Coldwell Banker Real Estate has positioned itself as the cream of the Cendant brands. Maybe it's having the word banker in the name, but there is just something old school and stately about the brand. That's why the company's announcement that it would create and test market a service model to serve the "self-directed, price-driven consumer" is a little surprising. Or is it?

Coldwell Banker has shown quick responses to pending threats in the past, and turned them into advantages for the brand, proving it is not only reactionary, it is not afraid to be an innovator.

It was the first franchise to adopt the Internet in a big way with a national site;

It was the first to create a consumer new listing e-mail feature;

It was the first to offer a listings retriever, and;

It was the first to offer the Virtual Open House, a feature which puts sellers' disclosures and other information on the Internet for interested buyers to see - before they talk to an agent.

When the Internet first gained in popularity in the early and mid-nineties, agents everywhere were terrified of being disintermediated. Companies like Coldwell Banker showed them they had nothing to fear and everything to gain. The company's adoption of open consumerism features such as email alerts of new listings and disclosure displays showed that Coldwell Banker was in tune with rising consumer unrest about the mysteries of the buying process. Coldwell's announcement of a new service model shows the brand's ear is close to the ground. The new service model is also a pre-emptive strike at new threats.

Consider where the dangers lurk by using the clues in Coldwell Banker's announcement. "The new model," writes the PR machine, "will allow Coldwell Banker to target and capture the self-directed, price-driven consumer segment currently restricted to either selling homes without professional assistance, or utilizing the service offerings of upstart Web-based real estate companies."

Franchise brands like Coldwell are now in direct competition with well-funded e-based startups like zipRealty and eRealty because they both are planning national roll-outs. With rare exceptions such as Fred Sands, Realtors, most brokers tend to expand within their own jurisdictions. Only franchise brands are national currently. Shortly, the e-brokers will be national, too, building brand awareness with every new city conquered.

Start-up zipRealty is backed by Benchmark, which is not only capable of steering them to IPO heaven but are also capable of leveraging other relationships. It's no accident that zipRealty, which is in less than a dozen cities nationwide, owns the real estate "advertising" position on the world's largest Internet marketplace - eBay. eBay is also backed by Benchmark. According to a source, eRealty's president Russell Capper is in the middle of a road show, trying to drum up additional investment for his national-bound e-brokerage. And the chances are good that he'll get the money he wants. He has a business model that can change real estate brokerage services forever.

The first advantage that Capper, et al, has is that the e-brokers are not franchises. They can centralize their operations to process transactions and streamline costs in a way that the franchise brands do not. Each franchise office is individually broker-owned, and relies on in-house agents and support staff to process data. eRealty, on the other hand, boasts that 80 percent of its services are automated. That leaves agents in the field, doing what they do best, moving consumers toward buying or selling.

Second, the franchise brands are built on empowering the individual franchisee. With a broker-centric business model, the franchise brands are somewhat less than agent-friendly. Agents must prove themselves through a baptism of fire to enter and stay in the business. The marketing costs to differentiate themselves is high. The e-brokers, on the other hand, are only concerned with empowering the brand. Agents are given a place to work which is brand-centric. They don't have to worry about promoting themselves or their listings - the system does it for them. They receive special training, wireless Internet access, cell phones and other tools so they can do their jobs as field agents. And they have a limited number of duties so broker liabilities are kept to a minimum. Best of all, the agents receive a steady paycheck. As if that weren't enough to entice agents to stay long and prosper, other incentives include stock options, something a traditional broker or franchise brand doesn't offer.

Third, the e-brokers announce reduced commissions as part of their marketing. They reduce the commissions by offering rebates to their customers, regardless of whether they are on the buyer or seller side. The broker-centric business models have been paying lip-service to buyers, but at the core, they shun them because buyers bring 95 percent of all real estate lawsuits. Not surprisingly, buyers have been difficult to corral. Yet with 50 percent of buyers going to the closing table unrepresented according to several reports, buyers are too lucrative to ignore. The e-brokers seem to have done what all the statutory laws in all the states have been unable to do - get buyers under contract because they are enticed by the cash-back at closing. What buyer wouldn't want a few thousands dollars in cash back after scraping together everything they have in the world to get a down payment across the finish line? Franchise brands, by contrast, don't dictate pricing to their broker-owners.

Coldwell Banker's handicap, in short, is that in order to capture the consumer, it has to stay true as a brand to its real customers - the broker franchisee. How is it going to be able to do that and serve the price-conscious consumer at the same time?

The test phase of the new service model is designed to complement the traditional delivery platform of full-service real estate brokerage offices, says the announcement. Whatever the brand is planning, it has to include a transaction platform that is Internet-enabled and allows its brokers to serve the brand's consumers who wish to do most of the work themselves. The new model will "offer a highly defined mix of real estate services and professional advice while leveraging the Internet to help manage the transaction." That means salaried agents.

"In order for a real estate company to remain in a leadership position, it must recognize that their delivery system is continually faced with adjusting to the disparate but demanding service requirements of today's consumer in the home selling process - a process that is multifaceted, complex and highly personal," said Alex Perriello, President & CEO, Coldwell Banker Real Estate Corporation. "While seemingly more challenging, this evolving marketplace is prolific with opportunity. The companies that will prosper in the future must have more than a Web site and the lure of low prices, they must possess a keen understanding of how this business actually works and an experienced, professional support staff. Coldwell Banker has and will continue to test new innovations and delivery methods that leverage the expertise and market dominance of our affiliates."

The whys are obvious, but how Coldwell Banker is going to pull off this feat has yet to be explained. Is Coldwell Banker franchising new e-brokerages, providing an e-model to existing franchisees or enabling all franchisees to use a centralized transaction system in the test markets? The answer to that tantalizing question remains unanswered as Coldwell spokespersons could not be reached for comment by press time.

Coldwell Banker intends to leverage what it does have, a respected, 94-year-old brand name with instant consumer recognition, a brand that is fostered by more than 3,000 independently owned and operated residential and commercial real estate offices staffed by over 72,000 sales associates. Currently zipRealty has about 50 agents. The e-brokers have a long way to go to compete with those numbers, but then maybe they won't need that many.

Published: September 21, 2000

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