Thursday, April 5, 2007
Interview with Glenn Kelman, CEO of Redfin
Our interview today is with Glenn Kelman, CEO of online real estate brokerage firm Redfin (www.redfin.com). Venture backed Redfin has been making waves with its discounted real estate services. The firm, which is based in Seattle, has also ruffled a lot of features in the real estate industry for its approach to real estate commissions--the firm refunds 2/3 of the commission to consumers, and doesn't pay its agents on a commission basis, instead paying them a salary. Northwest Innovation spoke with Glenn about the firm's latest moves and expansion.
Northwest Innovation: How's the reception of your service in the Bay Area going?
Glenn Kelman: Well, we've had ups and downs recently, but our Bay Area business has been growing quite nicely. There was a time when we launched, when we would go for days without more than a few closed transactions, but now I would say our Bay Area business is almost equal to size of our Seattle business. It's also a more profitable business, because home prices are higher. We're relieved and delighted on how it has been doing recently. The growth really began in December of last year, and we've had strong growth since then.
Northwest Innovation: Can you talk a little bit about your expansion plans into rest of country?
Glenn Kelman: We've expanded to Southern California - San Diego, Orange County, and Los Angeles--and hope to open a Boston office by the first of May. After that, we plan on expanding to Washington DC and Chicago.
Northwest Innovation: How has it been expanding in what some people have said is a difficult time--with interest rates up, home sales down?
Glenn Kelman: It's largely left us unaffected. It's not as though we have thousands of clients who are now skittish in buying or selling a house. Every client we have is really market share wrested from another brokerage, regardless of whether the market is smaller or larger overall. It hasn't really affected us. The only difference is sometimes it affects productivity when the market is in flux, and people make offers that may not be realistic, or try to sell their property at a price that may be too aggressive. Otherwise, I wouldn't say it has affected us. We've been growing 250% quarter over quarter, and the market I think has shrank between 6 and 8 percent over the course of the year. So those dynamics are operating against one another. We still seem to be doing well.
Northwest Innovation: It seems like you've ruffled a lot of feathers in the real estate industry. How have you been handling that, having to work with the other agents every day?
Glenn Kelman: It's a difficult balance. On one hand, we came to the industry to make changes. On the other hand, we have so much to learn on how the industry works. Sometimes you put yourself at risk of being co-opted by the industry--the more reasonable you seem to a real estate agent, the less appealing you are to consumers. Personally, it's easy to be demagogic, a populist, to make statements that appeal to the public, but the company has to live with those statements for a long time to come. It's important as a CEO to balance the two. What's paramount of importance is not to lose sight of the original premise, which is we can make this industry better. The consumer wants the truth, wants to understand how their agents makes money, all the information a about the business, and how the process works. Not everyone in the industry is supportive of that.
Northwest Innovation: How well are you other finding your model scales -- real estate has traditionally been fairly labor intensive in negotiating sales, working with clients, making sure paperwork/etc. is completed? Do you find it works pretty well?
Glenn Kelman: We do. We feel that it is labor intensive, but most of the labor is focused on sales and marketing. Agents are spending their time trying to develop strategies for finding clients, by printing direct mailers and distributing refrigerator magnets, and building their own Google ads. That's mostly not very efficient. We feel we can do that by building a better website about what is going on in the neighborhood, and we can take out most of that effort. As a result, our agents are focused on closing more deals. Our agents 10 to 12 times more productive that traditional agents, and we charge a third of the price. So we feel that we're able to build a very healthy business, mostly by eliminating sales and marketing cost and automating paperwork such as generating documents automatically and gathering information on online forms. I would still say that there are parts of this that we'll never automate. People get emotional when they are busing a house. They want to talk to someone. You just can't take a call in a call center. You must have highly skilled, emotionally mature people, a very high quality human working with clients--otherwise the service wouldn't be what it can be. Our challenge is figuring out how we can automate the grunt work, and still have this very, very successful agent work with clients who is accustomed to that level of emotional support. It's probably the biggest challenge in the business.
Northwest Innovation: So it looks like clients are still looking for that human touch?
Glenn Kelman: I think so. It's a big financial transaction. Clients value an agent's negotiating skill, and they want to feel that an agent's interest and theirs is aligned. Nothing is more uncomfortable than feeling that someone who is representing you is not entirely on your side, and the advice you get may not be entirely trustworthy. So, we try to focus on that first, but I'd say the emotional component is significant, and that's something I'd had to learn in my time here. I can be a very analytical person, and sometimes I walk out of my office and see people buying a house--and I think--what are they doing here, why are they so happy? And now, I enjoy that more than I used to. At first, it was an unwelcome intrusion to how we coded the website -- but it's a reminder of what we're here to do.
Northwest Innovation: Thanks!