Every so often I check and see what’s been going on in my principal market space over the last 12 months — see who’s doing what, see if the competitive situation has changed any with respect to sales of single family homes, condos, and townhomes (no rentals, multifamily or commercial). I define my principal space as being from Atlantic Boulevard in Pompano on the north, I-95 on the west, I-595 on the south, and the ocean on the east. (This is an area of roughly 40 square miles (10 miles by 4 miles) give or take, and there were roughly 5,000 sales in the last year.)
The MLS data is my source. And no, I’m not going to name names. (Though I could!) It’s more general trends that I want to know, to see if there is any reason to modify my prior assessments.
And there isn’t.
The market is still highly fragmented. Using Michael Porter’s framework from Competitive Strategy (still the Bible as far as I’m concerned) the market is fragmented if the top four brands do not exceed 40 percent market share. And they do not.
By my measure the top four brands have just 26 percent of the market. It’s also worth noting that in the last 12 months, there were more than 1,100 brokerage firms that were involved in at least one transaction!
The Top 100 brokerage firms have 76 percent of the market. High fragmentation. Yet almost an 80/10 rule!
There were nearly 4,000 Realtors involved in at least one sale in east central Broward. Here again we do not see an 80/20 rule, but there is a 70/20 rule — 20 percent of the Realtors do 70 percent of the business.
Among the Realtors with at least one sale, I estimate average Gross Commission Income (before broker splits, expenses and taxes) at about $38,000 for the year. But of course the average is skewed by some very high figures among some Realtors/teams. I estimate that the median Realtor (half above, half below) involved in at least one sale… was involved in exactly one sale, and that the median GCI (again, before broker splits, expenses and taxes) was about $15,000 for the year.
Many times the general public forgets that substantially all of us are 1099 people, not employees. We have to pay our own taxes (when we have taxable income, anyway), insurances, office rent, marketing expenses… and pay various fees as well as a percentage of our commissions to our brokers.
The lessons as to optimal competitive strategy remain unchanged. There are only three workable strategies, whether you are a brokerage firm, a sole-operating Realtor, or a team. Two of them require A LOT of capital to execute effectively; the third can be implemented by just about anybody.
First Strategy: It’s All About Scale. Become the biggest player in the market. Increase market share at all costs. Acquire smaller firms. If you’re a team, add more people and become essentially a brokerage within a brokerage. Advertise extensively, everywhere.
Second Strategy: Be the Efficient Low Cost Operator. Slash expenses and prices/commissions through the use of technology and other innovations, and dramatically increase transaction volume.
Third Strategy (the one available to most anybody): Find a Niche to Dominate. Is there a market segment where you/your firm can be top of mind, or at least second of mind? Whether that’s geography, demographics, type of property, a certain building or buildings… something that sets you clearly apart so that you can be the “go to” Realtor/Broker in that segment.
I pursue Strategy Three. Which one do you and your company follow? Pick one.