Will Amazon Disrupt Real Estate?

In an era when disruption reigns supreme, it’s only a matter of time before an archaic industry like real estate gets shaken to it’s core.

Real estate is one of the oldest industries in the country, and many consumers are ready for a shakeup. From simplifying the transaction process to rallying for lower commissions, it’s clear that consumers want change.

Sensing this shift, many companies have already gone all-in to capitalize on this trend. From discount brokers who provide fewer services in exchange for a modest commission, to digital brokers who provide remote representation, to moonshot startups that aim to completely reshape the industry, there are plenty of challengers for the throne.

In this post, we’ll examine the biggest threat of them all: Amazon. Primarily known as the preeminent online retailer, Amazon actually possesses the tools to accomplish what many have failed to do before them: crack the real estate code and transform the industry.

Let’s look at the two main reasons Amazon is well-equipped for this task: 1.) They have financial means beyond almost any other company and 2.) they have a history of disruption.

AMAZON IS HUUUUUGE

To put into perspective how big Amazon is, here’s a chart showing the approximate market cap (number of shares X stock price) for 5 industry players…

Market Cap of Select Real Estate Companies (in Billions of Dollars)

No, I did not forget to input the data for Redfin, Realogy, or Zillow. That is actually how small they are in comparison to the deep-pocketed Amazon.

More fun facts: Amazon generates $26M in revenue every HOUR; Amazon has over $30B in cash reserves (enough to buy the $4.5B-valued Compass real estate startup 6 times over); Amazon CEO Jeff Bezos is richest man on Earth ($150B) and is #28 on the Land Report list; between 40-60% of all US households are Amazon Prime customers.

AMAZON’S HISTORY OF DISRUPTION

Before the word “disruption” even entered the business vocabulary, Amazon put Borders and Barnes & Noble out of business.

When Amazon purchased Whole Foods, Target & Walmart stock dropped 5%.

After Amazon announced a 2017 deal with Sears to sell some of their appliances, Lowes & Home Depot stock dropped 5%.

Amazon might consider entering the mortgage lending business. They were rumored to be hiring a head of their yet-announced mortgage division.  They were also rumored to be buying Capital One.

Last year, Amazon briefly posted “Hire a Realtor” page, which caused Zillow stock to drop roughly 4%.


ENTERING THE REAL ESTATE MARKET

One thing that Amazon is already doing: Amazon and Lennar have partnered to bring Alexa voice technology and smart home products into “Amazon Experience Centers”.


Here are four possible ways that Amazon could enter the real estate industry:

  1. Follow Berkshire Hathaway model - buy brokerages

    • They bought Prudential and others

    • This would be a vote of confidence for traditional real estate model

  2. Follow the Zillow model - sell leads

    • Zillow makes 70% of revenue from Premiere Agent

    • Also a vote of confidence for traditional real estate model

  3. Follow the iBuyer model - buy & sell properties and offer mortgage lending

    • Amazon has plenty of cash and buying power

    • Amazon could use their home improvement services for flipping

    • Amazon already has Amazon Lending for small vendors on their site

    • Amazon Web Services cloud computing could drive the process

  4. The “No One Has Any Idea” option

    • No one saw Borders or Barnes & Noble being disrupted

    • We don’t know how Amazon could disrupt real estate

REALTOR VALUE PROPOSITION

So how can Realtors expect to compete with an impending $800B steamroller? Real estate professionals will have to remain innovative to remain relevant.

Realtors need to bring extra value to clients.  There was a time when the MLS was only accessible via a printed book (ironic considering we’re talking about Amazon, eh?) Now most MLS data is publicly available. Many buyers and sellers are doing the research that was once reserved for Realtors only.

Agents need to keep a growth mindset. Keep learning. Keep improving. Keep finding ways to remain ahead of the curve. Keep finding new ways to bring value to clients. After all, clients deserve that!