In November 2018, as the only outside guest, I was invited to attend the 17th anniversary celebration of the famous real estate agency Chainjia and give a keynote speech.

However, when I arrived at the scene, I didn't see any “Chainjia” logos. I only saw an unfamiliar name “Seashell,” and the event was also called “2018 Seashell Open Course.”

What is a seashell? What is the relationship between seashells and chain families?

My presentation was only 1 hour long. But because I was curious, I couldn't help but throw out quite a few other arrangements and sat on the scene all day listening to Zuo Hui (founder of Chainjia, founder and chairman of Shell Housing Search), Peng Yongdong (co-founder and CEO of Shell Housing Search), and other internal executives.

After listening, I took a breath of cold air. They really dare to think.

They want to use a set of logic called ACN (Agent Cooperation Network) to break the boundaries between agents, store owners, and brands, turn blood-breaking competition among agents into cooperation, and improve the efficiency of the entire industry.

I really dare to think about it.

The logic is right. Use the same direction to compete, replace the opposite direction with competition, and expand the table.

However, it's not a logical thing; it can definitely be done. Changing the structure of interests is moving the job market.

This is so difficult.

After the festival, I kept watching the progress of the seashells. Until a few days ago, I saw Seashell's listing prospectus.

By tonight, Shell officially went on sale, with a market value of more than 20 billion US dollars.

Judging from the prospectus, as of June 2020, 250+ brands, 42,000 stores, and 456,000 agents have actually gone from offline competition to cooperation on seashells.

Moreover, because they all eat in one pot, vicious competition has been reduced, and industry efficiency has improved. At the same time, the revenue of many stores has increased by more than 1 times, while the number of days a customer's house is sold has also been drastically shortened, from 143 days to 109 days.

Dare to do it.

This team actually made it through this incredible ACN model.

So what exactly is this “incredible ACN model”?

At the Chainjia Festival in 2018, the Shell office in 2019, and on WeChat a few months ago, I had three exclusive interviews with Shell CEO Peng Yongdong.

Today, I'll try to use my own understanding to explain to you what ACN really is, what seashells actually do, and what Zuo Hui and Peng Yongdong are really thinking.

And what can you learn from it.

1 The real problems of the industry

In 2013, the mobile internet exploded.

Retail, education, finance, publishing... almost all industries have been greatly impacted by the mobile internet.

Of course, this also includes real estate agents.

The biggest advantage of the Internet is to eliminate information asymmetry and improve efficiency.

However, real estate agents at the time seemed to rely on asymmetric information to make money, and the industry was full of people:

• Use fake listings that don't exist to attract buyers and then sell other homes;

• Intentionally concealing all the shortcomings of the house, just to close the deal;

• Don't let upstream and downstream meet; eat the difference in price between the two;

...

In 2015, the entire real estate brokerage industry was filled with pessimism. The internet is about to clear up.

However, until 2018, the internet did not “clear up” the real estate brokerage industry.

Instead, the traditional real estate brokerage giant chains are getting better and better, and some internet companies that claim to clear the market are gone.

Why is that?

What did Chainjia do right? Or, what exactly is the internet doing wrong?

In 2018, at Chainjia's 17th anniversary celebration. Zuo Hui sat on my left, and Peng Yongdong sat on my right. Zuo Hui took the stage first.

Zuo Hui said that the real estate brokerage industry is not respected. However, information asymmetry is not a “real problem” for this industry.

The real problem in this industry is actually: a single game on the C side and a zero-sum game on the B side.

1) C-side single game

What is a C-side single game?

You went on a trip, walked into a seafood restaurant, saw a fish you hadn't seen before, so you asked the boss: Boss, what kind of fish is this?

Without saying a word, the boss immediately took the fish out of the fish tank, fell to death with a “bang” sound, and then told you what fish it was called.

500 yuan per catty. This fish is about 10 catties, 5,000 yuan.

You're stupid; if you say I'm just asking, why did you knock it to death. Then I wanted to go.

More than 20 people gathered around. You realise you've been slaughtered.

Why do we often encounter this phenomenon of “slaughter” at tourist attractions?

Because of a “single game.”

