The online agent claiming to be the longest-established in the UK is predicting consolidation, with acquisitions and mergers in the sector.
Mark Readings, who co-founded House Network in 2003, forecast that the industry will shake out over the next two or three years.
He said that the cost of customer acquisition is extremely high for most of the online firms, with millions of pounds being poured into marketing.
He said: “I don’t see how six or seven firms can be spending such vast sums of money and how all of them can expect to be the one that comes out on top.”
However, he is not forecasting that investors will stop pumping millions into the sector.
Well known examples include Savills and LSL, both backers of Yopa; Neil Woodford who backs Purplebricks; Toscafund, which backs easyProperty; and Carphone Warehouse founder Charles Dunstone who is backing HouseSimple.
Will these investors ever get their money back?
Readings said: “It’s still a great sector to be in.”
He said that for anyone interested in the residential agency sector, “Where else would you put your money?”
Readings, who emphasises his own business has been built slowly and organically, says that the online sector is all about potential – and that is what appeals to investors.
But what is the size of that potential?
He said: “If over the next five years the online sector increases its market share from 6% to 25%, it will have done very well.
“If over the next five years, the market share goes to somewhere between 25% and 50%, and there are only five or six players left, then we’ll all be doing very nicely indeed.”
However, he thinks it is naïve to think that traditional agents will face a wipe-out: “When I started the business, it was all about providing customers with choice, and to me that is still the key.
“I also think that online agents and high street agents are showing less divergence. Online agents are charging more, and offering ‘no sale, no fee’ as well as fixed rates; high street agents’ fees are coming down.”
Readings said that high street agents do face a dilemma: “They have interesting choices to make. Trying to go online as well is not easy. The Countrywide offering was always going to fail.”
His business is based in Brentwood, the UK capital of the online agent world, with Emoov just round the corner.
House Network has grown headcount to 63, including 16 Local Valuation Specialists, and recent key hires are Dominic Green (ex-Countrywide) and Richard Durrant (ex-LSL).
The business charges sellers depending on where they are in the country: on a ‘no sale, no fee’ basis, they would pay between £1,000 and £2,000. On a fixed fee basis, the cost would be between £595 and £795. Accompanied viewings are extra, at £375.
That makes it cheaper than many, but Readings does not believe that price is the USP that matters as online agents – he prefers the term ‘non-traditional’ – fight for supremacy.
He says: “Our message is all about customer service. All our staff are employed and we’re staffed until 7pm, although we do use a call centre after that as it enables us to offer a 24-hour service.
“Of course we use technology, but I simply cannot see us becoming a company that is wholly dependent on it. That’s not going to happen.”
It has also recently upped its marketing, promoting a 20-point promise to customers (everything from promising that viewing agents – he uses Viewber – will take their shoes off to offering vendors their own relationship manager).
Use of TV, radio and digital platforms to get the message across has, he says, been successful.
Over the last 20-24 months, House Network has averaged 250 new instructions a month and gone on to sell 78%.
This month the business is on target to get to 400 new listings. He sees no reason why the sales rate should drop.
Comments (29)
Interesting how some Part Service/DIY agents pluck figures from thin air.
I smell blood, PB share price down below £3 !!! at 11:10AM today
Local personal realtors/agents who know what they are doing and who genuinely provide an outstanding, caring approach to a clients needs is what and who will win the day.
Cheap only carries a business so far. At some point it will go bust.
Quality endures long after price is forgotten.
A brand that genuinely sets itself apart as being caring and professional will always be better than the no sale still pay outfits.
Exactly
I don’t see what all the fuss is about!
The world and all its industries will eventually have an online presence alongside more traditional business, it’s inevitable!
However, the current situation in which a few big on-liners are dominating the media can only help traditional agents with a fixed fee option such as ours, as long as they’re still getting through the front door.
Once at a property appraisal you have the chance to explain why it is imperative for you to work hard to achieve a sale for the vendor because that is the only way you’ll get paid. Unlike on-liners who demand payment upfront for services not yet received, if ever!
