Is KE really going to become a property developer?

Yesterday, KE successfully acquired the hottest piece of land in Chengdu.

I travel to Chengdu frequently this year and am well aware of the popularity of this piece of land. Almost all the real estate developers I know in Chengdu were interested in it.

In the end, it was acquired by KE.

Regarding KE's land acquisition, they had previously acquired land in Xi'an, but at that time, KE was more of a minor partner behind the scenes and did not play a leading role in a project's development.

This time, they have truly acquired the most important piece of land.

So, a question arises: Does KE really want to become a property developer?

It seems like an obvious question, but

Does KE really want to become a property developer?

The only business trip I took was to Beijing.

Regarding KE Home, it has become the main business unit for property development within the KE system.

I cannot share the details of the conversation in the deep mountains today, but what I can discuss with everyone is, what is KE's true intention and strategic thinking in this step?

01

There is an interesting logic in the business world that if a company wants to grow, it must find incremental opportunities.

Only with incremental opportunities can the organizational structure be solidified.

If incremental opportunities cannot be found, the existing market share may decrease.

KE's core incremental business in the past was entering the primary property market from the secondary property platform.

The integrated model of primary and secondary properties better meets customer needs and also taps into the primary property market, instantly expanding the market share.

Moreover, the hedging logic of primary properties also helps KE to have better risk resistance, becoming the cornerstone of the company's development.

After that, KE has been looking for the next incremental opportunity.

Currently, the focus is on the "One Body, Three Wings."

One of them is the decoration carried by Shengdu.

After customers buy a property, the next demand is for decoration. Decoration has always been a headache for ordinary people, second only to property transactions. Entering this market also aligns well with KE's values.

Focusing on decoration is a strategic move to establish a long-lasting business.

The purpose of this strategy is also very clear.

When future property transactions reach a bottleneck, the demand for leasing will increase. Not buying a property and long-term renting will become mainstream. KE's layout in leasing fundamentally achieves internal hedging. Regardless of the real estate market situation, KE can always find a business focus.

Although this business targets different customer groups, the salespeople are the same group.

Therefore, KE's emphasis on leasing is a very understandable corporate strategy.

Next is the KE Home business.

Undoubtedly, KE Home's strategy is a bigger challenge.

Firstly, the team structure is different. Property transactions and property development are essentially two different types of work, and whether the core team can handle both is a question.

Secondly, property development is essentially a process of first TO B and then TO C.

Although it ultimately faces property buyers, in the process, it needs to go through the TO B process from land to project development The process, procedures, and workflows are very different from before.

I believe that the challenges in Beihaojia's development will be greater for Beike, which will greatly reshape the workflow and interface.

However, Beike must also do Beihaojia in another aspect.

From a business logic perspective, when the entire real estate market is not doing well, opportunities in the land market emerge.

More and more high-quality land is being auctioned in the market, providing Beike with more choices.

Therefore, from a business perspective, Beihaojia becomes the focus of Beike as a second curve for the company.

In other words, for Beike's three wings,

My understanding is that the decoration part activates more customer demand, the leasing market activates more business opportunities for salespeople, and Beihaojia activates the data accumulation and application possibilities for Beike.

These three wings help Beike enter the next stage in various dimensions.

So, from a corporate management perspective, we may see such a blueprint, but at the strategic level, can Beike do well in development?

Before discussing whether Beike can and should do it, there is a prerequisite: do they want to.

Here, I have another question: Is Beihaojia really playing the role of a developer now?

Whether they want to be a good developer and whether they want to develop a good project is a philosophical question.

Regarding this issue, I don't want to talk about anything abstract with everyone.

In fact, from the essence of business logic, Beihaojia also needs to become a mission for high-end and quality project output in the future.

Why do I say this?

The reason why it has developed so well in recent years is actually benefiting from some pessimistic dividends.

What does that mean?

Have we ever thought that the reason why the channel business has developed well is fundamentally because there are too many homogeneous products and rigid demand products on the market, so channels are used.

