How much longer can traditional estate agents and letting agents survive, asks Guardian journalist Patrick Collinson – who seems to think the answer is “not very long at all”.
In a provocative blog, the paper’s money editor says that letting agents charge “extraordinary fees” – but that both sales and lettings agents will “go the same way as Blockbuster, HMV and Lunn Poly – business models blown apart by the internet”.
He says that until now, online agents have had “lamentably little impact”and that most sellers still hire a traditional estate agent and the vast majority of tenants have little choice but to go through a letting agency and pay “often exorbitant fees”.
Collinson confidently predicts: “But in 2015 that will change. Already, star fund manager Neil Woodford has pumped £7m into PurpleBricks.com, while easyProperty.com, the latest venture from Sir Stelios Haji-Ioannou, has raised £10m and begins its assault on the lettings market early next year.
“Emoov is expected to reveal in the next few weeks its new financial plans, while uPad is planning a multi-million pound advertising blitz.
“If you are selling your home, or are a landlord trying to find a tenant, you have almost certainly not heard of any of these players – but next year you won’t be able to miss them.
“Last month the marketing boss of Confused.com was taken on by PurpleBricks, and industry observers are likening it to the moment when the price comparison sites wiped out the traditional insurance broker.”
Collinson argues: “But will the online agents, even if stuffed with cash for advertising, really dislodge the incumbents, as much as we like to hate them? On a straightforward comparison of costs, there is no case to answer.
“PurpleBricks has a flat fee of £798, while Emoov’s full service is £658.50. For lettings, OpenRent charges landlords £49 to find a tenant, easyProperty £59.99 and uPad £118.80, although these are for the basic service. To manage a rental, easyProperty will charge 3% of the rent.”
Collinson concludes: “Crucially, what all these online services have gained is access to Rightmove and Zoopla.”
* Separately, the City press is buzzing with speculation after two of star fund manager Neil Woodford’s key executives left without explanation. Their departures come less than a year since Woodford launched his investment company. Chief operating officer Nick Hamilton and chief legal and compliance officer Gray Smith resigned from Woodford Investment Management last Tuesday.
Collinson’s full article is here
Comments (33)
GMG? let's review your track record. How well is autotrader doing? Oh yeah pretty good now Emap is running it. GMGPS hows that going? oh yeah your Think property is now worth £1 billion after it was given to Alex chesterman as a key foundation stone of Zoopla.
Suggest you go study dung Patrick, when you know **** come back and tell us stuff you understand!
Better watch what you’re spraying there Mr Collinson and make sure it doesn’t get in the hair, that’s not cool – so I’m told. Jeez my buzz just flatlined so I’ll paypal anyone twenty bucks if they can find this dudes off switch because he seems to think that serendipity’s all we got. Come on buddy don’t be that guy because reducing agency to dollars and cents leaves any quality service dead on arrival and if that’s the goal then our survival’s nothing to what consumers will lose. Some old guy said the two most important days in your life are when you are born and the day you find out why so quit acting like our drink got spiked, smart agents will figure out the adjustments and make them.
What do you think about the big corporates buying up independent high street letting agents? They have plans to buy more in 2015. Is this something the Competition Commission should be looking at?
Good luck to them and no.
I think articles like this miss the real question in my mind and that is CAN online only firms operate successfully, getting the best prices for customers and offering the levels of service required to see a sale successfully through to completion, with all the problems that potentially be encountered, FOR the fees they charge. I don't believe they can. I think that the recent money spending variety have taken a punt, they used price as the advertising pull but the reality is their business models were a gamble on gaining a reasonable chunk of market share, only then do their business models pay because theres is one of profitability by numbers. The plain fact is none of them have made a profit, or are likely to over the next few years, unless there is a shift of market "their" way. You have seen comments from Russell Quirk of Emoove recently saying they are close to a turnover of £1.5 million, thats not big business numbers and is an extremely poor return on the money that must have been invested. So what does this mean: well I think that none of them truly knows what you actually need to cost your service at to make a profit and lets be frank without it you are running a charity not a business. The bigger online only agents as I say have taken a punt, the others have wanted to occupy the same space so have copied their pricing structure to compete. Its unsustainable and I agree with SP the market will change over the next few years, but it will be with the collapse of some of the unsustainable business models that have tried to capitalise on the boom in sales this last couple of years. That of course doesn't mean there is a place for non high street local online firms, there perhaps is, in their infancy they can often offer customers very good one to one service, but of course like many firms, the minute they try to expand they lose that advantage and as I have said before if their pricing model is wrong they also struggle because in this industry it is easy to be busy fools.
What a sensible post Real Agent. Well done.
