The Apartment Industry Arms Race

I’ve not blogged in a while, but this topic keeps coming up almost every day for me.  I see it in marketing, IT and operations on a regular basis.  Essentially, there is a race in our industry to be the first company that can be a one-stop-shop for owners and managers.  The more services a company can offer, the more weapons they have in their arsenal.  In meetings with credit reporting/background verification companies, they talk about their Craigslist posting service and web site design capabilites.  In meetings with property management software companies, they talk about their ability to do utility billing (RUBs) or lead tracking numbers.  In meetings with lead management and call tracking companies, they talk about their upcoming property management software package.  In a few years you will be able to go to the company that did your water billing five years ago to design your website, track your leads and manage your social media.

There is an inherent problem to all of this, initially, but I think we’ll find it to be extremely successful in the long run.  The best way to illustrate this issue is using an industry that is very near and dear to me, the auto industry.  Growing up in Detroit, I watched the big dogs slowly lose market share to newcomers to the market.  Hyundai and Kia, for example, started to manufacture cars in South Korea.  Hyundai was originally a construction company.  Kia originally manufactured bicycle parts and metal tubing.  These two companies are now one large company and happen to be the fourth largest manufacturer of automobiles in the world.  A South Korean company.  Who would have thought?  Just like who would think today that a company that we use today to track our marketing leads might become our property management software provider in a few years?  It will happen and stranger things will also happen.  Here’s the issue I need to address:  Kia and Hyundai made crappy cars for a long time.  Cheap and crappy.  So crappy, they had to put 10 year warranties on them in order to compete.  These cars didn’t even last ten years.  The tires didn’t even last ten-thousand miles.  I’m exaggerating, but hopefully you get the point.

The companies that are in this race in the apartment industry are essentially designing a vehicle for property owners and managers to drive their business.  The problem is some of them have crappy transmissions and some of them have to demand a recall because the gas tanks explode on impact.  To put it in terms of our business, some of them have crappy craigslist posting tools and some of them have not quite figured out how to make sure there isn’t a break in the code when a resident tries to reserve an apartment online.  This means we have to have spare parts lying around to compensate for the shortcomings of the “one-stop-shop” concept until it is perfected.  This could get pretty costly, but in the long run we may simply have to sacrifice in order to support this initiative.  Also, there will be a-la-carte options offered as well, I’m sure, but this too will more likely cost more than the one-stop-shop solution.

I don’t know who the winners will be and I sure don’t know how long it will take for the first company to get there, but the bottom line is, this is a great thing for our industry.  Kia and Hyundai make some pretty nice cars today and are winning awards for quality and design.  I hope the companies that are competing in this race to be all things to all people in the apartment industry figure this out soon.  It’s exciting to watch as the quality of products and services in our industy continue to improve.

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2 Comments

  1. NIce post Brian. I think that businesses need to focus on their core business first. I see a lot of companies that have a core business diversifying. Think Apple. They use to be in the computer business. In 1995 they had 9% of the business In 2005 it had fallen to 3%. Now in those years the entire pool shrank. But Apple moved to digital music and then phones. Now Apple is leading in new areas. Remember when General Dynamics sold off all but three business units – submarines, info systems, and electronics.

    When a new competitor enters the space, the are unburdened by poor economics hence th acquistion by existing companies OR they beat existing companies. Theink Walmart flying by Kmart, think Toyota flying by GM.

    But growth cannot be sustained based on diversifying alone. At some point you’ve got to be known for something! I see this happening on the advertising side. There is a very strong focus on acquisition, of course, because there is a business model and services approach for it. But in reality retention is still a better and easier alternative.

    Im like you in that I believe that companies need to focus on what they do. I don’t want to work with a water company that designs websites. Or marketing guys that sell water pipes. If there is no focus, Im less likely to pay attention. Not saying others should be the same – thats how I approach it.

    There’s only a few species of fish that can fly. Lets keep it that way 😉

  2. Hey Brian, interesting post. I guess in the mean time, how do we identify which tools are the “early Kia’s” of our business? Companies are switching from one main focus and spreading their interests over a number of industries where they think they can make money. It’s hard to figure out which companies have a long term goal in a certain product or sub-industry versus ones that are just going to try it out for a minute. Maybe we should start focusing on the characteristics of some of these companies and ideas when they start up.

    If we could have seen early on that Kia and Hyundia were in the auto industry to stay, it might have been beneficial to get on board early.

    We talked a little about this at the last conference that we were at. How do we know which social media is the next one that is here to stay? Myspace and Facebook are / were big, but is foursquare really here to stay? Vflyer has nation accounts with a number of property management companies but there is major competition coming on the scene for them. As far as our industry goes, it’s probably easy enough to just try them and see for ourselves. However, being on the leading edge is sometimes a great way to seperate ourselves from the competition. Being the first to hit the new lead tracking company, or reporting company can be what it takes to secure a new fee management contract or catch the eye of potential investors.

    It is an interesting time to be in our business. With new products and ideas coming all the time it will be fun to see which ones stick. Are leasing consultants around the country really going to use ipads when leasing? Is social media really the best way to stay current in the market? If nothing else, there will always be a need for the next best thing. That will keep everybody on their toes.


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