And actually, industry insiders all know that if it is a homogeneous product, the profit margin of doing channels is far higher than that of being a developer.

In other words, if Beihaojia wants to make money, it will not continue to do homogeneous rigid demand products, but continue to do channels, which does not conform to business logic.

For Beihaojia, it must be all in for improvement and high-end.

This is also the reason why they acquired the high-end land in the city center in Chengdu this time.

It is also the reason why Beike officially announced its ambition with this piece of land.

Because this is the incremental market that needs to be segmented.

I think Beike definitely understands this principle better than us.

In recent years of development, Beike has almost the most comprehensive data system in the industry.

About how customers are currently living, whether they want to buy a house, what their needs are, when they might change houses in the future, and what kind of house they might change to, these numbers are clear at a glance.

The reason why we met in Beijing and Agan before was partly to share some good product practices with them.

03

If you look closely, you will find that Beihaojia has been established for more than a year and has not been idle, already training a large and robust big data and AI system This system will not only tell them what the future trends of the industry are, but also inform them about the current situation of their target customers and how to develop products accordingly.

Internally, Beike Home has been training in an internet-based model, and its current scale and capabilities are even stronger than imagined, a scenario unseen in the real estate industry.

Another aspect is that due to the company's strong cash flow, a risk-free project development now has financial support. In addition, with the emergence of another project in the future, Beike will have a large external sales team as support.

In a project tested by Beike Home in Taiyuan, the only part they intervened in was the marketing system within the project, while in the Xi'an project, they mainly intervened in the product positioning module.

It is quite obvious that all these preparations are being made for Beike Home's present situation.

Therefore, when we look at Beike Home's capabilities on paper, positioning, funding, marketing... all these have become guarantees for project development.

This is also why Beike Home remains firm in its identity as a service platform even now.

The core is also the long-standing internal secret C2M system.

The essence of this system is based on massive data, utilizing big data and AI technology to form two capabilities: precise pricing ability and precise product positioning ability.

Recently, Beike Home has established the C2M Innovation Center around this system, with departments for data, research and development, products, and customer research, comprehensively coordinating Beike Home's C2M product positioning solutions.

This means that although they have the ability to independently develop, Beike Home will become a platform in the future.

They will collaborate with more real estate companies and partners who want to enter the real estate industry to jointly operate and develop a project.

All these capabilities are based on the product positioning ability of C2M.

I sincerely recommend that projects and companies that are considered good can cooperate with Beike Home, perhaps it is a new beginning.

The last area that Beike Home needs to make up for and enhance in the future is the construction engineering capability.

Of course, this is also why the Chengdu project needs to be undertaken by themselves.

Essentially, through the development of this high-end project, Beike Home is consciously cultivating an organizational capability: supply chain integration capability.

Developers are essentially integrators.

Good products require supply chain partners and the integration of corresponding materials, which indeed require a certain amount of time to accumulate.

Although the threshold is not high, there is a need to consciously cultivate the internal organization to possess such capabilities, which is very important for controlling the overall cost and implementing the concept of later projects.

04

Regarding this business area, Beike Home has already launched it vigorously. I am also very much looking forward to the future project in Chengdu.

But as I write this text today, a phrase comes to mind: One whale falls, giving birth to all things.

Many people see the bleak side of the industry, but for others, the industry's changes may be a source of opportunity But what is the core of this opportunity?

First, it comes from the stable cash flow of our own company.

Third, it is based on the foundation of serving customers over the years, giving them confidence to build better houses in the future.

In this industry, there are always reasons to be pessimistic, but if we have a solid foundation, we have the possibility to hedge against everything.

Actually, we don't need to worry about the future of real estate. People have been coming and going in this industry all along, with some capacity being eliminated and some new directions emerging.

This cycle has been going on for more than thirty years.

Barring any unforeseen circumstances, this industry will still exist for another hundred years. Real estate has always been an ancient industry, so don't easily dismiss it.

What we may need to consider is where we stand in the industry.

As the saying goes: self-improvement leads to great strength, self-improvement leads to great strength