COVID-19 has acted as a “forcing function” for iBuying, Opendoor CEO Eric Wu told Brad Inman during an Inman Connect Now session Tuesday.
As the coronavirus pandemic continues to rage across the United States, consumers have leaned into more digital experiences, Wu said in a conversation with Inman’s publisher during a virtual session titled, “iBuying’s Second Act.”
Opendoor CEO Eric Wu. Credit: Opendoor
“When consumers demand experiences, that’s when innovation happens,” Wu said. “People can vote with their wallets and vote with their clicks.”
“I think COVID-19 was a forcing function that then allowed consumers to say, given the set of two choices, am I going to choose something that is digital or not — and in a lot of cases they chose the more digital experience.”
The nation’s top iBuyers, including Opendoor, were forced to shutter half of their businesses as COVID-19 began spreading across the United States in March. Opendoor, along with competitors Zillow and Offerpad, were forced to completely cease homebuying for roughly a month.
At the height of the pandemic, Opendoor laid-off approximately 35 percent of its staff, or 600 employees. But the business model and need for iBuyers — quick close, all-cash homebuyers — never waned, according to Wu, who insisted the economics for iBuying at Opendoor have held steady.
“IBuying is going to be a staple of how people buy and sell real estate,” Wu said. “Now, even more so, it’s full steam ahead.”
Opendoor’s focus has always been to create a more convenient and controlled experience — that’s also the premise on which Opendoor charges a fee, which is how the company makes its money.
But now, COVID-19 has created a new reason for homeowners to sell to an iBuyer and a new focus for Opendoor: safety. Opendoor has scrambled to make safe selling a priority
“Because of COVID-19, there’s this new theme around safety, so [we offer] a contactless experience to buy and sell,” Wu said.
“If you’re thinking about the value offering of Opendoor, there’s simplicity, certainty and speed, but now safety,” Wu added. “It feels like the beginning stages of a very big sea change towards this exact experience.”
COVID-19 has also led to a change in the psychology of sellers, which has fueled the change in experience, Wu said. He pointed to the increased use of Amazon and other e-commerce platforms, as well as digital transactions for food delivery services and car services.
“I think that’s something that consumers are starting to prioritize, which is, how do we make the transaction more digital, how do I find services to make the transaction more digital,” Wu said. “And secondarily, given everything that’s happened, safety, so having less human interactions to accomplish what they’re trying to accomplish, which, in this case, is to move between a neighborhood or a home or a city.”
Inman challenged Wu, asking if those safety concerns will continue to fuel a shift in consumer behavior towards digital experiences, even once there’s a vaccine and the COVID-19 pandemic is over, whenever that may be.
Wu said you can ask the same questions of Amazon and Instacart.
“This adoption curve that’s deepened towards digital experiences, I think there’s a good argument that it’s permanent,” Wu said. “When people realize that it’s better, it’s faster, and if it can be cheaper, then you can say that becomes more the way that people view the default as opposed to right now, the traditional sale or traditional experience.”
Despite the current trends, Wu put the digitization of the transaction into full perspective to close the conversation. IBuyers still account for less than 1 percent of total transactions. Even a more ubiquitous-seeming company like Uber only accounts for 5 percent of transportation. Instacart accounts for less than 1 percent of the food industry.
Wu said his company views it like chipping away at the ice, to eventually reveal an ice sculpture, rather than a massive crack that reveals something new immediately.
“We still have many, many years ahead of us before the vast majority of transactions are done digitally,” Wu said.
