Are Countrywide agencies risking their profits?
If I was working in Countrywide estate agents right now, I’d be seriously contemplating my future.
Aside from recently reported issues, I believe its new hybrid estate agency model, being trialled by three of its agency brands, threatens to destabilise its business. When it’s rolled out across the country, I believe it will seriously damage its employees’ wealth!
Giving customers the choice of a traditional high street agency or a cheaper fixed-fee DIY online alternative with the option to switch may sound like a great idea on paper.
But, as David Cameron will tell you, giving people a choice doesn’t always go the way you planned! Customers will only be too happy to pay less if they can – and the inevitable consequence will be a serious impact on the bottom line. Poor customer service will surely put the model in doubt.
I’ll even go so far as to forecast the company will become unprofitable, carrying high street overheads while trying to compete with the low-cost online alternatives. This will lead to offices closing and fewer staff, resulting in a decline in sales.
Already we are seeing the cracks with hybrid agents, with mounting losses running into millions at Purplebricks, who are pinning their hopes of salvation on extending their services Down Under. There are still questions on how many sales they are actually achieving compared to the traditional model, which I would back every time.
As we have discovered from disgruntled internet customers who have switched to our agency group, many are handing over their money to the online agents without getting the results or service they expect, particularly when chains start falling apart or properties are undervalued by so-called experts who don’t know the local area.
Countrywide may be hoping for first-mover advantage but other traditional agents are already following suit into the hybrid arena. If everyone embraces this model, all we will do is suppress fees even further. As the UK’s largest corporate estate agency group, Countrywide has an awful lot to lose.
Talk the market up
It’s not just the hybrid agencies that need to be worried right now – so should we all. If politicians, the media and even our own industry commentators continue to talk down the market post-Brexit, we’ll all have recessionary woes on our hands.
I was so frustrated when George Osborne tried to scare people into joining the Remain camp by declaring, when Chancellor, that house prices will fall ‘significantly’.
We’ve had enough of politician’s lies. It’s a stupid prophecy that has already started to become self-fulfilling – though I hope this will be temporary.
It just doesn’t need to be the case. Demand is still strong, supply is still short in most places and mortgage rates are at an all-time low. Even the uncertainty over leadership has disappeared, with Theresa May now at the helm.
All that will happen is that more people will have to rent – and end up paying a larger amount than they would if they had a mortgage.
We’ve seen overseas investors returning to the London market as they see it as a safe place for their cash. If people from other countries are investing in the UK post-Brexit, they recognise we have a sound economy.
The online agencies should also be worried. During the last recession, we commissioned a major piece of research which confirmed that during difficult times, people shunned the internet model in favour of the traditional, reassuring High Street agency. We all need the internet to market our properties, but you can’t beat the human touch when it comes to selling.
We just need interest rates to remain low to maintain the momentum and we need calm and stability to return to the market. After all, the Englishman’s home is still his castle.
Newspapers have lost the plot
I’ve suggested to so many newspaper groups that they need to reinvent themselves in order to compete with the likes of Rightmove and it is interesting to note that some are finally trying to put themselves in the market with their own online portals and compete.
However, it’s too little and too late. They may be uploading property from the agents who advertise in their papers but numbers have dwindled to a paltry low. I know of one area where there are just two agents advertising, compared to the good old days when they had 20.
We halved our ad spend in newspapers and it had no impact on our market share. I know many others have done just the same.
It’s all very well newspapers saying their model is both online and traditional and they now have a bigger audience than ever – but they let their income streams from advertising and circulation slip through their fingers.
Newspapers are an important part of their local communities but they have forgotten how to attract estate agents. I just hope that the print industry’s story will have a happy ending.
- Paul Smith is chief executive of Spicerhaart
Comments (23)
Good to see Mr Smith is still waffling nonsense. He’s still bitter due to “Isold” now taking off when they launched it back in 10/11.
The comparison with supermarkets and Amazon carries no water at all. The average house price in the UK is two hundred and eleven thousand quid. The thought process, deep considerations and feeling of vulnerability a home seller has and that ultimately effect their decision over who to sell through versus someone considering frozen pizzas or the latest Shades or Grey novel are not remotely connected.
affect*
Oh sweet baby Jesus I was quickly running out of things to live for and then Smithy throws me a bone. Dude stop playing with my emotions.
There’s a lot to parse. Most of it icky but ok, PB are spending a huge nutt just to stay relevant all the while acting like they’re holding pocket aces. They’re playing the long game. Now we got CW pushing a f*cked up facsimile with a side order of fries but dude, a small flock of swallows never made a summer. Jeez who decided we have to go all out online? I will fight that person. Seriously, I get that we’re eventually headed down this route but it’ll take years for online to to be that overnight success. Maybe only when Scientology has vendors treating their homes as an asset or maybe when they’ve convinced them that the new altar for personal customer service is a shiny touch screen button.