I’m sure that most people’s common sense prevails, which is why our towns and city’s are not awash with sale boards from agents who are solely online.
Sure they win some instructions, but an interesting trend also seems to be that some of those properties displaying their boards have also done the rounds with other local agents, because the vendors asking price far exceeds the valuation.
As they say, any competition is good competition!
Especially if the up-front offering is even more expensive than a fixed fee, no sale-no fee agent!
Bearing in mind he has a business to push/promote I personally think thats a well balanced realistic article. Online agents arent going away, there is a place and market for them. How big that market will be nobody actually knows, unsurprisngly people in that sector think it will be bigger than “full service” estate agents. Only time will tell.
Prudential, Halifax, General Accident, Woolwich, Black Horse et all all thought the same. It isn’t possible to compete with hungry independents with salaried staff.
I will see your Pru, Halifax, GA etc and raise you Countrywide (I know), LSL, Foxtons etc 😉 It is possible to make money out of Estate Agency as a corporate not easy but possible. In my opinion there will always be potential vendors who think they know best and anyone can sell a property, the onliners are just the 21st century version of the guy who puts his own board up in his garden.
I am a small independent and I know that my team are better than the onliners, unfortunately not every member of the public does and some will take a chance on a percieved saving. Unless Rightmove kick the onliners off in my opinion there will still be online agents if they have 1% – 5% or 25% off the market nobody knows.
It is people like you who’ve stopped me building a better Emoov or Purplebricks which I could quite easily have done 5 or 6 years ago. Unless I have 3500 #local agents of your quality or better who know the area better than you do, who are recognised in the area like you are, I can’t compete with you on service and would not run at a loss trying to buy business. I’m smart enough to build the platform I’d build for my own agency but to let you operate it. The rewards at the end of the year are the same and I have a superb network agents to work with. I’ve done it before and I am doing it again!
The business you lose to online listing firms is business and clients you probably don’t need or want. The PI listers are taking more business from agent who don’t care than from those who do. The industry will rationalise itself by as much as 50%, it might be tough but this is just another phase of agency.
You should have used other peoples money to buy business, its all the rage these days by the looks of it !!!
There are people who buy business and people who build it. I can’t see the challenge, the satisfaction or any respect in buying it.
Couldnt agree more
‘If over the next five years the online sector increases its market share from 6% to 25%, it will have done very well. If over the next five years, the market share goes to somewhere between 25% and 50%….we’ll all be doing very nicely indeed’
Where is the evidence to make these statements? I don’t see any past predictions of market share coming true, weren’t we supposed to be at 25% already? Cloud cuckoo land IMHO.
Reads like an advert for sale !
Ultra local and ultra niche market online agency that isn’t reliant on an ITZA premises by virtue of its applicant base will survive and thrive. Tech has given power to reach out across the world to people who need never visit their offices. Those agents command sensible fees and do well by their clients. It is proper, proper agency in the full and professional definition of agent
Passive intermediary internet listers attempting to stack em high sell em cheap can’t compete long term with #local. Cheap fees don’t provide any contingency for getting it wrong. Sooner or later a disgruntled, 1* vendor, estate beneficiary or repossessed mortgagor will realise their lister hasn’t fulfilled and wasn’t ever capable of fulfilling their precedent defined obligations to them as principal. It gets expensive quickly as the PPI litigators realise the opportunity of undersell. I can think of one example where a vendor got £97,000 less than his agent told him to list at! 13.8% out is a lot and well worth chasing after!
The average AVM error is in excess of 3%, any lister who relies on random number generators as the basis of a good guess at value is leaving themselves wide open to litigation. That vulnerability is masked in a steadily rising market but not being genuinely local and being reactive rather than proactive to applicant requirements means online listers could leave themselves very exposed to breaches of their basic duty of care and skill. In a market that is falling away from clients who’ve been given advice that can be demonstrated as negligent that risk is magnified and the whole house of cards could collapse very rapidly.
‘Trying to go online as well is not easy’
How come? I press a button on our CRM system and the property goes on the portals…..isn’t that online?
