China, as you may be aware, is the world’s factory. Most of the products used by the people in the world are Chinese. Be it electronics, toys, clothes, accessories, appliances, furniture or such other articles, one is sure to find a ‘Made in China’ tag attached.
What is the success mantra of China?
The major contributor to China’s growth is the formation of 4 SEZs (Special Economic Zone) in 1979. These SEZ are focused on providing comprehensive services needed by industries so that the cost of production remains most economical. For example if there is a textile SEZ, it would have the following:
1. Dyes and Chemical plant which can supply to all plants
2. Affluent management
3. Captive power plant
4. Raw Textile manufacturers
5. Processing house
6. Manpower training
7. Stitching factory
8. Export quality check
9. Legal and compliance consultants
10. Banks and health care facilities
In this way the group of industries work in a collaborative way to make the cheapest products, in the quickest time and on a large scale. The products are so competitive that most of the countries in the world have stopped their manufacturing units altogether and removed import duties for products from China.
Lessons for a normal broker from China’s success story
A broker’s business needs a lot of common services. Let us scrutinise each service separately.
a. Office space. Now if 50 brokers in a city individually have 200 sq feet office, they would occupy about 10,000 sq feet in total. Then to look better than each other, successful brokers will start looking for bigger offices so net effect would be about a 1,00,000 sq feet of office space. The cost of real estate increases when the customer doesn’t get any value for dealing with a broker who has a bigger office space. So the RE/MAX Business model is all about sharing office space. So if 5 big offices have 10 brokers each sharing desk space, the total office space occupied will be around 5,000 sq feet and the overall cost of running the entire office will be drastically low. The overheads like electricity, administration and other common services reduce which saves a broker a lot of money each month.
b. Technology. It is a lateral need of any broker. The cost pattern of technology is such that it has a high fixed cost and very nominal variable costs. So if brokers share the same technology platform it is cheaper. Right now most of the brokers use portals. The portals charge per listing per month for each individual broker ID. Therefore if a broker has 10 employees, each need a separate ID and they cannot have the benefit of bulk pricing. RE/MAX technology has fixed monthly charges. A broker gets to upload unlimited properties for an unlimited period on to the RE/MAX portal. Also each broker gets an ID and hence there is no need of ID per office.
c. Branding. Then there is a need to have a brand image and each individual broker has to build one. If a small broker starts his business today and tries to build brand image by giving small display advertisements then the first person to earn out of it would be the media house. It takes years to build a recognisable brand and also a lot of investment. RE/MAX on the other hand offers a common brand and when any of the broker advertises, it slowly and steadily builds the brand and all brokers gain from it.
d. Training. It is an important need for brokers as in today’s economy, a well-trained person always earns more than an untrained one. Brokers individually do not know where to get trained from as there are no formal training programs for real estate brokers. However, RE/MAX has the most comprehensive training program in the real estate broking industry. The training programs solely focus on increasing the real estate business and its measure of success is growth of agent productivity.
e. Networking. The last need of a broker which is addressed by cooperation is establishment of a network. As brokers deal with unique properties, to find a matching buyer or seller would require to get connected with a lot of buyers and sellers. A network of brokers helps in accessing a lot of buyer seller requirements. RE/MAX is one such network. Due to its model of large broker offices with a lot of agents in one office there is a lot of networking amongst agents.
SEZ has changed the way manufacturing is done across the world and the RE/MAX franchise model is about to change how real estate broking is done worldwide. Just a matter of time when brokers realise that the benefit of joining hands has more advantages and creates a win-win situation for all.
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