On the 2nd March 2011 Steve Jobs was on stage launching the iPad2. During his presentation he made the case for why Apple was not just another computer company. “It is in Apple’s DNA that technology alone is not enough — it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing.”
In 2017 you could transpose this quotation to read “It is in the Retail Markets DNA that the liberal arts, married with the humanities is not enough - it's by adding technology and data that yields us the results that make our heart sing.”
Yes the product is still of primary importance, and it is artistic and intensely human skills that are required to create goods people want to buy, but these alone are no longer enough. All of us need to know our customers better; who they are, what they like/dislike, what they buy, what they crave, when they shop, where they shop, and most importantly of all, what makes their 'heart sing'. That's a tough ask isn't it?
Historically it has been nigh on impossible to understand our customers this well, at least since the era of Supermarkets and Shopping Centres put paid to people shopping in the same local shops every day and being served by the same person, who was probably a neighbour anyway.
Now, apart from understanding our customer deeply, we have to contend with the great elephant in the room, the online, virtual world. The old shibboleth of 'people like to touch things' has proven to be wishful thinking. Amazon is now the 4th largest clothing retailer in the US, online sales are growing multiples of times faster than in store, and it is likely that 20% or even more of all sales will be online in the UK by 2020.
We have to acknowledge that most people, for most products, do not HAVE to come to a store to shop. Yes Click & Collect drives a fair amount of traffic to stores but this is just a temporary windbreak until the likes of Amazon crack same day delivery at scale. In the US Amazon have depots within 45 minutes of 25% of the population. Certainly within major cities, very fast delivery will be a solved problem within a few years.
So what do we do with physical retail? The answer is two part; first, the experience of shopping has to be exciting, stimulating and very agreable. The aim must be 'the liberation of dopamine'! This is the liberal arts and humanities side. Great product, environment and service. A friction free sensorial treasure hunt. An experience that cannot be replicated offline.
The second part is that we need to use technology, data and networks to understand our customers in such depth that we can personally tailor the experience our shops and centre deliver to each and every visitor. But how? Well in 2017 it is not 'Go West, young man' but 'go East', and look at China. In particular look at the incredible online behemoth Alibaba, who are involved with more than 80% of ALL online shopping there.
In January they bought Shopping Centre Owner Intime, who run more than 30 mid-to-upscale department stores across mainland China for $2.6 billion. "Today we cannot just separate online and offline" said Alibaba CEO Daniel Zhang. This is like Amazon buying Hammerson and is a huge signal that big change is afoot.
Why would they buy, outright, 30+ shopping centres? Because they have realised online isn't enough and retailers need shops? Absolutely not. They have realised that the future of retail is where online and offline merge into one offering for the public. Zhang describes it as a networked distribution channel, that is a closed loop and data driven. E-tailer and retailer come together to be one.
Imagine how accurate the profiling could be with the e-tailers knowledge of what people are buying locally, what the retailers have in stock, and the profiles of millions of individual users. Bolt on online payments in store, shared warehouses and a battle hardened logistics operation, and you have a 'data platform' that facilitates exceptional customer experiences.
This is Systems Thinking on a grand scale, optimising the entire value chain. Perhaps it is only Alibaba in China who are in a position to do this, but the underlying strategic imperative to create an end to end offering that is soft and flexible enough to cater for any number of whimsical customers is an idea to take to heart.
If you know what a customer wants, and also what is available, then you are in a position to create compelling reasons to visit your shop or shopping centre. To the shopper the experience is very human, very soft and pleasurable, but under the hood it is all about data. The more data you have and the more you understand the four V's about it (Volume, Variety, Velocity and Veracity) the greater the experience you can provide your customers.
Online and offline are merging to create something better than we have today. It turns out that technology and the liberal arts, just as Steve Jobs said, not only need each other, but together really can make 2+2 = 5.
And how does this impact Agents?
So how does this merging of Offline and Online impact on Agents. If their Retail Property clients are morphing from being ‘Property’ people to ‘Data’ people how is that going to impact relationships? Will they even understand each other? Where does PropTech figure in all of this?
The answer lies in what PropTech, in fact all technology, is really there to do: remove friction and enable discovery. Wherever there is a kink in the road, or a bottleneck, that makes doing X harder than it should be (or you’d like it to be) then PropTech’s job is to remove that blockage. Where too much time is spent trying to find out Y, or the answer to Z, then you have a ‘discovery problem.’ You might put this down to information overload but what you are really experiencing is filter failure; the inability of your systems to break down your data, to understand it, and to return to you exactly the information you need, when and wherever you are.
Truth be told, PropTech is about making your company a technology company. In a similar way to how Alibaba boss Jack Ma says ‘We are a data company, not an e-commerce company’ Property Agents have to become, at heart, data companies. Sure, they can retain and exploit all their human skills, but what is their actual purpose? Buying, selling or leasing property is what they are paid for. And to do that they need to understand exactly what their asset is (far more than bricks and mortar), who they are likely to transact with, and why that entity is going to deal with them as opposed to someone else. It should not be an accident that an agent introduces this property to that retailer. Serendipity needs to be engineered.
A great deal of data is in the public domain nowadays, but much of the really valuable data is in the hands of agents, even if many/most of them either do not realise this or do not have the tools (or inclination) to make best use of it.
PropTech startups are desperate for the sort of data that agents leave lying around. At the moment agents are largely protected from ‘disruption’ because startups don’t have access to the data that could rearrange the real estate value chain. That though will not maintain. It is an ‘unknown unknown’ but something will occur to upend the apple cart. In business it always does. Either a data owner (one of the big surveyors) will partner with a startup to leverage their own data or they will build the capabilities in house. And when they do, this newly fangled technology company, that happens to operate in the real estate sector, will be enormously powerful and dramatically more competitive than the bulk of market players.
The company that understands that they are in the data business, and that augmenting the human skills of their most capable employees is the way to out-compete their peers, will be a force to be reckoned with.
In my crystal ball disruption to the world of agency will come from within. When PropTech moves from being a niche silo to be being part of an agents DNA, feathers will be ruffled.
Who will make it happen?