I know some online Agents that have either had their backing taken and/away or gone out of business….and they are not online agencies that were particularly bad (like easyproperty) but the truth was, as real agent says, they just couldn't supply a service that people wanted, often regardless of price charged.
Well I hope I'm not about to get this site closed down again, but I heard the other day that Harry Hill had walked away from easy citing the fact that he thought it was an unsustainable business model….is this just unsubstantiated rumour?
He walked / pushed before the launch – interesting to hear he thought it was unsustainable though. Shame easychris is still in meetings with his solicitors over his last rant…. Have you ever come across homexperts? Got to admire / pity our local guy, works his nuts off for nothing and has done for last couple of years!
Ah well I guess if he was pushed that might explain the comment SP. No I haven't, although having just checked their website I was at the award ceremony they are advertising awards from. I think the problem they all have is that to get a decent quality of agent they need to pay a competitive market salary and I can't see they can do that. The local PB guy to us, even if they were paying him the full fee, would still only be earning half of what he got at the estate agency he was at. Well he might do that for a time but is he seriously going to do that for long?
Yes heard all our PB Reps are now fully commission based not salary. If you think a half decent net will earn 30k p.a. the PB reps need to be listing a lot of houses to make that!
"unsustainable business model"….In my view this is exactly what online agents are. In a few years time they will be operating at much higher fees, or not at all, in my view.
This is now considered an outdated viewpoint by most. You see the facts simply don't back up this sort of viewpoint at all…..whichever way you want to look at it……Online estate agents have managed to take just 2% in the ten years they have been going. If the public were happy to use them then they would have taken a much larger slice….The evidence clearly shows that the public are happy to trade just about anything online……EXCEPT their properties!
Sorry Wilko agree with a fair few of your posts and thoughts but feel on this occasion you may have the outdated view. Market is small for them now but does not mean that will not change with more tech and more trial and error start ups. It maybe sometime but I feel a online / high street hybrid will at some point be the accepted system (hopefully not for a while!) – Just look at the last two years more online agents have been established and I can certainly see in the towns and cities close to me that they are getting more boards up and they are being called to more vals. I remember when the internet came along and agents said it was a fad and the paper was where you needed to be at the time they were not wrong but as society changes so must our business model. Colour Pictures, Digital pictures, internet, portals, social media – All of these have been dismissed at the start, as an industry we need to continually change and evolve.
The biggest reason why the online market is so small is because 95% of sellers don't know it exists. There is no national media advertising whatsoever that is why OL only takes 2% of the market. EA's kidding themselves that 2% is because sellers don't want a cheaper service will be in for a shock if one or more of the OL's start advertising heavily on mainline TV. Yes, there will still be a high % of sellers who will sell with a traditional but I can see OL quickly taking 10%-15% of the market and other sellers asking difficult questions about traditional fees. OTM will imo bring the whole OL/fees issue to the notice of the media and the only benefactors will be OL who will effectively get £millions of free national advertising.
Agree whole heartedly with the first part of your post, more exposure and more good news stories from friends and such will in time grow their market share, im pretty sure of that. In respect to OTM I have a number of reservations but I do not feel that fees agents charge will be a negative effect on the site.
In a recent national survey, over 70% of the selling public said that they were interested in service and value for money…..and not fees. I think, imo, that a lot of your 10-15% that you think are totally fee driven may look to drive down a high street agent to.5-.75% rather than pay money to a company upfront that will put them on Rightmove. You may be right that some sellers are fee driven. ….But,in being prudent with their cash, they are way less likely to make an upfront online payment with no guarentees of Anything back for their money.
I think you are right as well…..In fact I've posted very similar points to yours on this subject many times before…..But as the years go on, the public don't seem to be interested in this online mode of property sale (I must admit – to my surprise) If you look at the difference that tech has made to say, the travel/flight industry, in 10 years…..it is very different story , one which maybe should have been replicated in our industry ?. I can't help but think that if the public liked the idea of online property agents ……they would be using them more by now. From talking to lots of sellers/staff/friends/family etc in the last 2-3 years about this subject it seems that the masses of online agents that have started have actually made them realise that they actually want a professional high street agent even more than before! I always monitor new starts in our areas and have found that a new high street agent actually attracts more instructions in one town compared to many online agents that attract less instructions,in the same timescale, on a National basis!!
Last post (out of sync) @ Smile…
I have often wondered how to adapt if the online presence becomes greater maybe a 10% market share (before it get too late). I think we will possibly have two offerings a "List" your property for sale price with no proactive sales, no viewing no sales progression and with an upfront fee AND a more traditional high street offering no upfront fees and the whole package offered. The one thing I am worried about as an industry is the erosion of fees. More and more agents think the way to survive and grow market share is slash fees. This will in time make it impossible for our current services to be viable – This is the biggest worry not Online agents. This is where a governing body or even a portal needs to sell the benefits of a well run estate agent to the public and help maintain and even increase fees.