Jeez I feel like I’m sentimental. I cry during commercials and if and when it happens I’ll miss quality high street agency but until then, f*ck you L.Ron Hubbard
The real threat to high street agency is the agents themselves
A lack of faith in what they charge, the worry of on-line bods picking up the odd listing, but worse translating this fear on-masse into a fee war with only dire consequences
lower fees lower service offering – less respect from the public
I am just about to open a new agency offering a genuine concierge style service and it won’t be for £500 a pop
Wake up High Street Agents – be better – charge more – stop worrying
POST OF THE WEEK/MONTH/MILLENNIUM?
Gets my vote.
If PB fails then they all fail. I dont think we’ll see anyone willing to spend (or get other people to) on this model again for some time afterwards. Online agency has been tried and tried over the last 10 years and NEVER succeeded. None of them have made any money since they started, NO PROFIT. In fact its cost all of them and their lemming investors huge amounts of money. All of their predictions have been way, way out as to when they would start turning a profit. If Neil Woodford bails it will be over. The only chance I think they have is if they get about the same amount of investment again over the next 3-4 years and even then I dont think they will make anything like whats been predicted. All we have to do as high street agents is continue keeping them at bay in our own towns. The horror stories that you see on twitter etc about them should be all you need to convince a vendor that they are not the people to be in charge of selling their biggest asset.
“Simple….. This is a Race to the Bottom” No real tangible way of differentiating the services you provide and the fees you charge” We Small High Street Agents were thinking about this five years ago !! Interesting times ahead…. Purple Bricks will soon be running out of ££££ and the investors aren’t happy. A nett fee of £500.00 per house sale isn’t sustainable based on the costs of running that business. The PB strategy of low fee to begin with, wipe all the Independent Estate Agents off the High Street and clean up is pure fantasy. As for the “smart” new management team at Countrywide……….. time to start shedding offices I’m afraid ! A hybrid model just isn’t going to cut it !
Ian K………Royal Wootton Bassett.
Its an interesting article but yet again comes across with the head firmly stuck in the sand.
The internet has the power to disrupt any medium, especially those with middlemen. While doing this it also has the luxury of lower running costs. History has shown that this model has worked across many sectors.
I find it funny that the article goes on about how online isn’t the future, but in the same breath acknowledges newspaper advertising is dead, or at least extremely declined. Why is that? Could it be that an online service does the job better, to a wider audience – we all know the answer is yes and its RM, Z or dare i say it OTM. The papers tried to take a grip on this market with Trinity opening Fish4 many years ago, but still pushing the papers. Much like autotrader, they used to throw in the online ads for free becuase “who cares about the internet” and now the magazine doesn’t even exist.
Uber is the largest taxi firm in the world, but owns no cars.
Amazon is the largest global retailer, but owns no shops (possibly a few demo stores recently opened).
eBay is the largest global auction house, but has no auctioneers.
The list goes on and on.
I don’t welcome this news. I totally agree the personal, local, expert is better. However, does that expert need a shop? does he need a company car? does he need paper brochures? and does he need to be in the paper still? could that local expert be linked to a national company?
I agree this will be a fee race to the bottom but don’t think that means they’ll disappear. Much like Rightmove over time one or two players will take the bulk of the market and then the finances of this model will massively stack up. It could even be Zoopla, who are being pushed down by OTM leavers. they certainly bought up enough propTech firms to easily switch over to a online agent – possibly even buying up a smaller existing online agent to get the local agents network they would require.
I don’t think traditional agents will disappear, but they won’t be in the numbers we see today. The market will switch in the next 4 years, to majority online sales – a bet I’m willing to wage with anyone. Its not good for the UK job market, its not good for house prices and it won’t be good to the consumer (at first) but the service levels will improve. There will be good and bad online agents, just as there are good and bad traditional agents – the world is a changing and no matter how much people try to stop it turning, you can’t.
12+ years and counting… Still 1% market share.
I agree with much of what you say, but you have missed one crucial factor – the human element. Amazon is geared to buyers buying and they dont care where they buy from. much the same for ebay. If im selling a bike on ebay for 50 quid, i dont much care who buys it as long a the money is good.
Selling a house is a whole different story. the human element comes in. people are very attached to their houses, they have lived in them, personalised them, brought up children in them and had happy times in them. when they come to sell it, they want someone who understands these things, empathises with them, cares about their feelings and is competent enough to manage the buyers for them and overcome all the problems which they may face. They want to feel safe that they have an experienced professional at their side.
