E-Commerce in the Real Estate Brokerage IndustryWaleed A. Muhanna*Executive Summary. This article summarizes the results of a survey of 150 real estate firmsdesigned to examine how they are attempting to adapt to the Internet and to assess theirperceptions regarding its potential. Results indicate a dramatic rise (50%) in the number of firmsusing the Internet during the second and third quarter of 1999, and that an increasinglysignificant portion of those firms’ gross sales is attributable to it. The adaptation of the newtechnology is viewed as an opportunity to attract new buyers and reduce marketing and customeracquisition costs. Respondents report that they expect a substantial increase in business via theInternet by 2002. Thus, firms may be underestimating the potential of the Internet.IntroductionThe confluence of technological, economic and cultural forces during the last decadehas given rise to new business models and made possible new systems and strategiesthat many believe will transform the very nature of work, the structure of organizations,the way firms operate, relate to other firms and compete in the marketplace. Although itmay well be one of the most over-hyped technological innovations of all time, there isno question that the Internet is already having an impact upon markets and businessorganizations. In a short period, the Internet has emerged as a viable commercialmedium, forcing significant changes on industry. According to data from a December1999 Harris Interactive survey, the use of personal computers (PC) in American homeshas just surpassed 50% (compared to 30% in early 1996), and 90% of PC users (about110 million adults) are now online. Industry analyst firm Dataquest, a unit of theGartner Group, reports that online retail sales doubled in 1999, reaching $20 billion, andprojects those sales to reach $147 billion in 2003.This article reports on the first phase of a larger research project investigating how thenew information technologies are likely to affect the real estate market and industrystructure and identifying the options these changes present for firm strategies. Thearticle summarizes the more important findings of a telephone survey of 150 Ohio realestate firms focusing on what those firms are doing in this area and their perceptionsregarding the potential impact of the new medium. The survey was conducted duringthe second half of August 1999.Motivation and ObjectivesThe Internet is quickly emerging as a major shopping medium. According to a July1999 study by America Online / Roper Starch, 42% of Internet users say they regularly*Ohio State University, Columbus, OH 43210–1144 or [email protected]1
2JOURNAL OF REAL ESTATE PRACTICE AND EDUCATIONshop and purchase products and services online, compared to 31% in 1998—an increaseof one-third. The activity of shopping for a home is no exception. In fact, according theNational Association of Realtors (NAR, 1999), the number of consumers in the UnitedState using the Internet to search for homes rose from just 2% in 1995 to 23% in 1999.