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94: Josh Cobb: What New York Taxi Drivers Can Teach Us About Disruption

By |August 31, 2016| No Comments

 

Much of the legislation surrounding ride-sharing apps in Australia revolves around compensating our taxi industry for the projected losses they’ll incur as more people adopt services such as Uber.

On the contrary, when Uber arrived in New York, instead of complaining or relying on government handouts, taxi drivers simply started competing and Uber have had to reduce their prices by up to 30% in order to win market share.

In this episode of Real Estate Pros, we discuss why there’s no use competing on price when it comes to disruption in real estate and what New York taxi drivers can teach us about their continued success in an already disrupted industry.

Josh Cobb: What New York Taxi Drivers Can Teach Us About Disruption

Back in January this year, I attended the Inman Conference in New York – a real estate event focused on technology and innovation. I highly recommended attending if you consider yourself a bit of an early adopter.

It was my first time in the ‘big apple’ and ever since I was a little kid, I’ve always wanted to hail a taxi on the streets of New York – you know,  just like they do ‘in the movies’.

These days, we’re more likely to use our phones to request an Uber driver but I still wanted to live out this childhood dream of mine.

Standing on the sidewalk of Times Square in January this year, I hailed my first New York taxi. After jumping into the yellow cab to head downtown, something didn’t seem right.

The taxi was clean. Remarkably clean.

The driver offered my friend and I a bottle of water for the trip and asked us where we’re from. The short trip downtown was essentially a narrated tour of the city by this likeable taxi driver. There was a television in the back of the seats if we wanted to check out what was happening on the news and when we reached our destination, the driver kindly handed us his card and asked when we were leaving town. He said he would be happy to be our driver with their promise of a flat fee of $55usd for travelling to the airport from any New York city hotel.

Pretty good service, right? It’s the kind of service we’d likely more associate with ride-sharing apps like Uber, more so than taxis.

Much of the legislation surrounding ride-sharing apps in Australia revolves around compensating our taxi industry for the projected losses they’ll incur as more people adopt services such as Uber.

On the contrary, when Uber arrived in New York, instead of complaining or relying on government handouts, taxi drivers simply started competing and Uber have had to reduce their prices by up to 30% in order to win market share.

Taxi fares are highly regulated in the US, as they are here in Australia, so taxi drivers in New York knew that dropping their fares wasn’t possible. The customer experience was all they could use to compete.

And compete they are doing.

A report in January this year told about how some Uber drivers have complained that Uber’s fare cuts have led to them being paid less than minimum wage and these struggling drivers have boycotted the service in response.

So what’s the lesson for us as real estate professionals?

Firstly, let me say that I fundamentally believe real estate agents will have a job in the future. But I do think new business models will change what a typical real estate agent does.

As you may already know, a platform called Purple Bricks launched here in Australia earlier this week that allows homeowners engage a local area specialist to sell their property for a $4,500 flat-fee.

Much of the discussion among real estate agents over the launch of Purple Bricks has been focused on the fact this type of business model has been around for many years in real estate, and how it hasn’t exactly been profitable for those who have tried it so far.

The big difference, however, is in the technology and the budget that Purple Bricks have to play with. In a recent article with UK’s The Guardian, Purple Bricks CEO Michael Bruce said:

“For every £1 we spend, they will spend £5.”

This really is the difference.

Purple Bricks have a lot of cash in the bank to saturate the real estate market in a big way, in a very short amount of time. Even though they might run at a loss for a little while, it won’t take long before home sellers are questioning the traditional method of selecting an agent.

Just as most buyers will go to the major portals to start their search for property, sellers will go to platforms like Purple Bricks to start their search for an agent.

But just like the taxi drivers in New York realised, there’s no use complaining. We need to start competing.

As agents, we will never compete with the budgets of our major portals and platforms like Purple Bricks. We need to compete on something else – the very same thing that gave rise to these discounted fee models in the first place.

You guessed it, service.

We need to add far more value to real estate consumers than we currently do and it probably needs to be outside of the products and services we currently offer.

I believe the questions we need to ask ourselves are many, but here’s a few I’m certainly thinking about:

  1. How can we add value outside of the real estate transaction?
  2. Are we in the real estate business or the property lifestyle business?
  3. What content can we provide to our communities that these flat-fee models and our portals don’t, that will allow us to charge what these platforms can’t?

These are the questions we all probably need to ask ourselves.

It’s certainly what we’re thinking more about for our own business and I hope you will too.

Good luck.

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