Redfin’s unique and innovative business plan was aimed at approaching a market previously saturated with specific constraints. While operating in the real estate industry, Redfin seems to be active in the nontraditional sector. As a web-based medium of selling homes in primarily metropolitan areas, Redfin has grown substantially over the course of its lifespan and with revenues continuing to increase, the company is set to make a profit in the next few years.
While the real estate industry was previously dominated by traditional agents and brokers, Redfin created a sector within the industry targeted specifically at the online brokers market. The company is still considered to be in the real estate industry, because they do still fulfill all the services a typical agent would, in addition to providing customers with information gathered through online algorithms and data. Home buyers gained access to home listings and were able to eliminate the realtor when searching areas for potential property. As Redfin is considered a registered broker, the company has access to all of the same information a real estate agent would be able to provide, while cutting costs and make the home buying process simpler.
Redfin’s primary competitors are other online brokers and third-party aggregators. These include Zillow and Truila, which were not registered brokers and only served as a point of contact between other realtors and potential customers. Realator.com, however, is a direct competitor as they are registered brokers with the ability to sell directly to consumers via their website. These specific websites serve as competitors, because to the average consumer they are all sites where homes can be bought, regardless of if the company or a third party is directly selling the property.
Company Strengths and Weaknesses
Redfin’s online presence is a force that is sure to prove to be a major strength as the company continues to grow. With online visits increasing each year, Redfin as a brand is gaining more traction in the world of mainstream real estate. In contrast to aggregator sites, Redfin’s ability to sell directly acquired properties will prove to be useful in the future when considering cutting costs and keeping providing unique services. With Redfin being a publicly traded company, the potential for future investors with be available and being the initial industry disruptor gives a strong brand image as the original home buying website. The ability to serve as both an online and in personal real estate company is arguably the most substantial strength Redfin has captured. Whether consumers are looking for a minimal contact buying process or an involved in person tour type process, where trained individuals are able to be physically present during every step of the way, Redfin offers both accompanied with lower buying and selling costs. All of these strengths will serve as advantages for future home buyers who are more technologically conscious and want to simplify the home buying process.
The constant battle to turn a profit is one of Redfin’s greatest weaknesses. Although the company does have an impressive income statement and the gap to profit is slowly closing as each year passes, investors may get wary in the future if this goal is not reached. Adaptations have and will continue to be integrated into the company as the market around them shifts and as seem in previous model shifts, these changes can be costly. The internal conflict of spending more money on a capability or resource that could potentially serve as a competitive advantage in contrast to just continuing present processes and cutting costs while becoming experts on specific competencies. Costly adaptation is a weakness Redfin has struggled with in the past in order to keep up with competition. With technological advances constantly emerging, Redfin will have to dedicate a larger portion of its capital into maintaining online resources and development to remain competitive in the online brokerage business.
Redfin targets potential home buyers and sellers by providing the ability to create custom home searches tailored to the consumers preferences across the United States, while offering lower costs/prices in comparison to typical fees charged in real estate transactions. Customers see value in the ability to search for or list homes without the hassle of going through traditional brokers and having to pay outrageous amounts of money due to higher fees or commissions. Redfin’s listing prices are nearly half of that of traditional competitors and on average saved home buyers a few thousand dollars upon closing. The company offers low costs with an efficient and speedy buying or selling process. This process is unique because it can be carried out remotely instead of through local contacts.
Company revenue is primarily sourced from brokerage revenue and partner revenue, with a small portion of other revenue coming from other ventures and investments. Additional revenue is made through the offering of services to consumers for flat fees on top of percentages of selling costs. With more purchasing options available to consumers, Redfin created more opportunities for revenue. The company spends a substantial amount of its capital on operating costs. These costs include technology and development, marketing and general and administrative cost. While these costs shift, Redfin has focused on being efficient and attempting to lower costs through help from hired engineers and consultants.
To ensure a profit be made in the near future, Redfin may need to consider other strategic alternatives to their current method. I would utilize capital from traded shares and put them toward a more intense marketing strategy as well as expansion into other major metropolitan areas. While there has been major progress in the area of expansion, I feel like maybe a different tactic for marketing should be pursued. Redfin is a unique business and should be marketed just as uniquely. Instead of ceasing all funding to present marketing efforts, I think a reallocation of these funds would be appropriate. Through targeting potential new customers on social media and through concise representation of the brand allow potential customers to recognize the consumer value that Redfin offers. Promote competitive advantages that set its capabilities apart from competitors. While this campaign has potential for brand recognition enchantment and an increase in site popularity, it may still prove to be too costly in the long run.
Another alternative would be to cut out poorly reviewed or underused features on the website or services that are rarely called upon. This would cut maintenance costs and simplify the site for new users and the removal of services via employees would help to reduce training costs.
Continuing the low-cost emphasis on services and listings is imperative to the brand image. Through a new marketing campaign and additional cost cutting via elimination of dated or underused features will send the company into a profitable quarter in the next near future. New marketing techniques will allow for reach of new audiences and spark growth from business from different generations. With the target of reaching new audiences in combination with simplifying of features and services to only the best, individuals will have a streamlined experience with considerable customer value.