I think I would be inclined to offer a very similar dual service. My only worry is that those that accept the cheaper option would probably want the same afterservice. I would find it very difficult to develop some new restrictive company policies around this, as the core of our business model is values linked to excellent full service…..It would be hard to tell the old ladty that opted for a cheap fee to naff off if she came across any difficulties in the conveyance.
Exactly wilko. We recently took on a property for a struggling single parent, and reluctantly agreed to reduce our fee on the understanding that we wouldn't be advertising in the paper etc. As it happened, there were loads of complications with the sale (which thankfully we did iron out) but the amount of work involved was barely covered by the reduced fee. If we as agents were to offer a dual service, we would have to make it crystal clear that if the client didn't want to pay for a "full service" .. then they didn't get it. In a nutshell, we WOULD have to "tell the old lady that opted for a cheap fee to naff off if she came across any difficulties in the conveyance".
Taff "we WOULD have to tell the old lady that opted for a cheap fee to naff off if she came across any difficulties in the conveyance"……or, I suppose we could say that we would help but the fee would have to revert to full service?
Although I don't promote the practice in my company, these is a good opportunity to use the frowned upon "Sale by tender" every now and then (6 months or so) we have a vendor that cannot pay our fees due to poor equity or marital split – This is when we use sale by tender to ensure our fee. Unlike some agents that see it as an instruction winner.
Although I do not agree with the timescales and players in the article, I do believe that agency is changing and agents need to adapt their offering. They need to get much more invested in SEO, Social Media and general brand awareness to stay viable and look to up their service. I think in the next 5 years your will see a decrease in high street agents but the ones left will be stronger. I also think their will be a rise of the online agent and they will start to eat into market share. This will be down to technology and the generation gap. The agent in the lead story today that complained he lost a property. Basically he was not good enough, and if he does not change he will loose more. I have seen it in my patch dominant independent loosing market share because they have not adapted and now they are complaining about the "New" aggressive agents. Sorry nobody has a right to business you go out their and earn it or you become a memory!
I attended a ‘cutting edge’ seminar for recruitment businesses a few years ago and this non-industry 'guru' told the packed room that the internet would be the death of us all. I'm delighted to able to report that it has actually had the complete opposite effect. These luminaries seem to fail to understand the importance of people in this ‘service’ industry that we recruitment and estate agencies all work in! On the subject of human beings, we have had a significant number of candidates registering with us who are currently working for these on-line models. Why? Whilst the attraction of being able to ‘work from home’ is alluring, they are quite simply not earning the money!
This is interesting…..What sort of packages were the online agencies offering that haven't worked out for negs?……Have you been asked to recruit any staff for online agencies….if so what are their packages like compared with high street agencies. I think it is a very valid point if the online agencies can't attract top agency staff…..then they stand even less chance of making any improvement in their current 2% share.
In the last 10 years the Guardians circulation has halved to 200K and it is outsold by every other newspaper other than the Independent. In the Summer, they printed an article saying that this had nothing to with the internet – by Roy Greenslade. Just an observation.
And traditional estate agency income went from an estimated £4.3bn last year to over £5bn this year. Online agents are wrong to focus on price. Saving 1-2% on fees instead of ensuring a home is sold for 5% more is a painful false economy. It's too bad the better agents can't show clearly their better performance.
I can't believe this hack's nonsense is even being discussed here. Better just to ignore.
What terrible Journalism again. Why do comentators continually compare the highest estate and letting agency fees with the lowest and most basic online fees. Selling fees I understand nationally are around 1.25 to 1.5% and rental management 8 to 10% with other fees nothing like those charged by Foxtons. Poor journalism once again misleading, trying to prove an agenda already decided upon.
Looks like today's big topic then? This lad from the Grauniad raises some good points, travel agents blah, blah, they all went although the manager of the high street branch had no control of the 'stock' of holidays they sold, HMV went when the format the music was sold in changed and it goes on, also I'm shouted at by people on here when we discuss OTM that you need billions for effective marketing national campaigns why will little players talking in millions able to do what we are told OTM Can't do even though they will kick off with huge stock levels? – Jonnie
Apples and oranges when comparing music streaming, travel agency and what we do. In regards to the latter and as I have said on Eye for some time, it is and will always be about service. The high street travel agent disappeared…but what do we see now popping up in major shopping centres and high streets…travel agents. People want service.