Evaluating Relocation Business Models

When evaluating Relocation Management Companies, it’s important to understand business models and how the structure of the organization can affect service delivery.

There are three common Relocation Management Company (RMC) business models in today’s marketplace:

1. Real Estate Company Owned
In the most prevalent business model in the industry, the RMC is a subsidiary of a real estate network. For many years, the dominant activity of a RMC was to manage the tax-protected home sale for the relocating employee. For this reason, residential real estate companies incorporated RMC capabilities to create a new source of customers for their real estate business. Relocation companies such as Cartus, Weichert, and Brookfield are in this group.

2. Household Goods Company Owned
More recently, household goods shipping companies have become purchasers of RMCs. Almost every relocation involves a household goods move, so it is logical that such companies would see relocation management as a source of additional business. SIRVA and Crown are examples of this business model.

3. Independent
Lastly, there is the pure RMC model, or “independent,” as they are sometimes called. This is a company that performs only relocation management functions and works with any and all suppliers, including some that have RMC capabilities themselves. Examples of this group are: NuCompass Mobility, Altair, and Plus.

Evaluating Business Models
An important consideration in deciding among these business models is the degree of flexibility and independence desired in supplier selection.

The independent RMC typically has more flexibility, since it is not bound by obligations to a parent organization. It is able to select suppliers based on objective service evaluation criteria. It can foster price competition among the suppliers, resulting in the lowest pricing among a wider group of competitors. This model also supports the concept that the RMC can leverage regional strengths of suppliers by selecting the best suppliers in a particular market, through a more diverse portfolio of suppliers. This model leverages the power of independent selection with the goals of better service and lower cost.

When evaluating this model, be certain to fully understand how the RMC selects and manages suppliers, and ask them to demonstrate how they use the power of independent selection for the benefit of the client and their transferring employees.

The real estate or household goods owned RMCs would argue that there is closer, more efficient coordination of the combined services they can provide, which leads to better service and lower total cost. Instead of using selection diversity, these RMCs leverage the power of higher potential volume to suppliers and corporate obligation to perform to influence cost and service.

When evaluating this model, ask what happens if an affiliate supplier is not performing, how the RMC guarantees that the selected supplier is the best one in a particular market, and how the politics of being required to use a particular group of suppliers might influence the desire of the supplier to “compete” for business that they may feel entitled to.

Both models have benefits and drawbacks. In either case, it is important to understand how these models work in actual practice and select one that meets your company philosophy about supplier relationships and management.