Selling a house is not the same as “bike, 3 years old, good condition – £50.
There is a place for online agents, of course there is. but they will never take over the market. why? because they dont possess the human touch.
people who are not estate agents cannot and do not understand this.
WELL SAID, Agent Orange!
I take on board what you say and they’re valid points, one’s I hope come true.
However, if we look at many sectors (in this example supermarkets) the markets have split into two major camps. Those that value price as their main concern, and those that value quality and service over price. We see waitrose and aldi do well while Tesco decline.
I feel the house market will be no different. There will be a large proportion that will go online, due to price & a second group that will go on service and quality. Hence why I don’t feel traditional agents will go anywhere. Its the middle market that will, and middle agents, go away with the growth of online (no bad thing).
I’m very open to the arguments on both side and aren’t convinced anyone really knows the outcome here. I do agree this is the largest asset in many peoples life’s and the human touch is important but this is where the online agents have employed local “experts” and they meet the home owners (in many cases). I know not all are comfortable with this and yes its new, different and far from the online agents that tried to do this 10-12 years ago. Saying “it hasn’t worked before” is a poor argument in this day and age. Tablets didn’t work 10 years ago, now find me someone that doesn’t have one. This is but one example, and I won’t go on and but it will be interesting times ahead.
None of your examples site a service industry.
Hi wardy – great to see you putting in a ‘Special Guest Appearance’!
Thankfully (as always) – you’ve nailed it.
In my business PDQ, we offer a pay-upfront budget service. We introduced this predominantly to undermine the high street agents who were being rather silly about their fees. We have achieved a similar number of listings this year on this scheme alone to a number of national call-centre agents in the area. Our offering is never going to be profitable as a stand alone service but, was not launched for that purpose.
The stand-alone fixed price model is doomed to fail, as many on here have predicted, by a simple race to the bottom and a game to see who can fool enough investors to keep throwing more money at a marketing budget in the hope they will be last man standing.
The call-centre model isn’t working, it doesn’t serve customers well and it needs ever high volumes of listings* and market share just to survive let alone make profits which, in the “tipping point” year of 2016 that Mr Quirk predicted seems ever more remote. In a market where listing volumes are falling and consumers do not appear to be as gullible as the disruptors has hoped, investors and shareholders too now appear to be waking up to this reality.That almost every single one of these ‘disruptors’ has used misleading or downright false claims to try to con consumers speaks volumes.
*Not sales of homes – A fact that consumer journalists finally appear to be taking on board
Newspapers may well have lost the plot, but so too have individual agencies. Rather than bemoaning the cost of media, agencies need to diversify and become the media. Their own personal narrative is so vital to local community, but most agents are simply too absorbed in the day to day mechanics of their role, that they fail to see the opportunity. Most towns have successful and profitable free magazines, full of local ads. What if the agency owned that medium instead of paying to advertise? Just a thought.
Sound economy? Sorry Mr S I don’t agree.
It is absolutely certain that another recession will be along any time soon. Perhaps the catalyst will be seen as the Brexit vote but in truth the root causes lie in the fundamental weaknesses of the economy. The economic garden is very far from rosy despite what the ex-chief gardner, Mr Osborne, would have had us believe.
You’re right Paul, we should continue to ignore those experts whose post brexit economic forecasts are now coming true, and instead bury our heads in the sand, think of a happy place and hope the UK economy doesn’t sink like predicted!
Changing times. With Settled offering a list on RM and Z at £399 surely it won’t be long in the race to the bottom that we see cheap listers offering £99 to £199 to get a home on main portals.
All said some cheap services may well cost sellers £housands in the long run
If it is that Paul Smith then it sounds like he’s speaking from experience maybe? Have to agree with much of what he’s saying…
Assuming this article is by the Paul Smith of Spicerhaart, then it’s a surprising u-turn from him.
From Wikipedia: “iSold estate agents is an online estate agent owned and operated by Spicerhaart, the UK’s largest independently owned estate agency, and working in association with Tesco. It was launched in March 2010.[1] iSold operates from a central location in Colchester, Essex, where Spicerhaart’s head office is situated. Unlike many other online estate agents, iSold directly employs Valuation Managers located around the country who visit properties to provide a free home appraisal and valuation service. iSold charge sellers a fixed fee to sell their property, and they claim that this can mean a substantial saving when compared to a traditional estate agent.”
He is obviously talking from bitter online only experience. Perhaps he should have said that in the article as it would have held much more weight. Nevertheless, a good message overall and I agree with alot of it.