What is not easy, is trying to reduce your Full Service offering down to a reduced service, so you can charge less, when every belief tells you that your client will also get a worse walk away result (completed sale price minus fee) and a worse overall experience.
It goes against the grain when your pride is all about delivering the very best customer service.
So the real challenge for the Full Service industry (as opposed to Call Centre listing) is about efficiently delivering the best possible service, that is recognised as good value for money, and at the same time keeping the cost of new client acquisition as reasonable as possible.
This is what Collective Marketing for Full Service Agents is all about.
I predict that we’ll within the next couple of years the systems, strategies and software to enable this to happen will be there for every independent to utilise.
The best service, part of which is making sure a sale is actually completed for the best price achievea, is what will always win out in the end!!!
BSOS23PC
It only works on mass numbers or locations. There simply aren’t enough units to make £800 work. I reckon 1 million chimneys and you would still only make £8k a month.
I also think the min you can charge if you want money left to invest is £2500 k a unit on most agents exchange rate of 7-10 houses a month.
We basically do this as a hobby now. Zzzzzz
P.s. to gain 8k of fees in an area that big will cost you £12 k in marketing.
I.e. impossible.
Agents just need to find some self esteem and commit to what everyone really knows but the media won’t let them forget. Which is…we ain’t dodgy gov.
To be fair to Mark I think he makes some good points.
What is becoming increasingly obvious is that when you are dealing with a commodity like property that owners perhaps trade every 5-8 years then millions of marketing spend is being wasted on people who for years just aren’t listening.
The choice for sellers and landlords of an agent is a local decision. It’s who they see on their way to work or in their street. It’s fundamentally why over the last 40 years we’ve seen local agents dominate, corporate purchases acquire, dominate for a short time, then struggle and local take over again.
There is a future for online but it’s over much smaller local territories and then it’s hardly online anymore as they all have to work from somewhere!
“…recent key hires are Dominic Green (ex-Countrywide)…”
Is that the ‘Dominic Green’ who’s Linkedin profile has him currently working at Costa Coffee?
Maybe that’s why he couldn’t smell it when he woke…
So taking your shoes off is the way forward for Online Agency?
I think that says it all really……
“Over the last 20-24 months, House Network has averaged 250 new instructions a month and gone on to sell 78%.”
STC or completed? 😉
Those numbers would seem a little unlikely. According to Zoopla, House Network currently have 1039 properties showing, or this figure 340 are showing as STC. On this current basis they are selling around 1 in 3 properties which is a hell of a long way from 78%. The available stock include 12 properties from 2010!!! These must be very patient vendors sticking with the same company for 8 years??
Not knocking House Simple, but online agents wont have 25% share or more in 5 years, and you arent selling 78% of your stock.
My guess is that he knows more about how much of his stock he’s selling than you do. Why is everyone of here so quick to call contributors and article writers liars?
Because as Mr Bruce found out the numbers are monitored and easily checked. Where the numbers are significantly at odds with what’s been claimed it’s reasonable to question the claim. My statistic for House Network tie up with Arthur’s
693 (clean) for sale listings, 334 sold SSTC, 1027. That’s 32.5% sstc to total listing not 78%.
February was 29.47%, January was 30.6%
>That’s 32.5% sstc to total listing not 78%.
The usual misleading comments.
They didn’t say that 78% of their total listings were SSTC.
“They didn’t say that 78% of their total listings were SSTC.”
No, ducky, you are correct. They didn’t say that – but the intimation is there. “Over the last 20-24 months” includes the day the statement was made. Therefore, it should be reasonably expected that the proportion of properties showing as ‘SSTC’ should be reflective of the claim.
So I guess they said something even more ridiculous and far more open to question.
And while your attention appears to be directed here, could you please revisit your last flurry of activity here:
http://www.propertyindustryeye.com/debt-ridden-countrywide-insists-it-will-re-set-itself-after-disastrous-retail-strategy/
as I’d like your comment on my post to you.
ArthurHouse02,
What about properties that are no longer in Zoopla?