Question

Someone please help me explain this:

“WeWork is offering commercial real estate brokers worldwide a 100 percent commission on the first year of rent paid by any tenant who switches to WeWork from a top competitor and signs a lease by October 1. Tenants also get half off the first year’s rent if they sign for at least 12 months."

So assume that a person rents a space for $7,000 a year. So the real estate broker will get $7,000 * 100% = $7,000; and the tenant will pay: $7,000 * 50% = $3,500??? So where is the profit???

If the way I think is not correct, please give an example to help me understand better. Thanks!

Answer 1

You are just think about the short term profit here. It's true that that there will be nor profit but instead there will be loss.

But the goal of the company here is to increase it's customer base. This is a really good strategy to get an edge over competitors.

Suppose this option led to increase in customers almost to 200%. So the loss of this year will be recovered in next one or two year. After that there will huge increase in profits.

It also helps in it strengthening it's relations with brokers.

I hope you understood..

Feel free to ask any queries.. also plz upvote it means a lot .thank you