Think about it from the perspective of a seafood restaurant owner. Most of the guests who enter the restaurant are tourists, and I think they only come once in their lives. If you are good to him, you won't eat it again, and if you are bad for him, you won't encounter it again.

What's your best strategy at this point?

It must have been until he is slaughtered!

This is a single game.

A single game can make people tend to maximize short-term benefits without considering long-term consequences.

Is there also a large number of single-game games in the real estate brokerage industry?

Zuo Hui shared a set of data.

In the entire real estate brokerage industry, there are about 1.5 million agents, who sell a total of 5 million apartments every year, and each person sells 3 units per year.

However, the average time spent working in this industry is particularly short, only 6 months.

Talent is an “asset” in other industries, and a “consumable material” in the real estate brokerage industry; they are replaced in 6 months.

These 6 months, or the entire career of an agent, are only enough to sell 1.5 homes.

I joined the business for 6 months, sold 1.5 apartments, and then I had to switch careers.

Excuse me, can you expect every agent to speak of “honesty”? A “one-off game” between them and C-end consumers is almost inevitable.

The impulse of a single game made individual agents earn a small amount of money, but the entire real estate brokerage industry was not respected.

2) B-side zero-sum game

What is B-side zero-sum game?

Here's a piece of cake. If I eat you don't have it; if you eat I don't have it. Then we got into a fight.

At the end of the game, there were only two results: either I ate you were hungry, or you ate me hungry.

This is a zero-sum game.

In the real estate brokerage industry, agency fees are a typical zero-sum game.

Zhang San worked hard to find customers, take customers to see the house, introduce the advantages and disadvantages of the house, and facilitate the transaction.

I was about to walk to the door. Li Si called the customer: Buy this house with me. The agency fee is 1,000 yuan cheaper. The customer made a deal with Li Si.

Zhang San worked hard to cultivate and got nothing (0%). Li Si secretly pegged and stole all the fruit (100%).

In a zero-sum game, the winner takes everything, and the loser empty-handed.

As a result, vicious competition continues to escalate, preying on each other, and even getting into big fights.

So what to do?

Zhang San requested that the owners who sell their homes here must sign an exclusive entrustment agreement.

This seems to prevent each other from preying on each other and vicious competition.

However, due to the restrictions of exclusive entrustment agreements, fewer people helped sell the house together, and the transaction slowed down, and they didn't even sell it, and the interests of the owners were collaterally damaged.

Zero-sum games damage customer interests and reduce industry efficiency.

Without asking real questions, of course, you can't find good answers.

The C-side service is a single game, and the B-side competition is a zero-sum game. This is the real problem limiting the development of the real estate brokerage industry. Only by seeing the real problem can we find a fundamental solution.

What is a “fundamental solution”?

Known internally as “Stanley,” Shell CEO Peng Yongdong said:

Change the game structure.

Change a single C-side game to a repetitive game;

Change the B-side zero-sum game to a multi-win game.

2 Changing the game structure

The real problem in the real estate brokerage industry is: a single game on the C side and a zero-sum game on the B side.

The root cause of a single game on the C-side is that agents work for a short time; the root cause of zero-sum games on the B-side is that the agent wins everything.

Well, the basic idea for solving this problem has come out. That is to use a set of industry cooperation mechanisms:

1. Extend the agent's working time, and the word-of-mouth effect of old customers is evident, so that agents can benefit from long-term integrity and reduce the C-side single game;

2. Agents cooperate to sell houses and distribute intermediary commissions according to contributions, so that all efforts can be rewarded accordingly, reducing the B-side zero-sum game.

This industry cooperation mechanism is that “incredible ACN.”

1) ACN: Broker Cooperation Network

What exactly is ACN? How does ACN plan to change the game structure of the industry?

ACN is an industry cooperation mechanism.

This cooperation mechanism divides the agent's work into 10 roles (5 for the listing party and 5 for the customer source):

● The person who entered the property.

The first agent to register a listing in ACN.

This person may be an agent at a store near the property, or an agent that has sold the house to the owner before, so the owner trusts.

There is a certain degree of randomness about who this character is. But this is the beginning of the whole real estate deal.

● Property maintainer.

