or Netflix in media. Consumers want choice, they want it accessible in one place, and they are willing to pay for it. Traditional players can resist for a while, but ultimately they either create and / or own a portion of the aggregator, or they see it erode their margin.
For developers and home builders, this is just starting. Zillow is trying to get in the game, but it’s dependent on builders sending in specific information. Consumers need a way to find these communities and understand the inventory – whoever gives them that will profit off highly qualified and directed leads.
2. iBuying
Buying or selling a house is generally acknowledged to be, using a technical term, a nightmare. Agents taking 6%, endless bids, home improvements, inspections, contingent deals, cash investment buyers sweeping in. It’s a mess. And it’s driving billions of venture dollars into companies like Opendoor who promise to use big data and digital to simplify the process and turn a profit.
But who knows homes better than the people who built the house and the community? Developers have a chance to shift the business model and take an even longer lifecycle view – become an “iBuyer”, entice customers with buy back guarantees, keep customers in your community portfolio, and make money on transactions. It’s a win for the consumer, a win for the developer, and a different way of thinking about the assets being developed.
3. Loyalty
It’s a truism of business – easier to keep a customer than get a new one. The travel companies (Marriott, United, etc.) have long since stopped competing primarily on product and started competing on perks and experience.
Communities are hot beds of transactions. Gas, groceries, retail, sports. Hundreds of billions of dollars a year. How do you attach loyalty to that, rewarding customers and incentivizing local spend, providing local businesses with unmatched consumer insight and marketing power, and creating a new revenue stream by taking small portions of transactions? It’s the holy grail of customer experience, operations, and money.
And it’s possible through the use of wearables, smart partnerships with systems like Apple Pay, and prudent infrastructure investments. But to make it happen, you need the data (see points 5-7 in operations). If you have it, you have the right to play. If you don’t…