zipRealty: Leading a Start-up to the Next Level (A)

Abstract

Start-up company zipRealty is a real estate brokerage that leveraged the Internet on the belief that selling or buying a home could be faster, easier, and more efficient than was possible with existing approaches to residential home transactions. Despite zipRealty’s successes, the company experienced a series of external and internal challenges.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: ZipRealty’s Website and Basic Information

Figure
zipRealty Milestones

Figure
Financial Results (As of July 2001)

Metrics

Value

Real Estate Sold

$103,000,000

Net Revenue

$1,255,000

Number of Transaction

309

Average Home Price

$333,333

Average Net Revenue/Transaction

$4,061

Number of Employees

110

Source: zipRealty.

Management Team
Eric Danziger: President and CEO

Eric Danziger joined zipRealty in June 2001. As Chief Executive Officer, Eric Danziger serves on the Board of Directors and is responsible for the company vision, planning and overall strategy of zipRealty. Mr. Danziger’s vision is to raise the standard and level of the customer experience. His life long career in the hospitality industry serves as the premise for understanding the importance and means to providing premier customer service. Most recently, Danziger served as President and Chief Operating Officer of Carlson Hotels Worldwide, a multi-billion dollar business that includes over 723 hotels in 64 countries around the world, where he was responsible for the growth, development, forward strategy and operations of all hotel and resorts for three leading hospitality brands – Radisson Hotels Worldwide, Regent International, and Country Inns and Suites. In addition, he brought in two new brands to the Carlson Hotels system, Park Inns and Park Plaza, as part of a Real Estate Investment opportunity with outside partners. Prior to heading Carlson Worldwide, Danziger was President and CEO of Starwood Hotels and Resorts Worldwide and served as President of Wyndham Hotels and Resorts, where he directed rapid growth that culminated in a successful IPO. He has received numerous industry awards and honors. Danziger has also served as the Chairman of the American Hotel and Motel Associations Strategic Planning Group, a Trustee of the American Hotel and Motel Federation, a member of the prestigious IREFAC (Hotel Industry Real Estate Council), and ULI. Prior to Wyndham, Danziger held a variety of executive and operations positions with Doubletree Hotels and Opryland Hotel. He began his career in 1970 at the Fairmont Hotel in San Francisco.

Juan Mini: Founder

Juan Mini served as the CEO of zipRealty from its founding to May 2001. Prior to zipRealty, he was CEO of VECESA, a Central American bicycle manufacturer with 200 employees and $10 million in revenues. He reorganized the company, making it profitable after years of losses, and expanded sales internationally to 10 countries in the region. Today, VECESA is the leading bicycle company in Central America and the Caribbean. Mr. Mini has an MBA from the Haas School of Business at UC Berkeley, a Masters of Science in Engineering from Stanford University, and a Bachelor of Science in Engineering from Cornell University.

Scott Kucirek: Founder

Scott Kucirek served as the President and co-founder of the company. Mr. Kucirek is also recognized as a leader in the Real Estate Industry, having been featured in many articles, panels, and association shows and was selected by REALTOR® Magazine in 2000 as one of the 25 Most Influential People in Real Estate. Prior to zipRealty, Mr. Kucirek served 9 years in the U. S. Navy as a Naval Aviator. In his last three years of service, he was the director of the Navy recruiting programs in Northern California, managing 225 recruiting personnel located in 39 regional offices. Mr. Kucirek has an MBA from the Haas School of Business and a Bachelor of Science in Bioengineering from the University of California at Berkeley.

Lane Hornung

Lane Hornung joined zipRealty in February 2000. Prior to zipRealty, Mr. Hornung served as the Director of Business Development at XOR, Inc, an eBusiness consulting firm, providing strategic B2C and B2B eBusiness solutions to Internet and click and mortar companies. In addition, Mr. Hornung was a partner at Greendeck Capital LLC, a seed stage venture capital firm focused on Internet investments. He holds a Bachelor of Science in Industrial Engineering from Stanford University and an MBA from the University of Colorado. Mr. Hornung also served as an attack helicopter pilot in the United States Marine Corps and is a Desert Storm veteran.

Patrick Lashinsky

Patrick Lashinsky joined zipRealty in February 2000. Mr. Lashinsky has over 10 years marketing experience working with such household names as General Mills, Taco Bell, and Del Monte. While at General Mills, he was responsible for the creation and development of Go-Gurt Yogurt in addition to managing brands such as Pop Secret and Chex Mix. Prior to joining zipRealty, Mr. Lashinsky was the lead for new product development at Del Monte. He has taught marketing classes at Wharton School of Business and the Anderson School of Business at the University of California at Los Angeles. Mr. Lashinsky has a Masters of Business in Marketing from the University of California at Los Angeles and a Bachelor of Arts in Political Economies from the University of California at Berkeley.

Joe Trifoglio: Vice President of Technology

Mr. Trifoglio has 18 years in various senior management, technical consulting and business development roles. Most recently, Mr. Trifoglio was CIO of K/P Corporation, an international graphics communications firm serving the Silicon Valley technical community. He has consulted on information systems projects for such companies as IBM, Wells Fargo Bank, Foundation Health and DHL airways. Mr. Trifoglio has a Bachelor of Science in Information Systems Management from the University of Connecticut.