However, the person entering the listing may not be close to the listing.

He probably just knows the owner, so he can't help with the sale of the house, or even accompany the customer to see the house.

Therefore, you need an agent who is close to the property, familiar with the community environment, and can accompany the customer to see the house.

This is the listing maintainer.

●Property surveyor.

Once you have a home, you'll need to take pictures or even record VR.

Theoretically, this role can of course be played by a property maintainer.

However, because the professionalism of taking pictures and recording VR is too important for the transaction, it is best to have a professional person take charge.

This is the property surveyor.

●Entrust spare parts personnel.

Some jobs are transactional.

For example, obtain a power of attorney, identity information, and real estate certificate information signed by the owner, and then upload it to a system designated by the government.

These things seem trivial, but you can't go wrong with them.

All spare parts work in one store can be done by one person.

This is entrusting spare parts personnel.

●Property key person.

This role is critical.

Whoever hands the keys must be approved by the owner.

This person is probably also a property maintainer, and also accompanies customers to view houses.

But as a character, it's independent. He instigated the owners' trust in the brokerage company.

This is the property key person.

These are the 5 characters on the property side. In practice, one broker might assume several roles at the same time.

In nearly half of the cases, the property entrant and the real estate surveyor are one person.

There are even times when these 5 characters are all one person.

However, there are also quite a few situations where the property entrant and the property maintainer are not the same person.

It is the characters who contribute, and the people who benefit. Therefore, it is important to clearly differentiate the characters.

In this way, the more roles you take on, the more benefits you get. That would be fair.

So how much of the agency fee can these 5 characters be added together?

Every city is different. Seashells are basically a one-size-fits-all policy. But generally, it's more than 40%.

Oh? What about the other 50% or more?

The other 50% or more will be distributed to 5 customer source characters.

●Customer source referrer.

This is the first person to approach and introduce this customer.

Whether the customer took the initiative to find me, or was recommended by an old customer or friend, I introduced the customer to the ACN cooperative network and made a deal on the platform.

I'm the customer source referrer.

●Customer source transaction person.

This is the person who helps the customer find a house they are satisfied with, complete the purchase, and finally complete the contract.

Most of the time, this person is also a customer referrer. But there are also those that don't match.

For example, if the customer source referrer has little experience, the store owner will arrange a higher-level agent to act as the customer source trader.

●Customer source partner.

Many times, agents work in groups and always have to have a supporting role, such as preparing some documents when reading and trading.

This character is usually a younger agent. His percentage of points is not high either. However, he can learn and grow along.

● The customer source is the first person to look at.

Agent A took the client to see a house. I didn't like it. He also went to see a few other houses with his agent B.

In the end, they went back and forth and traded the one at the beginning, but the person who traded was not A.

This A is the first person to see the customer.

ACN is protected for the first time. In this way, it is possible to effectively prevent order grabbing and prying on orders.

● Transaction/financial advisor.

ACN has a unified trading center.

The customer source trader takes the customer to the trading floor. The commissioner can help the owner and customer complete transaction procedures such as signing contracts and loans, reducing the transactional work of the customer source trader and reducing risk.

This is a transaction/financial advisor.

These 5 characters are distributed over 50% of the commission.

So who should get more?

Customer source transaction person. You can get about 50% or 60% of this, or around 30% of the total commission.

These distribution ratios are all refined from practice. Of course, it will continue to be optimized.

ACN has associations in every city to fine-tune local conditions to achieve the fairest balance.

After listening to Peng Yongdong's introduction to the 10 characters, I was amazed.

This is definitely not something a group of engineers can imagine sitting at home. This must have been distilled from Chainjia's 17-year experience of going downhill.

Behind every division of roles is the distribution of interests.

So what are the effects of ACN?

2) Victory in “repetitive games+multi-win games”

In April 2018, Shell's ACN network for housing search was officially launched.

Then it caused an uproar. Shells are greeted not with welcome, but with doubt, or even questioning.

Does Chainjia want to take over the entire industry?

I'm going to hand over the property to someone else to sell, are you sure this is really no joke?

Someone robbed my customer, who will enforce the law?

