Online vs Traditional Agents, is the industry really being revolutionised?
Tuesday 06 June 2017
For the last 5 years or so, almost annually, I have been reading lengthy articles published by mainstream leading newspapers, telling me how the estate and letting agency industry is being revolutionised by new tech companies.
Each time they tell me about who the new market leaders are and that in about 5 years time their market share will increase from 5% to as much of 40%.
What I have started to take from these articles is quite simple, they just don't get it!
I think the debate around estate agents (sales only) is less complex than that of Letting gents and I would have to concur that the online - or as I would put it - agencies without a physical branch, certainly has the potential to take a large part of the market share in the coming years. Rather than a traditional vs. online battle this is more a competition between the operating model within estate agencies.
To keep things simple, what we are seeing is the commoditization of the estate agency market. Costs are being driven down by new technologies and therefore the new entrants opting for the non-traditional model are entering the market with low-cost fixed-fee approaches. To be successful with that model though, they do need to chuck their net right the way across the UK and invest substantial funds whilst their businesses pick up traction. We’ve seen this with both Emoove and Purple Bricks recently - who have invested millions and still haven't made a penny.
I think what we are waiting for is a tipping point in which we see a change in consumer behaviour. It’s going to be a long, hard road, though, as a large percentage of the market are still entrenched in the value they see from the local traditional agent. I guess the question is will the new breed of agent run out of funds before that behaviour actually changes? We’ll see what happens.
When it comes to lettings agencies, I think this is a very different marketplace and any attempt to commoditize this market is going to find some very different challenges.
Like the traditional estate agency market that branched out into lettings during the recession - they naively thought this market was all about marketing properties to let! It’s not. Whilst that is a consideration the biggest challenge is actually property management, which is much more difficult to commoditize as it requires actual expertise!
The government is applying more and more pressure to this market place and exploring lots of different ways to regulate the sector. Any new propositions will have to include facilities to ensure landlords can adequately and effectively manage their properties once a tenant has been placed, and the biggest challenge to that is - quite simply - that most landlords don’t fully understand what their obligations are. Simply having a system just won’t cut it!
Add to this that roughly 72% of landlords own one property and many who don’t recognise themselves as a landlord makes this a very difficult market place to change.
I think the most interesting and overlooked point is that many of the new entrants talking about revolutionising the lettings industry and phasing out the traditional letting agent seem to forget that most letting agents are also landlords - and many of their clients are close trusted contacts. Again this makes for a colossal challenge!!!
I’d love to hear your thoughts on online and offline agencies, too. Drop us a line at Simple at or visit our Facebook page