Kurt Waag: Vice President of Administration

As Vice President of Administration, Kurt Waag is responsible for zipRealty’s innovative company culture and employee programs. Mr. Waag has 31 years experience in finance, human resources and administration with organizations ranging from large computer/office product corporations to medium sized distribution/service firms to a niche market software company. He has performed key roles in the acquisition/consolidation and divestiture of corporations ranging from $50MM to $80MM. In addition, he has experience in the turnaround of two high-tech organizations. Mr. Waag has a Bachelor of Science in Accounting from Miami University and a MBA from Oklahoma City University.

Dave Barca

Dave Barca joined zipRealty in 1999. Prior to zipRealty, Mr. Barca worked in management at a real estate company after working in real estate beginning in the early 1990s. Prior to that, he was a consultant in organizational development.

Source: zipRealty.

Exhibit 2: zipRealty Value Proposition

Figure

Source: zipRealty (The 2000 National Association of Realtors Profile of Home Buyers and Sellers).

Figure

*Based on zipRealty financial projections for Q4 2002.

**Based on publicly disclosed financial data of six brokerages and industry averages as reported by the National Association of Realtors Real Estate 1999 Survey.

Both estimates are based on the sale of a $250,000 home.

Exhibit 3: Competitive Landscape

Online Brokerages

Figure

*The above chart is an earlier chart from zipRealty when the company perceived itself as purely an online company. By the middle of 2001, the company was a hybrid online and offline company.

Traditional Brokerages
Top 10 Residential Real Estate Brokerages (1999)

Company

Operations

Transaction

Market Share

1. NRT

All 50 States

362,368

3.02%

2. HomeServices.com

12 States in Midwest

93,593

0.78%

3. Weichert

8 States Mid-Atlantic

77,100

0.64%

4. Long & Foster

VA, MD, DC, PA

64,189

0.53%

5. Prudential California

CA

36,103

0.30%

6. Prudential Fox & Roach

PA, NJ, DL

34,528

0.29%

7. Arvida

FL, GA

34,526

0.29%

8. Realty Executives

AZ, NM, CA

26,829

0.22%

9. DeWolfe

MA, CT, NH, RI, ME

26,196

0.22%

10. Crye-Leike

AK, GA, KY, MS, TN

23,231

0.19%

TOTAL TOP TEN

778,663

6.49%

TOTAL U.S.

12,000,000

100.00%

Source: zipRealty.

Exhibit 4: zipRealty’s Organization

Figure

The business can be depicted as a pipeline through which prospective clients progress and ultimately generate closed transactions. Unlike a traditional realtor, who services the client at all phases of the transaction, zipRealty leverages technology and specialization through division of labor to drive efficiencies. This pipeline approach allows large volumes of homebuyers and sellers to be served economically while maintaining high levels of service. Below are brief descriptions of each department.

Business Development

Business development forges business-to-business relationships between zipRealty and companies seeking to expand into real estate services or improve the profitability of their existing real estate offerings. This “business to business to consumer” (B2B2C) strategy brings large numbers of potential clients to zipRealty at a low, sustainable cost of acquisition. Every month over 7,000 homebuyers and sellers begin the process by registering on the zipRealty website. Current partners include online communities, such as eBay, Go2Net, EarthLink, and Domania.com; third party relocation companies, each handling between 2,000 and 20,000 employee moves per year; and new homebuilders.

Marketing/Client Services

Marketing and Client Services convert prospective clients provided through business development relationships into active zipRealty buyers and sellers. Conversion is achieved through a high-tech, high-touch interactive marketing approach based on client segmentation, personalized email campaigns, online community marketing, online interactive support, and online tools that empower the client. Marketing also ensures clear, consistent messaging in all phases of client communication and interaction.

Sales

zipRealty employs licensed real estate agents in the metropolitan areas in which it operates. These agents negotiate contracts and perform the transaction steps requiring local presence such as listing a home, conducting open houses, and showing properties to buyers. They sometimes operate from mobile office “zipMobiles” (branded VW bugs) and are connected to headquarters via a private network. A team of licensed agents at corporate headquarters who negotiate contracts and offer client support during extended working hours supports this national field force. Agents average 10 years of local real estate experience and provide the decision support and confidence needed to close the complex and emotionally stressful real estate transaction.

Source: zipRealty.

Exhibit 5: zipRealty Suggestion Box Scorecard – 3/6 to 10/19 2000

Total Suggestions: 150

“Resolved” Suggestions: 81

These are suggestions that were acted upon and implemented.

“Addressed” Suggestions: 62

These suggestions were discussed at length. However, they were not implemented due to lack of resources or because they were not in line with the company’s goals.

“In Progress” Suggestions: 7

  • 401(k) plan
  • zipRealty.com key chains
  • Catalog of zipMerchandise on the Intranet
  • Picnic tables outside for lunch
  • Secret Santa holiday event
  • Reference kits for the FSAs
  • Outside sign for our building

Most Frequent Suggestions:

  • Facility requests
  • Intranet requests
  • Employee satisfaction survey
  • Promotional ideas
  • 401(k) plan

Source: zipRealty.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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