Chainjia is an athlete, and Seashell is a referee. Do you really want me to believe that you are not selfish or biased?

This lack of understanding is completely understandable.

How are seashells made at this time? He first placed all of Chainjia's real properties on the ACN network, and all the later companies that joined, even those that were former rivals, can follow Chainjia's real properties and sell them.

Real housing has always been the core competitiveness of Chainjia.

This is equivalent to putting all the meat in my house on the table first, so you can eat it together. Would you like to bring two dishes to the table, let's make this feast even richer, see for yourself.

The chain family respects their pioneering work, and the industry will doubt it.

This sentiment continued for 5 months.

Until October 2018. There has been a turning point in the market. Gradually, people brought food to the table.

Willing to bring food to the table and share it with everyone must be because he has benefited from sharing.

This is a key sign that ACN logic can be established and forms an enhanced circuit.

It's interesting. I ask, are there more and more?

He couldn't hide his joy: more and more. More and more. Currently, desktop chains account for 70% of off-home listings.

Peng Yongdong gave me an example.

A real estate brokerage company, with the mentality of trying it out, posted a house that it couldn't sell on the ACN network.

Unexpectedly, it was a deal. Things that were originally rotten in their hands and had no profit actually actually made money because of cooperation.

After tasting the sweetness of cooperation, this real estate agency began searching for properties in large numbers, acting exclusively as a “property entrant” and “property maintainer,” moving from self-sufficiency in the small-scale farmers' economy to a professional division of labor in the industrial society.

Currently, the cross-store cooperation rate in ACN has exceeded 70%.

The division of labor brings efficiency, Peng Yongdong said. Before, it had to be 100%, or else 0%.

Real estate agents now have three matrices of choices:

1) 100% of the low probability;

2) High probability of 0%;

3) Definite X%.

Which one would you choose?

More and more real estate agencies are choosing a fixed X%. This has continuously promoted industry collaboration and expanded the market.

When the trading table gets bigger, the B-side zero-sum game will switch to a multi-win game.

It's interesting.

Peng Yongdong said that at the same time, the ACN network's 10 character settings also solved the problem of agents working for a short period of time, thus solving the problem of a single C-side game.

What if you're a newcomer, inexperienced, and can't sign the order?

Well, you can start with transactional work such as “entrusting spare parts workers” or “customer partners.”

Although the sharing is not high, it is enough to support myself while continuing to learn from my seniors and continue to grow.

In the past, on the first day a newcomer joined the industry, they had to compete on the same stage with the most experienced agents in the industry.

This kind of game where you play old monsters as soon as it comes up is very unfriendly to newcomers. Otherwise, there will be a complete victory; otherwise, there will be no bones left. Therefore, of course, the working time is short.

ACN's 10 characters, like a “career map,” allow newcomers to continue to climb positions and ranks of varying difficulty and importance, giving newcomers time to grow.

Peng Yongdong said that Chainjia itself is a good example. Currently, the average working time for a chain broker is 24 months.

Compared to 6 months, if you plan to work in the industry for 2, 5 years, or even a lifetime, of course, you will care more about your reputation and integrity.

After being in the business for a long time, the C-side single game mode will switch to repeated games.

Switch from a single game on the C side to a repetitive game; from a zero-sum game on the B side, switch to a multi-win game. Then, the development of ACN became unmanageable.

At the end of 2018, Shell connected 121 real estate brokerage brands, 19,600 stores, and 168,000 agents;

At the end of 2019, this figure became 220+ brands, 38,000 stores, and 360,000 agents;

In June 2020, 250+ brands, 42,000 stores, and 456,000 agents.

This is a seashell. What about the collaborators in Seashell, those stores?

Stores that joined ACN before 2019 and have been in operation for more than 1 year (excluding chain stores) have more than doubled their average revenue after 1 year;

At the same time, the efficiency of second-hand housing transactions in each store reached 1.6 times the industry average.

Ordinary people change results, excellent people change reasons, and top outstanding people change models.

3 Do seashells make money?

Any business model includes three parts: customer value, resource capacity, and profit method.

Shell's customer value is: solving the problems of the C-side single-game and B-side zero-sum game in the industry; resource capacity is: ACN broker cooperation network.

I asked Peng Yongdong: So, what is your profit method? How do you make money?

Peng Yongdong told me that the money Shell earns comes from the three global increments (delta) brought about by the ACN model.

All business models must have global increments. If not, then the so-called business model is to exchange the money in your pocket for mine.

ACN must create global increments to enable Shell to increase efficiency and make merchants make money, before it can be called business model innovation.

Delta1: The increase from chain house to shell.

Chainjia, GTV in 2018 was about 1 trillion. Shell, GTV in 2019 is about 2 trillion dollars, and is expected to reach 3 trillion in 2020.

GTV (Gross Transaction Volume) is the total amount of real estate transactions. If a house worth 10 million is sold, GTV is 10 million.

From fighting alone to industry collaboration, Shell is involved in a larger market than Chainjia (1 trillion → 2 trillion → 3 trillion).

Although Chainjia has taken everything in the competition and Shell shares part of the cooperation, the market has grown, and Shell's revenue scale is far greater than that of Chainjia.

From Chainjia switched to the platform in the first year, with revenue of more than 20 billion dollars; until the second year, 2019, the platform fully realized its benefits, Shell instantly rose to 46 billion dollars.

Delta2: Experience a continuous increase in word-of-mouth.

There's a very simple logic here.

On the one hand, Seashell carries 450,000 agents, insists on making real estate, and uses the idea of repeated games to prolong the agent's working time; on the other side, another 1.5 million agents still use the old routine. How will customers choose when buying a house?

Of course I would choose a better service. This in itself is the reason why Chainjia has stood out in the mixed brokerage industry over the past ten years. Now, all of these have arrived at Seashell, and the experience is better, and Shell and all of its collaborators will have a common increase.

Looking further, one definite trend is that China's future housing stock market will become larger and the penetration rate of brokerage services will be higher and higher. This market will be larger, and seashells with a better reputation will be more likely to gain growth in this new market.

Delta3: Increment from brokerage to periphery.

Brokerage is not the core of Seashell. Dividing commissions from brokerage companies' brokerage fees will inevitably lead to a game where more of me is less for you.

Peng Yongdong said that Shell hopes to reach a larger market and discover greater possibilities in the surrounding area through brokerage business.

Peng Yongdong predicts that for every 1 yuan of intermediary revenue generated by this industry, it will be able to touch 2 yuan of peripheral business.

This is more room for incremental growth.

For example, finance. For example, decoration. For example, a first-hand room.

First-hand homes used to be sold at sales centers near real estate. But now many first-hand stores have Shell ACN on their shelves. 42,000 stores nationwide, working with 456,000 agents to help you sell.

456,000 agents have jointly discovered the demand for a large number of scattered second-tier cities to buy provincial capitals, rent houses in the city center and buy new houses in the suburbs, over a long distance in time and space, greatly improving the efficiency of first-hand housing sales.

This is the increase you want or can't imagine from the traditional second-hand real estate brokerage business to the periphery.

As long as increments are created, the next question is not how to make money; it's just a question of how to split the money.

Last words

I finished talking with Peng Yongdong every time. One word pops up in my mind: dimensional reduction attack.

If you had a chain with a steady income of more than 20 billion dollars, would you want to kill yourself as a seashell with an uncertain future?

I think most people not only don't want to get rid of it, but they will also swear to the death to defend it. Whoever moves my vested interests, and who am I fighting hard for.

Industry bosses are generally the maintainers of the old order.

Therefore, in commercial history, most industries will only be disrupted from the outside, such as Taobao for retail, Didi for rental, and Meituan for restaurants.

Seashells, on the other hand, are a special case.

Zuo Hui, the founder of Chainjia, has a motto: do difficult and right things.

What's the right thing to do?

Face the “real problems” of the industry.

What's difficult?

Find the “fundamental solution” to the problem.

I hope today's article can help you understand the logic behind Shell's 100 billion valuation, help you understand the real problems in Shell's eyes, and the fundamental solutions in their hands.

Blessings seashells.

I would also like to send a message to all entrepreneurs who have never gone forward:

Ordinary people change results, excellent people change reasons, and top outstanding people change models.